EX-99 2 pr2q05.txt SECOND QUARTER 2005 PRESS RELEASE Press Release 405 Lancaster Avenue Greer, South Carolina 29650 (864) 879-1000 Contact: Fred T. Grant, Jr. For Immediate Release Senior Vice President - Finance July 20, 2005 RYAN'S ANNOUNCES SECOND QUARTER 2005 RESULTS ______________________ GREER, SOUTH CAROLINA - - Ryan's Restaurant Group, Inc. (NASDAQ:RYAN) reported second quarter 2005 results today. Second quarter restaurant sales were $215,510,000 in 2005 compared to $216,546,000 for the comparable quarter in 2004. Net earnings for the quarter amounted to $6,260,000 in 2005 and $14,170,000 in 2004. Earnings per share (diluted) amounted to 15 cents in 2005 compared to 33 cents in 2004. For the six months ended June 29, 2005, restaurant sales amounted to $425,149,000 compared to $428,203,000 for the comparable period in 2004. Net earnings were $18,073,000 in 2005 and $29,530,000 in 2004. Earnings per share (diluted) were 42 cents in 2005 compared to 68 cents in 2004. Commenting on the quarter, Charles D. Way, CEO of the Company, said "Our financial results for the second quarter were affected by weak sales and higher costs. During the quarter, we also took a $5 million charge to reflect the estimated minimum settlement of ongoing wage/hour litigation. In spite of promising sales results during the second quarter's holiday periods, we were disappointed with our same-store sales, which decreased by 4% for the quarter. While we believe that our customers' discretionary spending continues to be adversely impacted by high energy costs, we also understand that we must continually examine our strategies in order to attract and retain customers. Accordingly, our operations leadership team has held numerous meetings to re-focus on our restaurant operations standards, particularly those concerning staffing and exterior appearance. We continue to implement "theme nights" at our restaurants and are testing a buffet breakfast on Saturdays and Sundays at selected locations. We believe that breakfast represents an excellent way to increase sales that produce good margins without a significant investment, and we are excited about its potential impact on sales and profits." Restaurant-level margins for the second quarter were impacted by higher hourly labor charges as well as by higher energy and general liability insurance costs. We continue to believe that higher staffing levels, which we implemented at the beginning of 2005, contribute to better customer service, which is obviously important for customer retention. Just like our customers, Ryan's is also impacted by higher electricity and natural gas costs. General liability insurance costs, which are based largely on the estimated future costs of claims, increased due to higher cost projections and by a $750,000 favorable adjustment in the second quarter of 2004. Restaurant-level costs were also affected by an $838,000 impairment charge related to an under-performing restaurant, which we have decided to close and sell. This charge is included in other restaurant expenses in the accompanying consolidated financial statements. Food costs increased slightly from the second quarter of 2004. Beef costs decreased slightly during the quarter, and we are very encouraged by the recent U.S. Circuit Court decision that may allow Canadian beef imports in the future. This development could potentially increase beef supplies and therefore lower our operating costs." General and administrative expenses increased principally due to a $5 million charge to reflect the estimated minimum settlement for a wage/hour lawsuit that was filed in November 2002. Additional information about this case can be found in our reports filed with the Securities and Exchange Commission. At this time, we are negotiating a potential settlement with the plantiffs' attorney in order to avoid lengthy and costly court proceedings and will soon enter into a mediation process in hopes of reaching a mutually acceptable settlement. However, there can be no assurance that we will reach an agreement as a result of the mediation process, and it is not possible to predict this case's ultimate outcome." Regarding our balance sheet, as a result of lower net earnings in this and prior quarters, we have not met the fixed charge coverage ratio covenants in our various debt agreements. At June 29, 2005, our fixed charge coverage ratio, which is defined consistently in all of our debt agreements, was 2.05 times compared to the minimum requirement of 2.25 times. We have been in contact with our lenders throughout the quarter regarding this possibility and have been informed that they intend to grant us a waiver for this covenant violation. Based on our projections, it appears likely that we will not be able to meet the 2.25 times requirement for the next several quarters. We met all other debt covenants at June 29, 2005 and do not anticipate having any trouble complying with the other covenants in our debt agreements in the foreseeable future. Our lenders have indicated that they will work with us to amend the minimum fixed charge coverage ratio requirement and possibly other requirements and limitations for our third quarter and forward. Until the credit agreements are amended, our debt will be classified as current on our balance sheet." So far in 2005 we have opened nine restaurants, including two relocations, and plan to open another six restaurants, including two potential relocations, during the remainder of the year for a total of 15 new restaurants during 2005. All six restaurants planned for the remainder of 2005 are currently under construction. For 2006, we plan to build nine new restaurants, including three potential relocations. We believe that this reduction in new store expenditures will not only conserve cash flow, but will also allow us to spend more time to focus on building same-store sales at our existing restaurants." At June 29, 2005, the Company owned and operated 346 restaurants. As disclosed in the Company's reports filed with the Securities and Exchange Commission, the franchise relationship with the Company's remaining franchisee terminated on June 30, 2005. Accordingly, there will be no franchised restaurants operating after the second quarter of 2005. In connection with this press release, members of Ryan's executive management will be holding a conference call with investment analysts today at 4:00 p.m. EDT. The public can listen to a live webcast of this call by logging on to the web at www.ryans.com and following the appropriate links. Certain matters discussed in this press release are forward- looking statements within the meaning of the federal securities laws and are subject to uncertainties and risks, including, but not limited to, general economic conditions, including consumer confidence levels; competition; developments affecting the public's perception of buffet-style restaurants; real estate availability; food and labor supply costs; food and labor availability; an adverse food safety event; weather fluctuations; interest rate fluctuations; stock market conditions; political environment (including acts of terrorism and wars); and other such risks described from time to time in the Company's reports filed with the Securities and Exchange Commission. RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Quarter Ended June 29, June 30, 2005 2004 Restaurant sales $ 215,510,000 216,546,000 Cost of sales: Food and beverage 76,351,000 76,273,000 Payroll and benefits 69,737,000 69,175,000 Depreciation 8,684,000 8,188,000 Other restaurant expenses 33,944,000 29,355,000 Total cost of sales 188,716,000 182,991,000 General and administrative expenses 15,761,000 10,255,000 Interest expense 2,405,000 2,749,000 Royalties from franchised restaurants (135,000) (323,000) Other income, net (562,000) (531,000) Earnings before income taxes 9,325,000 21,405,000 Income taxes 3,065,000 7,235,000 Net earnings $6,260,000 14,170,000 Net earnings per common share: Basic $ .15 .34 Diluted .15 .33 Weighted-average shares: Basic 41,952,000 41,639,000 Diluted 42,770,000 43,258,000

RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Six Months Ended June 29, June 30, 2005 2004 Restaurant sales $ 425,149,000 428,203,000 Cost of sales: Food and beverage 148,964,000 148,773,000 Payroll and benefits 137,728,000 136,045,000 Depreciation 17,137,000 16,745,000 Other restaurant expenses 65,464,000 58,167,000 Total cost of sales 369,293,000 359,730,000 General and administrative expenses 26,231,000 20,577,000 Interest expense 4,765,000 5,434,000 Royalties from franchised restaurants (309,000) (686,000) Other income, net (1,762,000) (1,459,000) Earnings before income taxes 26,931,000 44,607,000 Income taxes 8,858,000 15,077,000 Net earnings $18,073,000 29,530,000 Net earnings per common share: Basic $ .43 .71 Diluted .42 .68 Weighted-average shares: Basic 41,945,000 41,860,000 Diluted 42,818,000 43,584,000

RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED BALANCE SHEETS June 29, December 29, 2005 2004 ASSETS (Unaudited) Current assets: Cash and cash equivalents $16,508,000 7,354,000 Receivables 4,633,000 4,639,000 Inventories 6,558,000 5,611,000 Prepaid expenses 1,403,000 1,016,000 Deferred income taxes 5,580,000 5,110,000 Total current assets 34,682,000 23,730,000 Property and equipment: Land and improvements 169,193,000 162,082,000 Buildings 501,437,000 480,781,000 Equipment 281,236,000 271,431,000 Construction in progress 27,303,000 31,531,000 979,169,000 945,825,000 Less accumulated depreciation 311,082,000 295,852,000 Net property and equipment 668,087,000 649,973,000 Other assets 10,535,000 10,643,000 Total assets $713,304,000 684,346,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable 8,932,000 5,963,000 Current portion of long-term debt 180,250,000 18,750,000 Income taxes payable 2,403,000 1,842,000 Accrued liabilities 52,460,000 42,569,000 Total current liabilities 244,045,000 69,124,000 Long-term debt - 164,250,000 Deferred income taxes 47,661,000 47,674,000 Other long-term liabilities 8,105,000 7,692,000 Total liabilities 299,811,000 288,740,000 Shareholders' equity: Common stock of $1.00 par value; authorized 100,000,000 shares; issued 41,911,000 shares in 2005 and 41,890,000 shares in 2004 41,911,000 41,890,000 Additional paid-in capital 3,671,000 3,878,000 Retained earnings 367,911,000 349,838,000 Total shareholders' equity 413,493,000 395,606,000 Commitments and contingencies Total liabilities and shareholders' equity $713,304,000 684,346,000

RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 29, June 30, 2005 2004 Cash flows from operating activities: Net earnings $18,073,000 29,530,000 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 18,413,000 17,635,000 Loss (gain) on sale of property and equipment (78,000) 502,000 Tax benefit from exercise of stock options 292,000 2,679,000 Deferred income taxes (483,000) 107,000 Decrease (increase) in: Receivables 6,000 (80,000) Inventories (947,000) (913,000) Prepaid expenses (387,000) 71,000 Other assets 12,000 (410,000) Increase (decrease) in: Accounts payable 2,969,000 3,048,000 Income taxes payable 561,000 (446,000) Accrued liabilities 9,891,000 6,215,000 Other long-term liabilities 413,000 434,000 Net cash provided by operating activities 48,735,000 58,372,000 Cash flows from investing activities: Proceeds from sale of property and equipment 4,099,000 3,302,000 Capital expenditures (40,452,000)(35,055,000) Net cash used in investing activities (36,353,000)(31,753,000) Cash flows from financing activities: Repayment of senior notes (18,750,000) - Net borrowings from (repayment of) revolving credit facility 16,000,000 (5,000,000) Proceeds from stock options exercised 1,074,000 5,008,000 Purchase of common stock (1,552,000)(18,207,000) Net cash used in financing activities (3,228,000)(18,199,000) Net increase in cash and cash equivalents 9,154,000 8,420,000 Cash and cash equivalents - beginning of period 7,354,000 8,617,000 Cash and cash equivalents - end of period $16,508,000 17,037,000 Supplemental disclosures Cash paid during period for: Interest, net of amount capitalized $ 5,481,000 5,488,000 Income taxes 8,488,000 12,737,000

RYANS RESTAURANT GROUP INC 8-K