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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
(X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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)
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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
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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.
YES NO X
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As of March 2, 1999, 2,398,300 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 March 5, 1999, as reported in The Wall Street Journal) held by
non-affiliates of the registrant was approximately $1,872,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1998 Annual Report to Shareholders are incorporated
by reference into Part II. Portions of the Proxy Statement for the registrant's
1999 Annual Meeting of Shareholders are incorporated by reference into Part III.
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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. As of December 30, 1998, the Company operated 26 Ryan's
restaurants in Florida, including nine in north Florida and seventeen in central
and west Florida. Two restaurants in Jacksonville, Florida were closed in
January 1999. The Company plans to open a restaurant in Deland, Florida in April
1999.
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 either a series of
"scatter bars" or a 65-foot, self-service, all-you-can-eat Mega Bar(TM), and a
separate fresh bakery and dessert bar. In addition to traditional salad bar
items, the scatter bars or Mega Bars(TM) 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 Family Steak Houses, 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 February 1986, 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
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stock to Eddie L. Ervin, Jr., in consideration for Mr. Ervin assigning to the
Company all of his rights under the Franchise Agreement, as defined below. The
Company completed its initial public offering of 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
$1,150,900, $1,108,400, and $1,138,600, for the fiscal years ended December 30,
1998, December 31, 1997, and January 1, 1997 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 exclusivity rights to
the Ryan's concept in the Company's north and central Florida territory. The
Company operated 26 restaurants as of fiscal year end 1998 and was therefore in
compliance with the Franchise Agreement. The Company has listed six restaurants
for sale. Although the Company closed two restaurants in January 1999,
management expects to be able to open enough new restaurants in 1999 to satisfy
the requirement. If management determines the Company will not be able to open
enough restaurants to satisfy the requirement, a waiver of the requirement will
be requested from the Franchisor.
The following schedule outlines the number of Ryan's restaurants
required to be operated by the Company on December 31 of each year under the
Franchise Agreement:
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Number of
Restaurants Required to
End of Fiscal Year be in Operation
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1998 26
1999 27
2000 28
2001 and subsequent years Increases by one each year
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, as
amended.
OPERATIONS OF RYAN'S RESTAURANTS
FORMAT. As of March 5, 1999, 22 of the Company's Ryan's restaurants are
located in free-standing buildings which vary in size from 7,500 to 12,000
square feet. Two of the Company's Ryan's restaurants are located in shopping
malls. Each restaurant is constructed of brick or stucco walls, interior and
exterior, with exposed woodwork. The interior of each Ryan's restaurant contains
a dining room, a customer ordering area, and a kitchen. The dining rooms seat a
total of between 270 and 500 persons and highlight centrally located,
illuminated scatter bars or Mega Barstm 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 brunch
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 or
Mega Barstm and the bakery dessert bar. Customers receive table service of the
entree and beverage
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refills. For the fiscal year ended December 30, 1998, the average weekly
customer count per restaurant was approximately 4,705 and the average meal price
(including beverage) was approximately $6.18.
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 period 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 Director 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.
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
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, except for fresh produce, which is delivered
three to five times per week. The Company has in the past obtained satisfactory
sources of supply for all the items it regularly uses and believes it will be
able to do so in the future.
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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
has a five-year term and is cancellable at any time with 60 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 24 Ryan's restaurants as of March 5,
1999.
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.
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.
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MANAGEMENT OF NEW RESTAURANTS. When a new Ryan's restaurant is opened,
the principal restaurant management positions are staffed with 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, and the
name "Mega Bar", 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 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. The increased competition had a
significant negative impact on sales of some Company restaurants in 1998.
Management has developed a plan to attempt to reduce the negative impact on
sales from new competition, but there can be no assurance that sales trends will
improve. In addition, the Franchisor has the right to operate restaurants in
several other west Florida and south Florida counties.
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EMPLOYEES
As of December 30, 1998, the Company employed approximately 1,200
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
December 30, 1998:
Lewis E. Christman, Jr., age 79, has been President and Chief Executive
Officer of the Company since April 1994. Mr. Christman was hired as a consultant
to oversee and direct the Company's purchasing program in January 1994 and has
been a Director of the Company since May 1993. In addition, Mr. Christman serves
as President of each of the Company's subsidiaries. Mr. Christman has been a
partner in East Coast Marketing since 1990. From 1979 to 1989, Mr. Christman
served as Chairman of the Board of Neptune Marketing, Inc., a food brokerage
company.
Edward B. Alexander, age 40, has been Vice President of Finance since
December 1996, and was Secretary and Treasurer of the Company from November 1990
to December 1996. In addition, Mr. Alexander was appointed to the Board of
Directors in May 1996, and serves as Secretary of each of the Company's
subsidiaries. Mr. Alexander served as controller of the Company from January
1989 to April 1990. From April 1985 until December 1988, Mr. Alexander was
employed as controller for Mac Papers, Inc., a wholesale paper products
distributor. Prior to April 1985, Mr. Alexander served as a senior accountant
for the accounting firm of Deloitte & Touche LLP.
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. The Company is also
subject to the Equal Employment Opportunity Act and a variety of federal and
state statutes and regulations. 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
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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 and
that compliance has had no material effect on the Company's capital
expenditures, earnings or competitive position, and such compliance is not
expected to have a material adverse effect upon the Company's operations. The
Company, however, cannot predict the impact of possible future legislation or
regulation on its operations.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company procures its food and other products from a variety of
suppliers, and follows a policy of obtaining its food and products from several
major suppliers under competitive terms. A substantial portion of the beef used
by the Company is obtained from one supplier, although the Company believes
comparable beef meeting its specifications is available in adequate quantities
from other suppliers. To ensure against interruption in the flow of food
supplies due to unforeseen or catastrophic events, to take advantage of
favorable purchasing opportunities, and to 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.
In December 1996, the Company entered into a $15.36 million Loan
Agreement with FFCA Mortgage Corporation ("FFCA"). The Loan Agreement governs
seventeen 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 Loan Agreement provides for various covenants, including
the maintenance of prescribed debt service coverages.
The Company used the proceeds of the FFCA loan 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
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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.
Also in December 1996, the Company entered into a separate loan
agreement with FFCA under which it borrowed an additional $2,590,000 in 1998.
This additional financing is evidenced by three additional Promissory Notes
secured by mortgages on three Company restaurant properties. The terms and
conditions of this loan agreement are substantially identical to those of the
loan agreement described above.
In October 1998, the Company received two commitments for new financing
from FFCA. One commitment was for construction financing for two new restaurants
to be built in 1999. Terms of this commitment include funding of a maximum of
$1,600,000 per restaurant, with an expiration date of October 1, 1999. The
second commitment provides for funding of a maximum of $3,000,000, secured by
mortgages on three Company restaurant properties, with an expiration date of
March 31, 1999. Other terms and conditions of these loan agreements are
substantially identical to those of the $15.36 million Loan Agreement described
above.
SEASONALITY
The Company's operations are subject to some 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.
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ITEM 2. PROPERTIES
Location Date Opened
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Jacksonville May 1982
Jacksonville November 1983
Orange Park May 1984
Jacksonville May 1985
Ocala September 1986
Neptune Beach November 1986
Lakeland February 1987
Lakeland March 1987
Winter Haven August 1987
Apopka September 1987
Gainesville December 1987
Hudson February 1988
New Port Richey May 1988
Tampa June 1988
Tallahassee August 1988
Daytona Beach September 1988
Tampa November 1988
Orlando January 1989
Orlando February 1989
Clearwater August 1989
Melbourne November 1989
Lake City March 1991
Brooksville January 1997
Leesburg June 1998
Deland April 1999 (expected opening date)
In January 1999, the Company entered into a lease agreement for a new
restaurant expected to be opened in July 1999.
As of March 5, 1999, the Company operated 24 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 December 30, 1998, the Company owned the real property on which
20 of its restaurants were located. Twenty of these properties were subject to
mortgages securing the FFCA notes.
The Company leases the real property on which four of its restaurants
are located. Those restaurants are located in Jacksonville, Clearwater,
Brooksville, and Leesburg, Florida. The Company also leases two buildings in
Jacksonville, Florida for its executive offices.
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The Company leases the premises where its Clearwater, Florida
restaurant is located. On May 13, 1997, the Company received notice from Aetna
Life Insurance Company, the mortgage holder of the property at which the
Company's Clearwater, Florida restaurant is located, that Aetna intended to
foreclose on the property due to a default by the landlord on the mortgage. In
October 1998, Aetna was granted a Motion for Summary Judgment of Foreclosure by
the Circuit Court of the Sixth Judicial Court in Pinellas County. The Company
subsequently agreed not to appeal the Circuit Court's ruling in exchange for
Aetna's agreement not to initiate any eviction proceedings prior to May 30,
1999. After May 1999, either the Company or Aetna may terminate the lease
agreement with 30 days notice. If Aetna decides to terminate the lease in 1999,
the Company would be required to write-off approximately $300,000 of leasehold
improvements.
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 1998 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 1998 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
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and Results of Operations" in the Company's 1998 Annual Report to Shareholders
is incorporated herein by reference.
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 effects the amount of interest income than can be
earned. For its debt instruments, a change in interest rates effects 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.
1999 2000 2001 2002 2003 Thereafter Total
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Assets
Overnight repurchase
account at variable
interest rate $ 1,791,300 $ 1,719,300
Weighted average
interest rate 4.6%
Certificates of deposit
at fixed interest rates $ 644,000 $ 644,000
Weighted average
interest rate 5.3%
Mortgages receivable at
fixed interest rate $ 71,100 77,800 159,800 $ 308,700
Weighted average
interest rate 9.0% 9.0% 9.0%
Liabilities
Notes payable at
variable
interest rate $ 370,500 406,400 446,000 489,200 536,700 14,696,000 $16,944,800
Weighted average
interest rate 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%
Long-term capital lease
at fixed interest rate $ 3,100 3,500 3,800 18,800 20,900 1,005,700 $1,055,800
Weighted average
interest rate 10.7% 10.7% 10.7% 10.7% 10.7% 10.7%
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company and the Report of
Independent Certified Public Accountants
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as contained in the Company's 1998 Annual Report to Shareholders are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors contained under the caption
"Election of Directors" in the Company's Proxy Statement for the 1999 Annual
Meeting of Shareholders, which will be filed with the Securities and Exchange
Commission prior to April 29, 1999, 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 1999 Annual Meeting of Shareholders, which will be filed with Securities and
Exchange Commission prior to April 29, 1999 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 1999 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission prior to April 29,
1999, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the caption "Security Ownership of
Certain Beneficial Owners and Management" in the Company's Proxy Statement for
the 1999 Annual Meeting of Shareholders, which will be filed with the Securities
and Exchange Commission prior to April 29, 1999, is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Election of Directors -
Certain Relationships and Related
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Transactions" in the Company's Proxy Statement for the 1999 Annual Meeting of
Shareholders, which will be filed with the Securities and Exchange Commission
prior to April 29, 1999, 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 1998 Annual Report to Shareholders. With
the exception of the pages listed below, the 1998 Annual
Report to Shareholders is not deemed "filed" as a part of this
report on Form 10-K.
Page
Reference
---------
Form 1998
10-K Annual Report
---- -------------
Consent of Independent Certified
Public Accountants F-1
Independent Auditors' Report 29
Consolidated Statements of Operations 13
Consolidated Balance Sheets 14
Consolidated Statements of Share-
holders' Equity 15
Consolidated Statements of Cash Flows 16
Notes to Consolidated Financial
Statements 17
(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 or the notes
thereto.
(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
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3.01 Articles of Incorporation of Family Steak Houses of Florida,
Inc. (Exhibit 3.01 to the Company's Registration Statement on
Form S-1, Registration No. 33-1887, is incorporated herein by
reference.)
3.02 Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 3.02
to the Company's Registration Statement on Form S-1,
Registration No. 33-1887, is incorporated herein by
reference.)
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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 Shareholder Rights Agreement, dated March 19, 1997, by and
between Family Steak Houses of Florida, Inc. and Chase Mellon
Shareholder Services, LLC (Exhibit 1 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 to the
Company's Form 8-A filed with the Commission on March 19,
1997, is incorporated herein by reference.)
3.08 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.)
4.01 Specimen Stock Certificate for shares of the Company's Common
Stock (Exhibit 4.01 to the Company's Registration Statement on
Form S-1, Registration No. 33-1887, is incorporated herein by
reference.)
10.01 Amended Franchise Agreement between Family Steak Houses of
Florida, Inc. and Ryan's Family Steak Houses, Inc., dated
September 16, 1987. (Exhibit 10.01 to the Company's
Registration Statement on Form S-1, filed with the Commission
on October 2, 1987, Registration No. 33-17620, is incorporated
herein by reference.)
10.02 Lease regarding the restaurant located at 3549 Blanding
Boulevard, Jacksonville, Florida (Exhibit 10.03 to the
Company's Registration Statement on
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Form S-1, Registration No. 33-1887, is incorporated herein by
reference.)
10.03 Lease, dated May 18, 1989, between the Company and Stoneybrook
Associates, Ltd., for a restaurant located in Clearwater,
Florida. (Exhibit 10.25 to the Company's Registration
Statement on Form S-1, filed with the Commission on September
29, 1989, Registration No. 33-17620, is incorporated herein by
reference.)
10.04 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.)
10.05 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.)
10.06 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.)
10.07 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.)
10.08 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.)
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10.09 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.)
10.10 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.)
10.11 $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.)
10.12 $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.)
10.13 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.)
10.14 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.)
10.15 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 March 31, 1998 is hereby incorporated by
reference.)
10.16 Employment agreement between the Company and Edward B.
Alexander, dated as of January 26, 1998. (Exhibit 10.16 to the
Company's Annual Report on Form 10-K, filed with the
Commission on March 31, 1998 is hereby incorporated by
reference.)
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10.17 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.)
10.18 Standstill and Settlement Agreement between the Company and
Bisco Industries, Inc. (and affiliates) dated February 24,
1998. (The Company's Form 8-K filed with the Commission on
March 6, 1998 is hereby incorporated by reference.)
10.19 Lease agreement dated January 29, 1998 between the Company and
Excel Realty Trust, Inc. (Exhibit 10.19 to the Company's
Annual Report on Form 10-K, filed with the Commission on March
31, 1998 is hereby incorporated by reference.)
10.20 First Amendment to Shareholder Rights Agreement dated February
25, 1998 by and between Family Steak Houses of Florida, Inc.
as Rights Agreement. (Item 6(a) from the Company's Quarterly
Report on Form 10-Q, filed with the Commission on May 18,
1998, is incorporated herein by reference.)
10.21 $3 million loan commitment from FFCA Acquisition Corporation,
dated October 2, 1998. (Exhibit 10.01 to the Company's
Quarterly Report on Form 10-Q is incorporated herein by
reference.)
10.22 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.)
10.23 Lease between the Company and Stuart S. Golding Company dated
February 3, 1999 for a new restaurant scheduled to open in
1999.
13.01 1998 Annual Report to Shareholders.
21.01 Subsidiaries of the Company.
23.0l Consent of Independent Certified Public Accountants - Deloitte
& Touche LLP.
27.00 Financial data schedules (electronic filing only).
(b) None.
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(c) See (a)3. above for a list of all exhibits filed herewith and the
Exhibit Index.
(d) None.
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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 25,
1999, appearing in the 1998 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 25, 1999 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
December 30, 1998.
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
25, 1999 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 December
30, 1998.
We further consent to the incorporation by reference in Registration Statement
No. 33-62101 pertaining to the 1996 Long Term Incentive Plan of Family Steak
Houses of Florida, Inc. on Form S-8 of our report dated February 25, 1999
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 December 30, 1998.
Deloitte & Touche LLP
Jacksonville, Florida
March 24, 1999
F-1
22
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 12, 1999 BY: /s/ Lewis E. Christman, Jr.
----------------------------------
Lewis E. Christman, Jr., President
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/ Lewis E. Christman, Jr. President (Principal March 12, 1999
- --------------------------- Executive Officer
Lewis E. Christman, Jr. and Director)
/s/ Edward B. Alexander Vice President and Director March 12, 1999
- ----------------------- (Principal Financial and
Edward B. Alexander Accounting Officer)
/s/ G. Alan Howard Director March 16, 1999
- ------------------
G. Alan Howard
/s/ Joseph M. Glickstein, Jr. Director March 19, 1999
- -----------------------------
Joseph M. Glickstein, Jr.
23
/s/ Richard M. Gray Director March 19, 1999
- ------------------
Richard M. Gray
/s/ Glen F. Ceiley Director March 19, 1999
- ------------------
Glen F. Ceiley
/s/ Jay Conzen Director March 16, 1999
- ------------------
Jay Conzen