10-K 1 g67693e10-k.txt FAMILY STEAK HOUSES OF FLORIDA, INC. 1 ================================================================================ 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 3, 2001 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. [ ] As of February 16, 2001, 2,416,200 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 16, 2001, as reported in THE WALL STREET JOURNAL) held by non-affiliates of the registrant was approximately $1,246,800. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's 2000 Annual Report to Shareholders are incorporated by reference into Part II. Portions of the Proxy Statement for the registrant's 2001 Annual Meeting of Shareholders are incorporated by reference into Part III. ================================================================================ 2 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 23 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. Ryan's restaurants serve lunch and dinner seven days a week and offer a variety of charbroiled entrees, including various cuts of beef, chicken, and seafood. Most of the restaurants serve a brunch on weekends only. Each restaurant features a diverse selection of items from "scatter bars" and a separate fresh bakery and dessert bar. In addition to traditional salad bar items, the scatter bars offer hot meats, pre-made salads, soups, baked potatoes with toppings, cheeses and a variety of vegetables. The Company believes that its operating strategy of selling top-quality meals at reasonable prices, at food costs to the Company which are higher than the industry average, 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 exclusive 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 4,266,000 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 2 3 Franchise Agreement, as defined below. The Company completed its initial public offering of 4,500,000 shares of its common stock in 1986 resulting in net proceeds to the Company of approximately $4,145,000. FRANCHISE AGREEMENT The Company operates its Ryan's restaurants under a Franchise Agreement between the Company and the Franchisor dated as of September 16, 1987, which Franchise Agreement 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 fully and faithfully performed its obligations under the Franchise Agreement during its original term. Under the terms of the Franchise Agreement, the Company has the right to use the registered mark "Ryan's Family Steak House" and the right to use the Franchisor's techniques in the operation of Ryan's Family Steak House restaurants. In 1996, the Company and the Franchisor amended the Franchise Agreement. The amended agreement requires the Company to pay a 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 $1,197,600, $1,165,300, and $1,150,900 for the fiscal years ended January 3, 2001, December 29, 1999 and December 30, 1998, respectively. The Franchise Agreement requires the Company to operate a minimum number of Ryan's restaurants on December 31 of each year. Failure to operate the minimum number of restaurants could result in the loss of exclusive franchise rights to the Ryan's concept in North and Central Florida. In 1999, the Company and Ryan's amended the number of restaurants required to be in operation as detailed below. The Company operated 23 restaurants as of fiscal year end 2000 and was therefore in compliance with the Franchise Agreement. The Company plans to open three restaurants in 2001, and expects to be in compliance with the requirement. However, there can be no assurance that the Company can open three restaurants, which could result in the loss of exclusivity in North and Central Florida. 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: NUMBER OF RESTAURANTS REQUIRED TO END OF FISCAL YEAR BE IN OPERATION ------------------ ------------------------ 2001 23 2002 25 2003 and subsequent years Increases by two each year 3 4 The amendment to the Franchise Agreement adopted in 1999 also clarified that the Franchisor's consent is needed for certain kinds of transactions. 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 may result in the disruption, and possibly the discontinuance, 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 23, 2001, 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. Three 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. 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. The customer ordering the salad bar is given unlimited access to the scatter bars and the bakery and dessert bar. Customers receive table service of the entree 4 5 and beverage refills. For the fiscal year ended January 3, 2001, the average weekly customer count per restaurant was approximately 5,270 and the average meal price (including beverage) was approximately $6.60. 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 five to seven restaurants. The supervisors report directly to the Vice President of Operations. 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. In 1999, the Company implemented 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 95% of the products used by the Company's restaurants through the centralized purchase control program. USDA choice grain-fed beef, the Company's primary commodity, is closely monitored by the Company for advantageous purchasing and quality control. The Company 5 6 purchases beef through various producers and brokers both on a contract basis and on a spot basis. Beef and other products are generally delivered directly to the restaurants three times weekly. 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 to 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. In June 1995, the Company renewed its agreement with Kraft Foodservice, Inc. to serve as its primary supplier. Kraft was subsequently purchased by Alliant Foodservice, Inc. The Alliant 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 23 Ryan's restaurants as of February 23, 2001. 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 assists 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), 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. The Company constructs its Ryan's restaurants using a general contractor selected from several solicited bids. For certain new restaurants, the Company may use its construction subsidiary to serve as the general contractor in order to expedite the process of obtaining building permits. 6 7 Management believes that by performing site selection through the Franchisor, the Company can select superior sites with high average sales volumes and control real estate costs. 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 preopening 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. 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 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 a plan to attempt to reduce the negative 7 8 impact on sales from new competition, but there can be no assurance that sales trends will improve. The strategies implemented include the installation of an exhibition grill cooking area in two restaurants, which have to date produced positive sales results. Management intends to add the grill cooking area to several more restaurants in 2001. In addition, the Franchisor has the right to operate restaurants in several west Florida and south Florida counties, and does operate two restaurants in west Florida. EMPLOYEES As of January 3, 2001, the Company employed approximately 1,300 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 3, 2001: Edward B. Alexander, age 42, 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. Kevin R. Pickett, age 41, has been Vice President of the Company since September 1999, and Director of Operations of the Company since August 1996. Mr. Pickett served as regional supervisor for the Company from July 1993 to August 1996, and was a manager of various Company restaurants from October 1988 to June 1993. 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 8 9 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. News reports suggest that the Federal minimum wage may increase by $1.00 per hour to $6.15 with a two to three year phase-in period, beginning sometime in 2001. 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. Such changes in the federal minimum wage would impact the Company's payroll and benefits costs. 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 9 10 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 insure 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 significant receivables and 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 two loan agreements with FFCA Mortgage Corporation ("FFCA"). Pursuant to the first Loan Agreement (the "1996 Loan Agreement"), the Company borrowed $15.36 million, which loans are evidenced by fourteen Promissory Notes payable to FFCA. Each Note is secured by a mortgage on a Company restaurant property. The Promissory Notes provide for a term of twenty years and an interest rate equal to the thirty-day LIBOR rate plus 3.75%, adjusted monthly. The 1996 Loan Agreement provides for various covenants, including the maintenance of prescribed debt service coverages. The Company used the proceeds of the 1996 Loan Agreement 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. Pursuant to its second loan agreement with FFCA (the "1998 Loan Agreement"), the Company borrowed an additional $2,590,000 in 1998. The proceeds of the 1998 loan were used to fund the construction of a new restaurant in Leesburg, Florida, and the land and a portion of the cost of construction of a new restaurant in Deland, Florida. This additional financing is evidenced by three additional Promissory Notes secured by mortgages on three Company restaurant properties. The terms and conditions of the 1998 Loan Agreement are substantially identical to those of the 1996 Loan Agreement. 10 11 In October 1998, the Company received two commitments for new financing from FFCA. The Company borrowed a total of $2.6 million in 1999 under the first commitment (the "1999 Loan"). The proceeds of the 1999 Loan were used to fund construction of new restaurants in Deland and Tampa, Florida. The 1999 Loan is secured by mortgages on two Company restaurant properties. The second commitment (the "2000 Loan") was for construction financing for two new restaurants to be built in 2000 and 2001. Terms of the 2000 Loan include funding of a maximum of $1,600,000 per restaurant. Other terms and conditions of the 1999 and 2000 Loans are substantially identical to those of the 1996 Loan Agreement. The Company plans to open three new restaurants in 2001. In July 2000, the Company received a new commitment from FFCA to fund $1,600,000 each for two additional restaurants to be constructed in 2001. 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. 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. 11 12 ITEM 2. PROPERTIES LOCATION DATE OPENED -------- ----------- Jacksonville May 1982 Orange Park May 1984 Ocala September 1986 Neptune Beach November 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 Tampa November 1988 Orlando February 1989 Clearwater July 1989 Melbourne October 1989 Lake City March 1991 Brooksville January 1997 Leesburg June 1998 Deland April 1999 Tampa September 1999 St. Cloud December 2000 As of February 23, 2001, the Company operated 23 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 3, 2001, the Company owned the real property on which 18 of its restaurants were located. All of these properties are subject to mortgages securing the FFCA notes. The Company leases the real property on which five of its restaurants are located. Those restaurants are located in Jacksonville, Clearwater, Brooksville, Leesburg, and Tampa, Florida. The Company also leases two buildings in Jacksonville, Florida for its executive offices. In November 2000, the Company closed on the purchase of real property for a new restaurant location in Titusville, Florida. A restaurant is under construction on that property and is scheduled to open in May 2001. The Company is seeking to identify two new restaurant locations for construction in 2001. The Company received notice in December 2000 from its landlord of the Clearwater, Florida restaurant that the lease for the restaurant would be terminated effective March 20, 2001. The Company had expected to renew the lease 12 13 for at least an additional year. Due to the lease termination, the Company recognized an asset valuation charge of $189,700 in 2000. 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 2000 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 2000 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 2000 Annual Report to Shareholders is incorporated herein by reference. 13 14 ITEM 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK The Company is exposed to market risk from changes in interest rates. For its cash and cash equivalents, investments and mortgages receivable, a change in interest rates affects the amount of interest income than can be earned. For its debt instruments, a change in interest rates affects the amount of interest expense incurred. The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates.
2001 2002 2003 2004 2005 THEREAFTER TOTAL ---- ---- ---- ---- ---- ---------- ----- Assets Overnight repurchase account at variable interest rate $ 597,000 $ 597,000 Weighted average interest rate 5.8% Certificates of deposit at fixed interest rates $ 10,000 $ 10,000 Weighted average interest rate 4.8% Mortgages receivable at fixed interest rate $ 172,000 13,400 342,000 $ 527,400 Weighted average interest rate 9.1% 10.0% 10.0% Liabilities Notes payable at variable interest rate $ 565,900 607,200 669,400 733,200 813,200 15,046,400 $18,435,300 Weighted average interest rate 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% Long-term capital lease at fixed interest rate $ 3,700 18,800 20,900 23,200 25,800 956,900 $ 1,049,300 Weighted average interest rate 10.7% 10.7% 10.7% 10.7% 10.7% 10.7%
14 15 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 2000 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 3, 2001 and December 29, 1999: FISCAL QUARTER ------------------------------------------ FIRST SECOND THIRD FOURTH TOTAL ----- ------ ----- ------ ----- $ In thousands, except per share amounts 2000 Sales $10,591 $10,180 $9,249 $9,940 39,960 Gross profit 6,500 6,251 5,607 6,133 24,491 Net earnings (loss) 538 275 (343) (517) (47) Basic earnings (loss) per share .22 .11 (.14) (.21) (.02) Diluted earnings (loss) per share .22 .11 (.14) (.21) (.02) 1999 Sales $10,146 $10,143 $9,238 $9,378 38,905 Gross profit 6,204 6,199 5,638 5,703 23,744 Net earnings (loss) 234 (192) (1,200) (824) (1,982) Basic earnings (loss) per share .10 (.08) (.50) (.34) (.82) Diluted earnings (loss) per share .10 (.08) (.50) (.34) (.82) 15 16 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding directors contained under the caption "Election of Directors" in the Company's Proxy Statement for the 2001 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission prior to May 3, 2001, 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 2001 Annual Meeting of Shareholders, which will be filed with Securities and Exchange Commission prior to May 3, 2001 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 2001 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission prior to May 3, 2001, 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 2001 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission prior to May 3, 2001, is incorporated herein by reference. 16 17 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 2001 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission prior to May 3, 2001, is incorporated herein by reference. PART IV ITEM 14. 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 2000 Annual Report to Shareholders. With the exception of the pages listed below, the 2000 Annual Report to Shareholders is not deemed "filed" as a part of this report on Form 10-K. PAGE REFERENCE -------------------- FORM 2000 10-K ANNUAL REPORT ---- ------------- Consent of Independent Certified Public Accountants 22 Independent Auditors' Report 28 Consolidated Statements of Operations 11 Consolidated Balance Sheets 12 Consolidated Statements of Shareholders' Equity 13 Consolidated Statements of Cash Flows 14 Notes to Consolidated Financial Statements 15 (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.) 17 18 NO. EXHIBIT --- ------- 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.) 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.) 18 19 NO. EXHIBIT --- ------- 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 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., 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.) 19 20 NO. EXHIBIT --- ------- 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.) 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.) 20 21 NO. EXHIBIT --- ------- 10.16 Commitment for construction financing for two restaurants from FFCA Acquisition Corporation, dated October 2, 1998. (Exhibit 10.02 to the Company's Quarterly Report on Form 10-Q filed with the commission on November 16, 1998 is incorporated herein by reference.) 10.17 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). 10.18 Employment Agreement between the Company and Lewis E. Christman, Jr., dated as of January 26, 1998. (Exhibit 10.17 to the Company's Annual Report on Form 10-K, filed with the Commission on March 31, 1998 is hereby incorporated by reference). 10.19 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.) 10.20 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 filed with the Commission on March 15, 2000 is incorporated herein by reference.) 10.21 Commitment for construction financing for two restaurants from FFCA Acquisition Corporation, dated July 18, 2000. 13.01 2000 Annual Report to Shareholders. 21.01 Subsidiaries of the Company. 23.01 Consent of Independent Certified Public Accountants - Deloitte & Touche LLP. (b) None. (c) See (a)3. above for a list of all exhibits filed herewith and the Exhibit Index. (d) None. 21 22 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 of our report dated February 23, 2001, appearing in the 2000 Annual Report to Shareholders of Family Steak Houses of Florida, Inc. We additionally consent to the incorporation by reference in Registration Statement No. 33-11684 pertaining to the 1986 Employee Incentive Stock Option Plan of Family Steak Houses of Florida, Inc. on Form S-8 of our report dated February 23, 2001 appearing in and incorporated by reference in this Annual Report on Form 10-K of Family Steak Houses of Florida, Inc. for the year ended January 3, 2001. We further consent to the incorporation by reference in Registration Statement No. 33-12556 pertaining to the 1986 Stock Option Plan for Non-Employee Directors of Family Steak Houses of Florida, Inc. on Form S-8 of our report dated February 23, 2001 appearing in and incorporated by reference in this Annual Report on Form 10-K of Family Steak Houses of Florida, Inc. for the year ended January 3, 2001. We further consent to the incorporation by reference in Registration Statement No. 33-62101 pertaining to the 1995 Long Term Incentive Plan of Family Steak Houses of Florida, Inc. on Form S-8 of our report dated February 23, 2001 appearing in and incorporated by reference in this Annual Report on Form 10-K of Family Steak Houses of Florida, Inc. for the year ended January 3, 2001. Deloitte & Touche LLP Certified Public Accountants Jacksonville, Florida March 19, 2001 22 23 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 9, 2001 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 3/2/01 ----------------------- (Principal Financial and Edward B. Alexander Accounting Officer) /s/ GLEN F. CEILEY Chairman of the Board 3/6/01 ----------------------- Glen F. Ceiley /s/ STEVE CATANZARO Director 3/2/01 ----------------------- Steve Catanzaro /s/ JAY CONZEN Director 3/2/01 ----------------------- Jay Conzen /s/ WILLIAM MEANS Director 3/2/01 ----------------------- William Means 23