-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nv5OyethnGXPClkm+CzX+oInOj2dHRt6OIngEzcTGjVXurZLWx2E7wh8vfSlHgnT 4neZC2bPJjZvBUVgavioiA== 0000355622-05-000049.txt : 20051107 0000355622-05-000049.hdr.sgml : 20051107 20051107164639 ACCESSION NUMBER: 0000355622-05-000049 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20050928 FILED AS OF DATE: 20051107 DATE AS OF CHANGE: 20051107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RYANS RESTAURANT GROUP INC CENTRAL INDEX KEY: 0000355622 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 570657895 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10943 FILM NUMBER: 051183843 BUSINESS ADDRESS: STREET 1: 405 LANCASTER AVE STREET 2: PO BOX 100 CITY: GREER STATE: SC ZIP: 29652 BUSINESS PHONE: 8648791000 MAIL ADDRESS: STREET 1: 405 LANCASTER AVE STREET 2: P O BOX 100 CITY: GREER STATE: SC ZIP: 29652 FORMER COMPANY: FORMER CONFORMED NAME: RYANS FAMILY STEAKHOUSES INC DATE OF NAME CHANGE: 19920703 10-Q 1 q305.txt THIRD QUARTER 10Q 2005 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter ended September 28, 2005 Commission File No. 0-10943 RYAN'S RESTAURANT GROUP, INC. (Exact name of registrant as specified in its charter) South Carolina No. 57-0657895 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 405 Lancaster Avenue (29650) P. O. Box 100 Greer, South Carolina 29652 (Address of principal executive offices, including zip code) 864-879-1000 (Registrant's telephone number, including area code) -------------------------------------------------------------- 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 whether the registrant is an accelerated filer (as defined in Rule12b-2 of the Securities Exchange Act of 1934). Yes X No ________ At September 28, 2005, there were 41,977,000 shares outstanding of the registrant's common stock, par value $1.00 per share. RYAN'S RESTAURANT GROUP, INC. TABLE OF CONTENTS PAGE NO. PART I FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Statements of Earnings (Unaudited) - Quarters Ended September 28, 2005 and September 29,2004 3 Consolidated Statements of Earnings (Unaudited) - Nine Months Ended September 28, 2005 and September 29,2004 4 Consolidated Balance Sheets - September 28, 2005 (Unaudited) and December 29, 2004 5 Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 28, 2005 and September 29, 2004 6 Consolidated Statement of Shareholders' Equity (Unaudited) - Nine Months Ended September 28, 2005 7 Notes to Consolidated Financial Statements (Unaudited) 8 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 Item 4. Controls and Procedures 16 Forward-Looking Information 17 PART II - OTHER INFORMATION Item 1. Legal Proceedings 18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18 - 19 Item 6. Exhibits 19 SIGNATURES 20
PART I. FINANCIAL INFORMATION Item 1. Financial Statements RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except per share data) Quarter Ended September 28,September 29, 2005 2004 Restaurant sales $ 202,967 205,331 Cost of sales: Food and beverage 70,169 72,880 Payroll and benefits 68,187 67,455 Depreciation 10,524 8,857 Other restaurant expenses 35,190 29,879 Total cost of sales 184,070 179,071 General and administrative expenses 11,270 10,185 Interest expense 2,378 2,598 Royalties from franchised restaurants (35) (265) Other income, net (1,127) (238) Earnings before income taxes 6,411 13,980 Income taxes 2,247 4,754 Net earnings $ 4,164 9,226 Net earnings per common share: Basic $ .10 .22 Diluted .10 .22 Weighted-average shares: Basic 41,934 41,679 Diluted 42,592 42,849
See accompanying notes to consolidated financial statements. RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except per share data) Nine Months Ended September 28, September 29, 2005 2004 Restaurant sales $628,116 633,534 Cost of sales: Food and beverage 219,133 221,653 Payroll and benefits 205,915 203,500 Depreciation 27,661 25,602 Other restaurant expenses 100,654 88,046 Total cost of sales 553,363 538,801 General and administrative expenses 37,501 30,762 Interest expense 7,143 8,032 Royalties from franchised restaurants (344) (951) Other income, net (2,889) (1,697) Earnings before income taxes 33,342 58,587 Income taxes 11,105 19,831 Net earnings $ 22,237 38,756 Net earnings per common share: Basic $ .53 .93 Diluted .52 .89 Weighted-average shares: Basic 41,941 41,800 Diluted 42,742 43,339
See accompanying notes to consolidated financial statements. RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED BALANCE SHEETS (In thousands) September 28, December 29, 2005 2004 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 11,117 7,354 Receivables 4,700 4,639 Inventories 5,663 5,611 Prepaid expenses 1,569 1,016 Deferred income taxes 7,277 5,110 Total current assets 30,326 23,730 Property and equipment: Land and improvements 170,267 162,082 Buildings 508,584 480,781 Equipment 285,424 271,431 Construction in progress 30,923 31,531 995,198 945,825 Less accumulated depreciation 319,574 295,852 Net property and equipment 675,624 649,973 Other assets 10,593 10,643 Total assets $716,543 684,346 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable 6,681 5,963 Current portion of long-term debt 18,750 18,750 Income taxes payable 2,989 1,842 Accrued liabilities 51,655 42,569 Total current liabilities 80,075 69,124 Long-term debt 161,500 164,250 Other long-term liabilities 5,714 7,692 Deferred income taxes 50,826 47,674 Total liabilities 298,115 288,740 Shareholders' equity: Common stock of $1.00 par value; authorized 100,000,000 shares; issued 41,977,000 in 2005 and 41,890,000 shares in 2004 41,977 41,890 Additional paid-in capital 4,376 3,878 Retained earnings 372,075 349,838 Total shareholders' equity 418,428 395,606 Commitments and contingencies Total liabilities and shareholders' equity $716,543 684,346
See accompanying notes to consolidated financial statements. RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended September 28, September 29, 2005 2004 Cash flows from operating activities: Net earnings $ 22,237 38,756 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 29,012 26,936 Loss (gain) on sale of property and equipment (622) 253 Tax benefit from exercise of stock options 789 2,820 Deferred income taxes 985 252 Decrease (increase) in: Receivables (61) 285 Inventories (52) (338) Prepaid expenses (553) 111 Other assets (94) (2,066) Increase (decrease) in: Accounts payable 718 2,251 Income taxes payable 1,147 2,026 Accrued liabilities 9,086 2,051 Other long-term liabilities (1,978) 506 Net cash provided by operating activities 60,614 73,843 Cash flows from investing activities: Proceeds from sale of property and equipment 7,073 6,403 Capital expenditures (60,970) (51,108) Net cash used in investing activities (53,897) (44,705) Cash flows from financing activities: Repayment of senior notes (18,750) - Net borrowings from (repayment of) revolving credit facility 16,000 (9,000) Proceeds from stock options exercised 1,648 5,360 Purchase of common stock (1,852) (18,207) Net cash used in financing activities (2,954) (21,847) Net increase in cash and cash equivalents 3,763 7,291 Cash and cash equivalents - beginning of period 7,354 8,617 Cash and cash equivalents - end of period $ 11,117 15,908 Supplemental disclosures Cash paid during the period for: Interest, net of amount capitalized $ 9,032 9,853 Income taxes 8,751 15,413
See accompanying notes to consolidated financial statements. RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) (In thousands) Nine Months Ended September 28, 2005 $1 Par Value Additional Common Paid-In Retained Stock Capital Earnings Total Balances at December 29, 2004 $41,890 3,878 349,838 395,606 Net earnings - - 22,237 22,237 Issuance of common stock under stock option plans 220 1,428 - 1,648 Tax benefit from exercise of non-qualified stock options - 789 - 789 Purchases of common stock (133)(1,719) - (1,852) Balances at September 28, 2005 $41,977 4,376 372,075 418,428
See accompanying notes to consolidated financial statements. RYAN'S RESTAURANT GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 28, 2005 (Unaudited) Note 1. Description of Business Ryan's Restaurant Group, Inc. (the "Company") operates a restaurant chain consisting of 339 Company-owned restaurants located principally in the southern and midwestern United States. Three of these restaurants were closed at September 28, 2005 as a result of damages caused by Hurricane Katrina. The restaurants operate under the Ryan's or Fire Mountain brand names, but are viewed as a single business unit for management and reporting purposes. A Fire Mountain restaurant offers a selection of foods similar to a Ryan's restaurant with display cooking and also features updated interior furnishings, an upscale food presentation and a lodge-look exterior. Through June 2005, an unrelated third-party operated Ryan's brand restaurants under a franchise relationship that was terminated by mutual agreement on June 30, 2005. Final franchise royalties were received by the Company in July 2005. The Company was organized in 1977, opened its first restaurant in 1978 and completed its initial public offering in 1982. The Company does not operate any international units. Note 2. Basis of Presentation The consolidated financial statements include the financial statements of Ryan's Restaurant Group, Inc. and its wholly- owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Consolidated operating results for the nine months ended September 28, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 2005. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the fiscal year ended December 29, 2004. Note 3. Relevant New Accounting Pronouncements In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004), "Share-Based Payment," ("SFAS 123R"), which amends SFAS No. 123 and SFAS No. 95. SFAS 123R requires all companies to measure compensation cost for all share-based payments, including employee stock options, at fair value and will be effective for the first quarter of 2006. The Company is currently evaluating the effect that this accounting change will have on its financial position and results of operations. Note 4. Stock Options As allowed by SFAS No. 123, "Accounting for Stock-Based Compensation," the Company accounts for its stock option plans in accordance with the intrinsic value provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. As such, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. No compensation cost has been recognized for stock-based compensation in consolidated net earnings for the periods presented as all options granted under the Company's stock option plans had exercise prices equal to the market value of the underlying common stock on the date of the grant. Had the Company determined compensation cost based on the fair value recognition provisions of SFAS No. 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts indicated in the following table: Quarter Ended Nine Months Ended Sep 28, Sep 29, Sep 28, Sep 29, 2005 2004 2005 2004 (In thousands, except earnings per share) Net earnings, as reported $4,164 9,226 22,237 38,756 Less total stock-based compensation expense determined under fair value based method, net of related tax effects (197) (229) (1,076) (814) Pro forma net earnings $3,967 8,997 21,161 37,942 Earnings per share Basic: As reported $ .10 .22 .53 .93 Pro forma .09 .22 .50 .91 Diluted: As reported .10 .22 .52 .89 Pro forma .09 .21 .50 .88
Note 5. Earnings per Share Basic earnings per share ("EPS") excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS includes common stock equivalents that arise from the hypothetical exercise of outstanding stock options using the treasury stock method. Outstanding stock options to purchase 417,850 and 3,000 shares of common stock at September 28, 2005 and September 29, 2004, respectively, were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. Note 6. Legal Contingencies In November 2002, a lawsuit was filed in the United States District Court, Middle District of Tennessee, Nashville Division, on behalf of three plaintiffs alleging various wage and hour violations by the Company of the Fair Labor Standards Act of 1938. The plaintiffs' attorneys sought collective-action status for the case. In October 2003, the presiding judge denied the Company's request to enforce the arbitration agreements signed by the plaintiffs and also ordered the Company to turn over certain employee addresses to the plaintiffs' attorneys. The Company appealed that decision. As part of the appeal process, the presiding judge stayed the order regarding the employee addresses. In March 2005, the Sixth Circuit Court of Appeals affirmed the ruling that denied enforcement of the arbitration issue, and in June 2005, the presiding judge ordered that notices be sent to potential class members, thereby approving collective-action status for the lawsuit. In July 2005, the Company began negotiations with the plaintiffs' attorney in hopes of reaching a mutually acceptable settlement. In September 2005, the parties took the matter to a mediation hearing. Although no agreement was reached through mediation, settlement discussions between the parties have continued. The Company charged $5,000,000 as the estimated minimum settlement for this litigation to general and administrative expenses in the second quarter of 2005. Based on the ongoing discussions, the Company believes that the $5,000,000 estimated minimum settlement is still applicable and, accordingly, has not charged any additional amounts related to this case during the third quarter of 2005. However, as it is not possible to predict the case's outcome, the ultimate settlement cannot be estimated at this time. In addition, from time to time, the Company is involved in various legal claims and litigation arising in the normal course of business. Based on currently-known legal actions arising in the normal course of business, management believes that, as a result of its legal defenses and insurance arrangements, none of these actions should have a material adverse effect on the Company's business or financial condition, taken as a whole. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Quarter ended September 28, 2005 versus September 29, 2004 Restaurant sales during the third quarter of 2005 decreased by 1.2% compared to the third quarter of 2004. Average unit growth, based on the average number of restaurants in operation, increased by 1.8% in the third quarter of 2005 compared to the same quarter of 2004. The Company owned and operated 339 restaurants (275 Ryan's brand and 64 Fire Mountain brand), including three restaurants currently closed due to damages caused by Hurricane Katrina, at September 28, 2005 and 338 restaurants (299 Ryan's brand and 39 Fire Mountain brand) at September 29, 2004. In comparison to the third quarter of 2004, average unit sales ("AUS"), or average weekly sales volumes per unit, for all stores (including newly opened restaurants) decreased by 2.5% in 2005, and same-store sales decreased by 3.7% in 2005. In computing same-store sales, the Company averages weekly sales for those units operating for at least 18 months. All converted or relocated stores (see "Liquidity and Capital Resources") are included in the same-store sales calculation, provided that the underlying stores were operating for at least 18 months. Same-store sales and related factors for the third quarters of 2005 and 2004, as compared to their comparable prior years' quarters, were as follows: Same-store 2005 2004 Sales (3.7%) (3.1%) Customer count (6.3%) (7.1%) Menu factor (principally pricing) 2.6% 4.0%
Management believes that the Company's sales results continued to be adversely impacted by high gasoline and utility costs during the third quarter of 2005, resulting in decreased discretionary spending and lower dining-out expenditures by its customers. Third quarter 2005 sales were also impacted by Hurricanes Katrina and Rita, not only in the areas of immediate landfall but also in many of the Company's other operating areas. During the quarter, the Company had 41 stores closed for at least one day due to the hurricanes, resulting in a total of 243 closed restaurant-days (less than 1.0% of total available restaurant-days). Except for three locations that are still closed, the affected restaurants re- opened quickly and have typically shown increased sales since that time due to high demand from repair and emergency crews and returning residents. In addition, restaurant sales in southern and mid-Atlantic states generally were adversely affected by the heavy storms that resulted after the immediate landfalls and by high gasoline pricing and shortages. Management believes that these factors as well as the related extensive television coverage decreased dining visits by customers. Management is working to increase sales by implementing a weekend buffet breakfast at the Company's restaurants. At September 28, 2005, 38 locations were offering a breakfast buffet on weekend mornings. The Company plans to have breakfast at approximately 160 locations by year- end. Cost of sales includes food and beverage, payroll, payroll taxes and employee benefits, depreciation, repairs, maintenance, utilities, supplies, advertising, insurance, property taxes and licenses at Company-owned restaurants. Such costs, as a percentage of sales, were 90.7% during the third quarter of 2005 compared to 87.2% during the third quarter of 2004. Food and beverage costs amounted to 34.6% of sales in 2005 and 35.5% of sales in 2004. In 2005, these costs decreased due to lower sirloin, soybean-oil and pork costs, partially offset by higher fresh chicken and seafood costs. Payroll and benefits increased to 33.6% of sales in 2005 from 32.9% of sales in 2004 due principally to management's tactical decision to increase hourly staffing levels in order to provide a better dining experience for customers with the aim of building and retaining sales. All other restaurant costs, including depreciation, increased to 22.5% of sales in 2005 from 18.8% of sales in 2004. This increase resulted principally from $2.6 million of property write-downs related to five underperforming stores and from higher electricity and natural gas costs, which increased by a combined 0.6% of sales. All other restaurant costs also increased, as a percentage of sales, due to the impact that 2005's lower AUS had on the many fixed-cost items included in this category, such as repairs and maintenance. Based on these factors, the Company's margins at the restaurant level decreased to 9.3% of sales in 2005 from 12.8% of sales in 2004. General and administrative expenses increased to 5.6% of sales in 2005 from 5.0% of sales in 2004 due principally to higher salaries and wages and from a favorable adjustment in 2004 to performance-based bonuses. Also, lower AUS in 2005 increased the impact, as a percentage of sales, of this highly fixed- cost category. Interest expense for the third quarters of 2005 and 2004 amounted to 1.2% and 1.3% of sales, respectively. The average effective interest rate decreased to 6.0% for the third quarter of 2005 from 6.2% for the comparable quarter in 2004, resulting principally from the scheduled $18.8 million annual installment payment on the Company's 9.02% senior notes in late-January 2005. Borrowings under the floating-rate revolving credit facility, which accrued interest at a 4.5% average rate during the quarter, were used as the source of funds for this payment. Revenues from franchised restaurants decreased by $230,000 from the third quarter of 2004 to the third quarter of 2005 as the Company's sole franchisee, EACO Corporation ("EACO"; formerly Family Steak Houses of Florida, Inc.), converted its Ryan's brand restaurants to non-affiliated brands in accordance with the December 2003 amendment to the franchise agreement. Per the amendment, the franchise relationship between the Company and EACO terminated on June 30, 2005, and final collection of franchise revenues was completed during the third quarter of 2005. Other income increased $889,000 due principally to gains realized on the sale of two restaurant properties during the third quarter of 2005 compared with a loss on the sale of one property during the third quarter of 2004. The effective income tax rate increased to 35.0% for the third quarter of 2005 compared to 34.0% for the third quarter of 2004, primarily from an increase in the projected rate to be utilized for all of 2005, compared to the tax rate for the first six months of 2005. This increase was partially offset by the greater deductive impact of anticipated Federal tax credits, such as Work Opportunity, Welfare to Work and FICA taxes paid on reported employee tip income, on 2005's lower earnings before income taxes (as compared to 2004). Net earnings for the third quarter amounted to $4.2 million in the 2005 period compared to $9.2 million in the 2004 period. Weighted-average shares (diluted) decreased by 0.6% to 42.6 million in 2005 from 42.8 million in 2004 as the lower price of the Company's common stock reduced the impact of outstanding stock options on the diluted weighted-average share calculation. In general, as the stock price decreases, the number of shares related to stock options in the diluted weighted-average share calculation also decreases, which has the effect of increasing earnings per share (diluted). Accordingly, earnings per share (diluted) amounted to 10 cents for the third quarter of 2005 compared to 22 cents for the third quarter of 2004. Nine months ended September 28, 2005 versus September 29, 2004 For the nine months ended September 28, 2005, restaurant sales were down 0.9% compared to the same period in 2004. Principal factors affecting the 2005 sales decline include a 2.9% decrease in all-store AUS, partially offset by the 2.4% unit growth of Company-owned restaurants. Same-store sales and related factors for the first nine months of 2005 and 2004, as compared to their comparable prior years' periods, were as follows: Same-store 2005 2004 Sales (3.6%) 0.5% Customer count (6.3%) (3.3%) Menu factor (principally pricing) 2.7% 3.8%
Cost of sales, as detailed above, for the first nine months of 2005 and 2004 amounted to 88.1% of sales and 85.0% of sales, respectively. In 2005, food and beverage costs were relatively flat (34.9% of sales) when compared to 2004 (35.0% of sales). Payroll and benefits increased to 32.8% of sales for 2005 from 32.1% of sales for 2004 due to higher hourly labor costs, partially offset by lower medical and workers' compensation insurance costs. All other restaurant costs, including depreciation, increased to 20.4% of sales for 2005 from 17.9% for 2004 due principally to higher utility (electricity and natural gas), repairs and maintenance, depreciation, general liability insurance and store closing costs. These costs also increased, as a percentage of sales, due to the impact that 2005's lower AUS had on the many fixed- cost items included in this category. General and administrative expenses increased to 6.0% for 2005 from 4.9% for 2004 due principally to the $5,000,000 charge in the second quarter of 2005 for the Tennessee collective-action lawsuit described in Note 6 to the accompanying consolidated financial statements. These costs also increased, as a percentage of sales, due to the impact that 2005's lower AUS had on the many fixed-cost items included in this category. Effective income tax rates of 33.3% and 33.8% were used for the first nine months of 2005 and 2004, respectively. The rate decrease is due principally to the greater deductive impact of anticipated Federal tax credits, such as Work Opportunity, Welfare to Work and FICA taxes paid on reported employee tip income, on 2005's lower earnings before income taxes (as compared to 2004). Net earnings for the first nine months of 2005 amounted to $22.2 million compared to $38.8 million in 2004. Weighted- average shares (diluted) decreased by 1.4% due to the reduced impact of outstanding stock options on the diluted weighted- average share calculation (see third quarter's discussion) and from the Company's stock repurchase program. Accordingly, earnings per share (diluted) amounted to 52 cents in the 2005 period compared to 89 cents in the 2004 period. LIQUIDITY AND CAPITAL RESOURCES The Company's principal source of liquidity is from its restaurants sales, which are primarily derived from cash, checks or credit / debit cards. Principal uses of cash are operating expenses, which have been discussed in the preceding section, capital expenditures and stock repurchases. A comparison of the Company's sources and uses of funds for the nine-month periods ended September 28, 2005 and September 29, 2004 follow (in thousands): 2005 2004 Change Net cash provided by operating activities $60,614 73,843 (13,229) Net cash used in investing activities (53,897)(44,705) (9,192) Net cash used in financing activities (2,954)(21,847) 18,893 Net increase in cash and cash equivalents $ 3,763 7,291 (3,528)
Net cash provided by operating activities decreased by $13.2 million in the first nine months of 2005 mainly as a result of lower net earnings and less tax benefit from the exercise of stock options in 2005, partially offset by the $5.0 million addition to accrued liabilities in 2005 for the charge related to Tennessee collective-action lawsuit, as described in the above section. As of September 28, 2005, no settlement payments had been made for this lawsuit. Net cash used in investing activities increased by $9.2 million as capital expenditures for the first nine months of 2005 exceeded the prior year's comparable amount due to the construction of two additional restaurants in 2005 compared to 2004 and higher construction costs per unit in 2005. Finally, net cash provided by financing activities increased by $18.9 million largely due to less stock repurchase activity in 2005. At September 28, 2005, the Company's working capital deficit amounted to $49.7 million compared to a $45.4 million deficit at December 29, 2004. Management does not anticipate any adverse effects from the current working capital deficit due to the significant and steady level of cash flow provided by operations. At September 28, 2005, the Company's outstanding debt consisted of $56.3 million of 9.02% senior notes, $100.0 million of 4.65% senior notes and a $150.0 million revolving credit facility of which $24.0 million was outstanding at that date. After allowances for letters of credit and other items, there were approximately $114 million in funds available under the revolving credit facility. The Company's ability to draw on these funds is limited by the financial covenants in the agreements governing both the senior notes and the revolving credit facility. As disclosed in the Company's quarterly report on Form 10-Q for the second quarter of 2005, the Company was not in compliance with the fixed charge coverage ratio ("FCC ratio") covenant in its debt agreements at the end of the second quarter and received waivers from its creditors for that quarter. In November 2005, the Company and its lenders finalized amendments to the debt agreements. The amendments reduce the FCC ratio requirements from 2.25 times to 1.55 times through the third quarter of 2006. After that point, the required ratio gradually rises to 2.25 times for the third quarter of 2007 and afterwards (or, if the calculation period includes two scheduled debt principal payments, 2.0 times). Management believes that these levels are achievable under current business conditions. However, based on current projections, a significant improvement in profitability will need to occur in order to achieve the required FCC ratio of 2.0 for the third quarter of 2007. Based on current business plans, compliance will require increases in same-store sales at the Company's restaurants and would also be impacted, either favorably or unfavorably, by changes in operating costs, including interest rates. In addition to reducing the minimum FCC ratio, the amendments place additional restrictions on stock repurchases and capital expenditures during 2006 and 2007. Management believes that these restrictions will not impact its current plans for capital expenditures as described in the third succeeding paragraph. Total capital expenditures for the first nine months of 2005 amounted to $61.0 million. The Company opened 12 new and closed 14 existing restaurants during the first nine months of 2005, including three openings and three closings for relocations. Management defines a relocation as a restaurant opened within six months after closing another restaurant in the same marketing area. A relocation represents a redeployment of assets within a market. All new restaurants open with the display cooking/lodge-look format. This format involves a glass-enclosed grill and cooking area that extends into the dining room and the use of stone and wood inside and outside the building in order to present an atmosphere reminiscent of a mountain lodge. A variety of meats are grilled daily and available to customers as part of the buffet price. Customers go to the grill and can get hot, cooked-to- order steak, chicken or other grilled items placed directly from the grill onto their plates. All new restaurants will operate under the "Fire Mountain" brand name in order to differentiate them from the older Ryan's and other restaurants that operate with a more traditional family steakhouse format. The Company also has a program in which existing Ryan's restaurants undergo significant changes and are converted to Fire Mountain restaurants. The changes generally include the addition of display cooking and various interior and exterior modifications in order to create a lodge-look. During the first nine months of 2005, eight restaurants were converted to the Fire Mountain brand. For the remainder of 2005, the Company plans to build and open three new restaurants, including one relocation, and convert approximately three restaurants to the Fire Mountain brand. Total 2005 capital expenditures are estimated at $73 million. As part of the Company's routine business process, management reviews the Company's underperforming restaurants and evaluates the potential for improvement of each restaurant based on current and future retail traffic in each respective marketing area. In general, restaurants located in satisfactory areas are updated either through cosmetic remodeling or conversion to the Fire Mountain brand. Those restaurants located in declining areas are generally either relocated or closed. During the third quarter of 2005, the Company closed 10 restaurants of which two restaurants were closed for relocations, seven restaurants were closed and either sold or currently held for sale, and one restaurant was closed and remains under a land lease. Management is attempting to sublease the leased property. The Company is currently concentrating its efforts on Company- owned restaurants and is not actively pursuing any franchised locations, either domestically or internationally. For 2006, the Company intends to decrease capital expenditures from 2005 levels by building three to four restaurants, including one relocation, compared to the 15 new restaurants planned for 2005 in order to conserve cash flow for debt repayment purposes and focus on building same-store sales at existing restaurants. Capital expenditures for 2006 are estimated at $34 million. The Company began a stock repurchase program in March 1996 and is currently authorized to repurchase up to 55 million shares of the Company's common stock through December 2008. Repurchases may be made from time to time on the open market or in privately negotiated transactions in accordance with applicable securities regulations, depending on market conditions, share price and other factors, and are subject to limitations under the Company's debt agreements. During the first nine months of 2005, the Company purchased 132,700 shares at an aggregate cost of $1.9 million. Through September 28, 2005, approximately 44.4 million shares, or 55% of total shares available at the beginning of the repurchase program, had been purchased at an aggregate cost of $334.7 million. In July 2005, the Company's Board of Directors suspended all future share repurchases in order to retain the Company's cash flow for debt repayment and other corporate purposes. Management believes that its current capital structure is sufficient to meet its 2005 and 2006 cash requirements. The Company has entered into interest rate hedging transactions in the past, and although no such agreements are currently outstanding, management intends to continue monitoring the interest rate environment and may enter into such transactions in the future if deemed advantageous. CRITICAL ACCOUNTING POLICIES Critical accounting policies have a significant impact on the Company's financial statements and involve difficult or subjective estimates of future events by management. Management's estimates could differ significantly from actual results, leading to possible significant adjustments to future financial results. The following policies are considered by management to involve estimates that most critically impact reported financial results. Asset Lives Property and equipment are recorded at cost, less accumulated depreciation. Buildings and land improvements are depreciated over estimated useful lives ranging from 25 to 39 years, and equipment is depreciated over estimated useful lives ranging from 3 to 20 years. Depreciation expense for financial statement purposes is calculated using the straight- line method. Management is responsible for estimating the initial useful lives and any revisions thereafter and bases its estimates principally on historical usage patterns of the assets. Such revisions to the useful lives have not significantly impacted the Company's results of operations in recent years. Material differences in the amount of reported depreciation could result if different assumptions were used. Impairment of Long-Lived Assets Long-lived assets, which consist principally of restaurant properties, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management reviews restaurants for possible impairment if the restaurant has had aggregate cash flows of $50,000 or less over the previous 12 months or if it has been selected for relocation and the new site is under construction. For restaurants that will continue to be operated, the restaurant's carrying amount is compared to the undiscounted future cash flows, including proceeds from future disposal, over the remaining useful life of the restaurant. The estimate of future cash flows is based on management's review of historical and current sales and cost trends of both the subject and similar restaurants. The estimate of proceeds from future disposal is based on management's knowledge of current and planned development near the restaurant site and on current market transactions. Each of these estimates is based on assumptions, particularly with respect to future sales and costs, that may differ materially from actual results. If the carrying amount exceeds the sum of the undiscounted future cash flows, the carrying amount is reduced to the restaurant's current fair value. If the decision has been made to close and sell a restaurant, the carrying value of that restaurant is reduced through accelerated depreciation to its current fair value less costs to sell and is no longer depreciated once it is closed. Total impairment costs, including related accelerated depreciation charges, amounted to $3,284,000 and $1,100,000 for the first nine months of 2005 and 2004, respectively. Self-Insurance Liabilities The Company self-insures a significant portion of expected losses from its workers' compensation, general liability and team member medical programs. The aggregate amounts of these liabilities were $14,421,000 at September 28, 2005 and $13,466,000 at December 29, 2004. For workers' compensation and general liability claims, the portion of any individual claim that exceeds $250,000 is covered by insurance purchased by the Company. Accrued liabilities are recorded for the estimated, undiscounted future net payments, or ultimate costs, to settle both reported claims and claims that have been incurred but not reported. On a quarterly basis, management reviews claim values as estimated by a third-party claims administrator ("TPA") and then adjusts these values for estimated future increases in order to record ultimate costs. Both current and prior years' claims are reviewed because estimated claim values are frequently adjusted by the TPA as new information, such as updated medical reports or settlements, is received. Management reviews the relationship between historical claim estimates and payment history, overall number of accidents and historical claims experience in order to make an ultimate cost estimate. For team member medical claims, the portion of any individual claim that exceeds $300,000 is covered by insurance purchased by the Company. Accruals are based on management's review of historical claims experience. Unexpected changes in any of these factors could result in costs that are materially different than initially reported. Income Taxes The Company estimates certain components of the provision for income taxes on a quarterly basis. These estimates include, among other items, depreciation expense allowable for tax purposes, allowable federal tax credits for items such as Work Opportunity, Welfare to Work, Renewal Community and FICA taxes paid on reported employee tip income, effective rates for state and local income taxes, and the tax deductibility of certain other items. These estimates are based on the best available information at the time the tax provision is prepared. There were no significant changes to these estimates during the third quarter of 2005. Annual income tax returns are prepared and filed several months after each fiscal year-end. Income tax returns are subject to audit by federal, state, and local governments, generally up to three years after the returns are filed. These returns could be subject to differing interpretations of the applicable authority's tax laws. As part of the audit process, the Company must assess the likelihood that a requested adjustment in income taxes due will be payable either through legal proceedings or by settlement, either of which could result in a material adjustment to the Company's results of operations or financial position. When the Company concludes that it is not probable that a tax position is sustainable, a liability is recorded for any taxes, interest or penalties that are estimated to be due. IMPACT OF INFLATION The Company's operating costs that may be affected by inflation consist principally of food, payroll and utility costs. A significant number of the Company's restaurant team members are paid at the Federal minimum wage or, if higher, the applicable state minimum wage and, accordingly, legislated changes to the minimum wage rates affect the Company's payroll costs. There has been legislation introduced to increase the minimum wage in the U.S. Congress and in the legislatures of approximately one-third of the states in which the Company operates. It is impossible to predict which increases will be implemented. If such increases were implemented, the Company expects that payroll costs, as a percent of sales, would increase. However, the Company is generally able to increase menu prices in order to cover most of the dollar impact of legislated payroll rate increases. The Company considers its current price structure to be very competitive. This factor, among others, is considered by the Company when passing cost increases on to its customers. Annual menu price increases during the last five years have generally ranged from 2% to 4%. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's exposure to market risk relates primarily to changes in interest rates. Foreign currencies are not used in the Company's operations, and approximately 90% of the products used in the preparation of food at the Company's restaurants are not under purchase contract for more than one year in advance. The Company is exposed to interest rate risk on its variable- rate debt, which is composed entirely of outstanding debt under the Company's revolving credit facility (see "Liquidity and Capital Resources"). At September 28, 2005, there was $24.0 million in outstanding debt under this facility. Interest rates for the facility generally change in response to LIBOR. Management estimates that a one-percent increase in interest rates throughout the quarter ended September 28, 2005 would have increased interest expense by approximately $51,000 and decreased net earnings by approximately $35,000. While the Company has entered into interest rate derivative agreements in the past, there were no such agreements outstanding during the three months ended September 28, 2005. The Company does not enter into financial instrument agreements for trading or speculative purposes. Item 4. CONTROLS AND PROCEDURES Under the supervision and with the participation of the Company's management, including its principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report (the "Evaluation Date"). Based on this evaluation, the Company's principal executive officer and principal financial officer concluded as of the Evaluation Date that the Company's disclosure controls and procedures were effective in providing reasonable assurance that the information relating to the Company, including its consolidated subsidiaries, required to be disclosed in its Securities and Exchange Commission ("SEC") reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. During the third quarter of 2005, the Company did not make any changes in its internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, those controls. FORWARD-LOOKING INFORMATION In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions that the statements in this quarterly report and elsewhere that are forward-looking involve risks and uncertainties that may impact the Company's actual results of operations. All statements other than statements of historical fact that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as Company plans or strategies, deadlines for completing projects, expected financial results, expected regulatory environment and other such matters, are forward-looking statements. The words "estimates", "plans", "anticipates", "expects", "intends", "believes" and similar expressions are intended to identify forward-looking statements. All forward-looking information reflects the Company's best judgment based on current information. However, there can be no assurance that other factors will not affect the accuracy of such information. While it is not possible to identify all relevant factors, the following could cause actual results to differ materially from expectations: general economic conditions, including consumer confidence levels; competition; developments affecting the public's perception of buffet-style restaurants; real estate availability; food, labor supply and utility 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 risks and factors described from time to time in the Company's reports filed with the Securities and Exchange Commission, including the Company's annual report on Form 10-K for the fiscal year ended December 29, 2004. The ability of the Company to open new restaurants depends upon a number of factors, including its ability to find suitable locations and negotiate acceptable land acquisition and construction contracts, its ability to attract and retain sufficient numbers of restaurant managers and team members and the availability of reasonably priced capital. The extent of the Company's stock repurchase program during 2005 and future years depends upon the financial performance of the Company's restaurants, the investment required to open new restaurants, share price, the availability of reasonably priced capital, the financial and other covenants contained in the Company's loan agreements that govern both the senior notes and the revolving credit facility, and the maximum debt and stock repurchase levels authorized by the Company's Board of Directors. In July 2005, the Board of Directors suspended stock repurchases under the Company's stock repurchase program. PART II. OTHER INFORMATION Item 1. Legal Proceedings. In November 2002, a lawsuit was filed in the United States District Court, Middle District of Tennessee, Nashville Division, on behalf of three plaintiffs alleging various wage and hour violations by the Company of the Fair Labor Standards Act of 1938. The plaintiffs' attorneys sought collective-action status for the case. In October 2003, the presiding judge denied the Company's request to enforce the arbitration agreements signed by the plaintiffs and also ordered the Company to turn over certain employee addresses to the plaintiffs' attorneys. The Company appealed that decision. As part of the appeal process, the presiding judge stayed the order regarding the employee addresses. In March 2005, the Sixth Circuit Court of Appeals affirmed the ruling that denied enforcement of the arbitration issue, and in June 2005, the presiding judge ordered that notices be sent to potential class members, thereby approving collective-action status for the lawsuit. In July 2005, the Company began negotiations with the plaintiffs' attorney in hopes of reaching a mutually acceptable settlement. In September 2005, the parties took the matter to a mediation hearing. Although no agreement was reached through mediation, settlement discussions between the parties have continued. The Company charged $5,000,000 as the estimated minimum settlement for this litigation to general and administrative expenses in the second quarter of 2005. Based on the ongoing discussions, the Company believes that the $5,000,000 estimated minimum settlement is still applicable and, accordingly, has not charged any additional amounts related to this case during the third quarter of 2005. However, as it is not possible to predict the case's outcome, the ultimate settlement cannot be estimated at this time. In addition, from time to time, the Company is involved in various legal claims and litigation arising in the normal course of business. Based on currently-known legal actions arising in the normal course of business, management believes that, as a result of its legal defenses and insurance arrangements, none of these actions should have a material adverse effect on the Company's business or financial condition, taken as a whole. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. The following table summarizes activity under the Company's stock repurchase program during the third quarter of 2005: Period Total Average Total Maximum Number Price Number Number of of Paid of Shares that Shares Per Shares May Yet Be Purchased Share Purchased Purchased as Under the Part of Plan Publicly Announced Plan July 22,000 $13.60 44,350,406 10,649,594 (06/30/05 - 08/03/05) August - - 44,350,406 10,649,594 (08/04/05 - 08/31/05) September - - 44,350,406 10,649,594 (09/01/05 - 09/28/05) Total 22,000 $13.60 44,350,406 10,649,594
The Company began its stock repurchase program in March 1996 and is currently authorized to repurchase up to 55 million shares of its common stock through December 2008. At September 28, 2005, there were 10,649,594 shares remaining under the current authorization. There were no purchases of the Company's common stock by or on behalf of the Company or any "affiliated purchaser" during the third quarter of 2005 other than through this stock repurchase program. In July 2005, the Board of Directors suspended stock repurchases under the Company's stock repurchase program. Item 6. Exhibits. Exhibits (numbered in accordance with Item 601 of Regulation S-K): Exhibit # Description 10.22.1 First Amendment to Credit Agreement, dated as of November 7, 2005, to the Credit Agreement referred to at Exhibit 10.22 of the Annual Report on Form 10-K for the period ended December 29, 2004 (the "2005 10-K"). 10.23.3 Third Amendment, dated as of November 7, 2005, to the Note Purchase Agreement referred to at Exhibit 10.23 of the 2005 10-K. 10.24.2 Second Amendment, dated as of November 7, 2005, to the Note Purchase Agreement referred to at Exhibit 10.24 of the 2005 10-K. 31.1 Section 302 Certification of Chief Executive Officer 31.2 Section 302 Certification of Chief Financial Officer 32.1 Section 906 Certification of Chief Executive Officer 32.2 Section 906 Certification of Chief Financial Officer Items 3, 4 and 5 are not applicable and have been omitted. SIGNATURES Pursuant to the requirements 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. RYAN'S RESTAURANT GROUP, INC. (Registrant) November 7, 2005 /s/Charles D. Way Charles D. Way Chairman and Chief Executive Officer November 7, 2005 /s/Fred T. Grant, Jr. Fred T. Grant, Jr. Senior Vice President-Finance and Treasurer and Assistant Secretary (Principal Financial and Accounting Officer) November 7, 2005 /s/Richard D. Sieradzki Richard D. Sieradzki Vice President-Accounting and Corporate Controller EX-10.22.1 2 firstamendcredagmt.txt FIRST AMENDMENT TO CREDIT AGREEMENT FIRST AMENDMENT RYAN'S RESTAURANT GROUP, INC. FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT dated as of November 7, 2005 (the "Amendment") is entered into among Ryan's Restaurant Group, Inc., a South Carolina corporation (the "Parent"), Fire Mountain Restaurants, Inc., a Delaware corporation ("Fire Mountain"; together with the Parent, individually a "Borrower" and collectively the "Borrowers"), the Guarantors, the Lenders party hereto and Bank of America, N.A., as Administrative Agent for the Lenders (in such capacity, the "Administrative Agent"). All capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement (as defined below). RECITALS WHEREAS, the Borrowers, the Guarantors, the Lenders and the Administrative Agent entered into that certain Amended and Restated Credit Agreement dated as of December 20, 2004 (as amended or modified from time to time, the "Credit Agreement"); WHEREAS, the Borrowers have requested that the Lenders amend the Credit Agreement as set forth below subject to the terms and conditions specified in this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Reaffirmation. The Credit Parties acknowledge and confirm (a) that the Collateral Agent, on behalf of the Lenders, has a valid and enforceable first priority security interest in the Collateral, (b) that the Borrowers' obligations to repay the outstanding principal amount of the Loans and reimburse the Issuing Lender for any drawing on a Letter of Credit are unconditional and not subject to any offsets, defenses or counterclaims, (c) that the Administrative Agent and the Lenders have performed fully all of their respective obligations under the Credit Agreement and the other Credit Documents, and (d) by entering into this Amendment, the Lenders do not waive or release any term or condition of the Credit Agreement or any of the other Credit Documents or any of their rights or remedies under such Credit Documents or applicable law or any of the obligations of the Credit Parties thereunder. 2. Amendments. The Credit Agreement is hereby amended as follows: (a) Any reference to "Applicable Percentage" in the following sections of the Credit Agreement is hereby replaced with the words "Revolving Loan Commitment Percentage": the definition of "L/C Advance" in Section 1.1, Section 2.2(b)(ii), Section 2.2(c)(i), Section 2.2(c)(ii), Section 2.2(c)(iv), Section 2.2(d)(i), Section 2.2(d)(ii) and Section 11.6(c). (b) The following sentence is hereby added at the end of the definition of "Applicable Percentage" in Section 1.1 of the Credit Agreement and shall read as follows: Notwithstanding the foregoing, (a) from the First Amendment Effective Date through and including March 29, 2006, the Applicable Percentage (i) for Eurodollar Loans and Letter of Credit Fees, shall be 1.50%, (ii) for Base Rate Loans, shall be 0.50% and (iii) for Unused Fees, shall be 0.275%; and (b) from March 30 , 2006 until the first Calculation Date subsequent to July 4, 2007, the Applicable Percentage (i) for Eurodollar Loans and Letter of Credit Fees, shall be 1.25%, (ii) for Base Rate Loans, shall be 0.25% and (iii) for Unused Fees, shall be 0.225%; provided, however if the Parent delivers an officer's certificate in accordance with the provisions of Section 7.1(c) demonstrating that the Fixed Charge Coverage Ratio as of the end of any fiscal quarter ending during the period from March 30, 2006 through and including July 4, 2007 is greater than or equal to 2.25 to 1.0, the Applicable Percentages shall be determined and adjusted on the applicable Calculation Date in accordance with the terms of the preceding paragraph; provided, further, however that if the Parent fails to provide the officer's certificate required by Section 7.1(c) on or before the date required by such Section 7.1(c) for any four fiscal quarter period ending during the period from March 30, 2006 through July 4, 2007 demonstrating that the Fixed Charge Coverage Ratio for the applicable period is greater than or equal to 2.25 to 1.0, the Applicable Percentages from such date shall be the percentages identified in subsections (b)(i), (b)(ii) and (b)(iii) above. (c) The definition of "Carryforward Capital Expenditure Basket" in Section 1.1 of the Credit Agreement is hereby amended to read as follows: "Carryforward Capital Expenditure Basket" means the aggregate, if any, of (i) the Unused Restricted Payment Allowance allocated by the Parent pursuant to Section 8.8(b) for Capital Expenditures in future fiscal years and (ii) if in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 7.2(b), commencing with fiscal year 2007, the Unused Capital Expenditure Allowance allocated by the Parent pursuant to Section 8.13(b) for Capital Expenditures in future fiscal years. Notwithstanding the foregoing, the Carryforward Capital Expenditures Basket may not be increased in any fiscal year by more than $10,000,000. (d) The definition of "EBITDA" in Section 1.1 of the Credit Agreement is hereby amended to read as follows: "EBITDA" means, for any period with respect to the Credit Parties and their Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Net Income for such period (excluding the effect of any extraordinary or other non-recurring gains or non-cash losses) plus (b) an amount which, in the determination of Net Income for such period has been deducted for (i) Interest Expense for such period, (ii) total Federal, state, foreign or other income taxes for such period and (iii) all depreciation and amortization for such period plus (c) costs and charges incurred during such period associated with the settlement of the wage and hour lawsuit in the Middle District Court of Tennessee in the aggregate amount of up to $12 million to the extent accrued during such period, all as determined in accordance with GAAP. (e) The definition of "EBITR" in Section 1.1 of the Credit Agreement is hereby amended to read as follows: "EBITR" means, for any period with respect to the Credit Parties and their Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Net Income for such period (excluding the effect of any extraordinary or other non-recurring gains or non-cash losses) plus (b) an amount which, in determination of Net Income for such period has been deducted for (i) Interest Expense for such period, (ii) total Federal, state, foreign or other income taxes for such period and (iii) Rent Expense for such period plus (c) costs and charges incurred during such period associated with the settlement of the wage and hour lawsuit in the Middle District Court of Tennessee in the aggregate amount of up to $12 million to the extent accrued during such period, all as determined in accordance with GAAP. (f) The definition of "Unused Capital Expenditure Allowance" in Section 1.1 of the Credit Agreement is hereby amended to read as follows: "Unused Capital Expenditure Allowance" means, for any fiscal year, commencing with the fiscal year ending January 2, 2008, the amount by which the Initial Capital Expenditure Basket for such fiscal year exceeds the aggregate amount of Capital Expenditures actually made by the Parent and its Subsidiaries during such fiscal year. (g) The definition of "Unused Restricted Payment Allowance" in Section 1.1 of the Credit Agreement is hereby amended to read as follows: "Unused Restricted Payment Allowance" means, for any fiscal year, commencing with the fiscal year ending January 3, 2007, the amount by which the amount of share repurchases the Parent was permitted to make as of the end of such fiscal year in accordance with Section 8.8 exceeds the amount of actual share repurchases made by the Parent as of the end of such fiscal year. (h) The following definition is hereby added to Section 1.1 of the Credit Agreement and shall read as follows: "First Amendment Effective Date" means November 7, 2005. (i) Section 7.2(b) of the Credit Agreement is hereby amended to read as follows: (b) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as of the last day of each fiscal quarter of the Parent, shall be greater than or equal to (i) for any fiscal quarter ending on or before September 27, 2006 (including, without limitation, the fiscal quarter period ending September 28, 2005) 1.55 to 1.0, (ii) for the fiscal quarter ending after September 27, 2006 and on or before January 3, 2007, 1.60 to 1.0, (iii) for the fiscal quarter ending after January 3, 2007 and on or before April 4, 2007, 1.65 to 1.0, (iv) for the fiscal quarter ending after April 4, 2007 and on or before July 4, 2007, 1.75 to 1.0 and (v) for any fiscal quarter ending after July 4, 2007, 2.25 to 1.0; provided, however, that if scheduled principal payments are due and payable with respect to both the Senior Notes and the 2003 Senior Notes during the four fiscal quarter period of the Parent included in any calculation of the Fixed Charge Coverage Ratio after July 4, 2007, the Fixed Charge Coverage Ratio for any such period shall be greater than or equal to 2.00 to 1.00. (j) Section 8.8 of the Credit Agreement is hereby amended to read as follows: (a) No Credit Party will, nor will it permit its Subsidiaries to, directly or indirectly, (i) declare or pay any dividends or make any other distribution (whether in cash, securities or other payments) upon any shares of its Capital Stock of any class (other than dividends payable solely in Capital Stock); provided that, any Subsidiary of the Parent may pay dividends to its parent or (ii) purchase, redeem, make a sinking fund or similar payment or otherwise acquire or retire or make any provisions for redemption, acquisition or retirement of any shares of its Capital Stock of any class or any warrants or options to purchase any such shares; provided, that, so long as at the time of any such repurchase and after giving effect thereto, no Default or Event of Default shall exist or be continuing, the Parent may repurchase shares of its Capital Stock pursuant to the Share Repurchase Program so long as, immediately after giving effect to any such repurchase, the aggregate amount of such repurchases declared or made during any fiscal year shall not exceed the sum of $15,000,000 minus the amount of the aggregate Unused Restricted Payment Allowance allocated to the Carryforward Capital Expenditure Basket as provided in subparagraph (b) below; provided, however, that if the Parent is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 7.2(b), the aggregate amount of such Restricted Payments of the Parent declared or made during the period commencing with fiscal year 2008 and ending the date such Restricted Payment is declared or made, inclusive, shall not exceed the sum of (1) $25,000,000 increased on a cumulative basis as of the end of each fiscal quarter of the Borrower commencing with fiscal year 2008 plus (2) an amount equal to 50% of Net Income for such period (or minus 100% of Net Income for such period if Net Income for such period if a loss) plus (3) the Carryforward Restricted Payment Basket minus (4) the amount of the aggregate Unused Restricted Payment Allowance allocated to the Carryforward Capital Expenditure Basket as provided in subparagraph (b) below. (b) Within 90 days after the end of each fiscal year of the Parent, commencing with 90 days after the end of fiscal year 2006, after or with the delivery of the audited annual financial statements in respect of the immediately preceding fiscal year of the Parent pursuant to Section 7.1(a), the Parent shall notify the Administrative Agent of (i) the Unused Restricted Payment Allowance for such immediately preceding fiscal year and (ii) whether or not the Parent will allocate any portion of such Unused Restricted Payment Allowance to the Carryforward Capital Expenditure Basket, whereupon the Carryforward Capital Expenditure Basket shall be immediately increased by the amounts allocated thereto. Notwithstanding the foregoing, the Carryforward Capital Expenditure Basket may not be increased in any fiscal year by more than $10,000,000. (k) Section 8.13 of the Credit Agreement is hereby amended and restated to read as follows: (a) (i) The Credit Parties will not permit Capital Expenditure in any fiscal year to exceed the sum of (A) $94,000,000 plus (B) the amount of net cash proceeds received in each such fiscal year from the sale of stores in accordance with Section 8.5(e) plus (C) the Carryforward Capital Expenditure Basket plus (D) the amount of insurance proceeds received in such fiscal year for losses, damages or casualties related to Hurricane Katrina or Hurricane Rita (ii) The Credit Parties will not permit Capital Expenditures in any fiscal year commencing with the fiscal year ending January 3, 2007, to exceed the sum of (A) $36,000,000 (the "Initial Capital Expenditure Basket") plus (B) the amount of net cash proceeds received in each such fiscal year from the sale of stores in accordance with Section 8.5(e) plus (C) the Carryforward Capital Expenditure Basket; provided, however, that such sum amount for a fiscal year may be increased by the amount of insurance proceeds received in such fiscal year for losses, damages or casualties related to Hurricanes Katrina or Rita; provided further that if the Parent is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 7.2(b), commencing with fiscal year 2008 the Initial Capital Expenditure Basket for purposes of calculating the sum amount hereinabove shall be as follows: Fiscal Year Amount 2008 $106,000,000 2009 $110,000,000
(b) If the Parent is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 7.2(b), within 90 days after the end of each fiscal year of the Parent, commencing with 90 days after the end of fiscal year 2007, after or with the delivery of the audited annual financial statements in respect of the immediately preceding fiscal year of the Parent pursuant to Section 7.1(a), the Parent shall notify the Administrative Agent of (i) the Unused Capital Expenditure Allowance for such immediately preceding fiscal year and (ii) the Parent's allocation of such Unused Capital Expenditure Allowance in whole or in part to the Carryforward Capital Expenditure Basket and/or the Carryforward Restricted Payment Basket, whereupon the Carryforward Capital Expenditure Basket and/or the Carryforward Restricted Payment Basket shall be immediately increased by the amounts allocated thereto. If the Parent fails to deliver such timely notice to the Administrative Agent, the Unused Capital Expenditure Allowance shall be allocated first to the Carryforward Restricted Payment Basket and then to the Carryforward Capital Expenditure Basket. Notwithstanding the foregoing, (A) the Carryforward Capital Expenditure Basket may not be increased in any fiscal year by more than $10,000,000 and (B) if the Parent is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 7.2(b), (1) the Carryforward Restricted Payment Basket, if any, may not be increased in any fiscal year by more than $25,000,000, and (2) no increase in the Carryforward Restricted Payment Basket shall be permitted if the aggregate amount of the Capital Expenditures made in the immediately preceding fiscal year was less than $40,000,000. 3. Conditions Precedent. This Amendment shall be effective as of the date hereof when all of the conditions set forth below have been satisfied: (a) The Administrative Agent shall have received counterparts of this Amendment, duly executed by the Borrowers, the Guarantors and the Required Lenders; (b) The Administrative Agent shall have received copies of resolutions of each Loan Party approving and adopting the Amendment and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of such Loan Party to be true and correct and in force and effect as of the date hereof; (c) The Administrative Agent shall have received a favorable legal opinion from counsel to the Credit Parties; (d) Receipt by the Administrative Agent of a copy, certified by a Responsible Officer of the Parent as true and complete, of (i) the amendment to the Note Purchase Agreements and (ii) the amendment to the 2003 Note Purchase Agreement, such amendments to be reasonably satisfactory in form and substance to the Administrative Agent; and (e) The Administrative Agent shall have received for the account of each Lender approving the Amendment an amendment fee equal to 10 basis points (0.10%) on the Commitment of each such Lender. 4. Miscellaneous. (a) Except as herein specifically agreed, the Credit Agreement, and the obligations of the Credit Parties thereunder and under the other Credit Documents, are hereby ratified and confirmed and shall remain in full force and effect according to their terms. (b) Each Guarantor (a) acknowledges and consents to all of the terms and conditions of this Amendment, (b) affirms all of its obligations under the Credit Documents and (c) agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge its obligations under the Credit Agreement or the other Credit Documents. (c) The Borrowers and each Guarantor hereby represent and warrant as follows: (i) Each Credit Party has taken all necessary action to authorize the execution, delivery and performance of this Amendment. (ii) This Amendment has been duly executed and delivered by the Credit Parties and constitutes the legal, valid and binding obligations of each of the Credit Parties, enforceable in accordance with its terms, except as such enforceability may be subject to (A) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors' rights generally and (B) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). (iii) No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or third party is required in connection with the execution, delivery or performance by any Credit Party of this Amendment. (d) The Credit Parties represent and warrant to the Lenders that (i) the representations and warranties of the Credit Parties set forth in Section 6 of the Credit Agreement and in each other Credit Document are true and correct in all material respects as of the date hereof with the same effect as if made on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date and (ii) no event has occurred and is continuing which constitutes a Default or an Event of Default. (e) This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of an executed counterpart of this Amendment by telecopy shall be effective as an original and shall constitute a representation that an executed original shall be delivered. (f) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF SOUTH CAROLINA. EX-10.23.3 3 thirdamendnpa.txt THIRD AMENDMENT TO NPA EXECUTION COPY THIRD AMENDMENT TO NOTE PURCHASE AGREEMENTS This THIRD AMENDMENT TO NOTE PURCHASE AGREEMENTS (hereinafter, the "Amendment") is entered into as of November 7, 2005 among Ryan's Restaurant Group, Inc. (formerly known as Ryan's Family Steak Houses, Inc.), a South Carolina corporation (the "Company") and the Purchasers. WHEREAS, the Company issued and sold Seventy Five Million Dollars ($75,000,000) in aggregate principal amount of its 9.02% Senior Notes due January 28, 2008 (as they may be amended, restated or otherwise modified from time to time, the "Notes") pursuant to separate Note Purchase Agreements, each dated as of January 28, 2000, between the Company and the purchasers identified on Schedule A thereto, (as amended by the Amendment Agreement dated as of July 25, 2003 and by the Second Amendment to Note Purchase Agreements dated as of December 20, 2004, the "Note Agreements"; capitalized terms used and not otherwise defined herein shall have the same meaning as ascribed to such terms in the Note Agreements). WHEREAS, the register for the registration and transfer of the Notes indicates that the Persons named in Annex 1 hereto are currently the holders of the entire outstanding principal amount of the Notes. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendments. Each Note Agreement is hereby amended in the following respects: (a) Section 10.4 of each Note Agreement is hereby amended and restated in its entirety to read as follows: "10.4 Fixed Charge Coverage Ratio. The Company shall not permit the Fixed Charge Coverage Ratio, as of the last day of each fiscal quarter of the Company to be less than (i) 1.55:1.00 for each fiscal quarter period ending on or before September 27, 2006 (including, without limitation, for the fiscal quarter period ended September 28, 2005), (ii) 1.60:1.00 for each fiscal quarter period ending after September, 27, 2006 and on or before January 3, 2007, (iii) 1.65:1.00 for each fiscal quarter period ending after January 3, 2007 and on or before April 4, 2007, (iv) 1.75:1.00 for each fiscal quarter period ending after April 4, 2007 and on or before July 4, 2007, and (v) 2.25:1.00 for each fiscal quarter thereafter; provided, however, that if scheduled principal payments are due and payable with respect to both the Notes and the 2003 Senior Notes during the four fiscal quarter period of the Company included in any calculation of the Fixed Charge Coverage Ratio for a fiscal quarter period ending after July 4, 2007, the minimum Fixed Charge Coverage Ratio required by this clause (v) of Section 10.4 as of the last day of such four fiscal quarter period shall be 2.00:1.00." (b) Section 10.5 of each Note Agreement is hereby amended and restated in its entirety to read as follows: "10.5. Restricted Payments and Restricted Investments. (a) The Company will not, and will not permit any of its Subsidiaries to, declare, make or incur any liability to declare or make any Restricted Payment or any Restricted Investment except that (i) any Subsidiary may declare and make Restricted Payments to its parent and (ii) the Company may make Restricted Payments and Restricted Investments if, immediately prior, and immediately after giving effect, to the making of such Restricted Payment or Restricted Investment, no Default or Event of Default would exist and, with respect to Restricted Payments, immediately after giving effect to such action, the aggregate amount of such Restricted Payments of the Company and its Subsidiaries declared or made during any fiscal year would not exceed $15,000,000 minus the amount of the aggregate Unused Restricted Payment Allowance allocated to the Carryforward Capital Expenditure Basket as provided in subsection (b) below, provided, however, if the Company is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 10.4, the aggregate amount of such Restricted Payments of the Company and its Subsidiaries declared or made during the period commencing with the first day of fiscal year 2008 and ending on the date such Restricted Payment is declared or made, inclusive, shall not exceed the sum of: (1) $25,000,000, plus (2) 50% of Net Income for each quarter in such period (or minus 100% of Net Income for such period if Net Income for such period is a loss), plus (3) the aggregate amount of net proceeds arising from sales of the Company's Capital Stock during such period, plus (4) the Carryforward Restricted Payment Basket, minus (5) the amount of the aggregate Unused Restricted Payment Allowance allocated to the Carryforward Capital Expenditure Basket as provided in subsection (b) below. (b) Within 90 days after the end of each fiscal year of the Company, commencing with 90 days after the end of fiscal year 2006, after or with delivery of the audited annual financial statements in respect of the immediately preceding fiscal year of the Company, the Company shall notify the holders of Notes of (i) the Unused Restricted Payment Allowance for such immediately preceding fiscal year and (ii) whether or not the Company will allocate any portion of such Unused Restricted Payment Allowance to the Carryforward Capital Expenditure Basket, whereupon the Carryforward Capital Expenditure Basket shall be immediately increased by the amounts allocated thereto. Notwithstanding the foregoing, the Carryforward Capital Expenditure Basket may not be increased in any fiscal year by more than $10,000,000. (c) If the Company is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 10.4, within 90 days after the end of each fiscal year of the Company, commencing with 90 days after the end of fiscal year 2007, after or with delivery of the audited annual financial statements in respect of the immediately preceding fiscal year of the Company, the Company shall notify the holders of Notes of (i) the Unused Capital Expenditure Allowance for such immediately preceding fiscal year and (ii) the Company's allocation of such Unused Capital Expenditure Allowance in whole or in part to the Carryforward Capital Expenditure Basket and/or the Carryforward Restricted Payment Basket, whereupon the Carryforward Capital Expenditure Basket and Carryforward Restricted Payment Basket shall be immediately increased by the amounts allocated thereto. If the Company fails to deliver such notice to the holders of Notes in the time required, the Unused Capital Expenditure Allowance shall be allocated first to the Carryforward Restricted Payment Basket and then to the Carryforward Capital Expenditure Basket. Notwithstanding the foregoing, (x) the Carryforward Capital Expenditure Basket may not be increased in any fiscal year by more than $10,000,000, and (y) if the Company is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 10.4, (i) the Carryforward Restricted Payment Basket, if any, may not be increased in any fiscal year by more than $25,000,000, and (ii) no increase in the Carryforward Restricted Payment Basket shall be permitted if the aggregate amount of Capital Expenditures made in the immediately preceding fiscal year was less than $40,000,000." (c) Schedule B of each Note Agreement is hereby amended as follows: (i) by amending and restating in its entirety the definition of "EBITDA" as follows: "EBITDA" means, for any period with respect to the Obligors and their Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Net Income for such period (excluding the effect of non-cash losses or any extraordinary or other non-recurring gains) plus (b) an amount which, in the determination of Net Income for such period has been deducted for (i) Interest Expense for such period, (ii) total Federal, state, foreign or other income taxes for such period and (iii) all depreciation and amortization for such period plus (c) costs and charges incurred during such period associated with the settlement of the wage and hour lawsuit in the Middle District Court of Tennessee in the aggregate amount of up to $12,000,000 to the extent accrued during such period, all as determined in accordance with GAAP. (ii) by amending and restating in its entirety the definition of "EBITR" as follows: "EBITR" means, for any period with respect to the Obligors and their Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Net Income for such period (excluding the effect of any non-cash losses or extraordinary or other non-recurring gains) plus (b) an amount which, in the determination of Net Income for such period, has been deducted for (i) Interest Expense for such period, (ii) total Federal, state, foreign or other income taxes for such period and (iii) Rent Expense for such period plus (c) costs and charges incurred during such period associated with the settlement of the wage and hour lawsuit in the Middle District Court of Tennessee in the aggregate amount of up to $12,000,000 to the extent accrued during such period. (iii) by amending and restating in its entirety the definition of "Permitted Capital Expenditures" as follows: "Permitted Capital Expenditures" means, (A) in fiscal year 2005 the sum of (i) $94,000,000 plus the amount of net cash proceeds received in such fiscal year from the sale of stores in accordance with Section 10.9 plus (ii) the Carryforward Capital Expenditure Basket, plus (iii) the amount of insurance proceeds received in such fiscal year for losses, damages or casualties related to Hurricane Katrina or Hurricane Rita and (B) in any fiscal year, commencing with the fiscal year ending January 3, 2007, the sum of (i) $36,000,000 (the "Initial Capital Expenditure Basket") plus (ii) the amount of net cash proceeds received in such fiscal year from the sale of stores in accordance with Section 10.9 plus (iii) the Carryforward Capital Expenditure Basket, provided, however, that such sum amount for a fiscal year may be increased by the amount of insurance proceeds received in such fiscal year for losses, damages or casualties related to Hurricanes Katrina or Rita, provided further that if the Company is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 10.4, for the fiscal year 2008 the Initial Capital Expenditure Basket for purposes of calculating the sum amount hereinabove shall be $106,000,000. (iv) by adding the definition of "Carryforward Capital Expenditure Basket" as follows: "Carryforward Capital Expenditure Basket" means the aggregate, if any, of (i) the Unused Restricted Payment Allowance allocated by the Company pursuant to Section 10.5(b) for Capital Expenditures in future fiscal years and (ii) if the Company is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 10.4, commencing with fiscal year 2007, the Unused Capital Expenditure Allowance allocated by the Company pursuant to Section 10.5(c) for Capital Expenditures in future fiscal years; notwithstanding the foregoing, the Carryforward Capital Expenditure Basket may not be increased in any fiscal year by more than $10,000,000. (v) by adding the definition of "Carryforward Restricted Payment Basket" as follows: "Carryforward Restricted Payment Basket" means the portion, if any, of all Unused Capital Expenditure Allowance allocated by the Company pursuant to Section 10.5(c) for permitted Restricted Payments in future fiscal years. (vi) by adding the definition of "Unused Capital Expenditure Allowance" as follows: "Unused Capital Expenditure Allowance" means, for any fiscal year, commencing with fiscal year ending January 2, 2008, the amount by which the Permitted Capital Expenditures for such fiscal year exceeds the aggregate amount of Capital Expenditures actually made by the Company and its Subsidiaries during such fiscal year. 2. Conditions Precedent. The effectiveness of this Amendment is conditioned on: (a) Receipt by the Required Holders of duly executed counterparts of this Amendment from the Required Holders and the Company; (b) Delivery to the Required Holders of the consent and reaffirmation attached hereto, duly executed by each Subsidiary Guarantor; (c) Receipt by the Required Holders of resolutions of the Company and each Subsidiary Guarantor approving and adopting the Amendment and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of such Person to be true and correct and in force and effect as of the date hereof; (d) Receipt by the Required Holders of a favorable legal opinion from counsel to the Credit Parties; and (e) Delivery to the Required Holders of a duly executed copy of a similar amendment to the Credit Documents and the 2003 Note Agreement (each as defined by the Note Agreement as amended hereby), certified by a Responsible Officer as true and complete, together with such other documents, instruments, approvals or opinions as the Required Holders may reasonably request, each in form and substance reasonably satisfactory to the Required Holders. 3. Representations and Warranties. To induce you to enter into this Amendment and to consent to the Amendment, the Company represents and warrants as follows: (a) The execution, delivery and performance by the Company of this Amendment (i) are within such Person's power and authority; (ii) have been duly authorized by all necessary corporate action; (iii) are not in contravention of any provision of such Person's certificate of incorporation agreement or other organizational documents; (iv) do not violate any law or regulation, or any order or decree of any governmental authority; (v) do not violate, contravene or conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound, the violation of which would have or be reasonably expected to have a Material Adverse Effect; (vi) do not result in the creation or imposition of any Lien upon any of the property of the Company or any of its Subsidiaries; and (vii) do not require the consent or approval of any governmental authority or any other person; (b) This Amendment has been duly executed and delivered for the benefit of or on behalf of the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors' rights and remedies in general; (c) There are no pending or threatened actions, suits or proceedings affecting the Company or any of its Subsidiaries or the properties of the Company or any of its Subsidiaries before any court, governmental agency or arbitrator, that would reasonably be expected, if adversely determined, to have a Material Adverse Effect or to affect the legality, validity or enforceability of each Note Agreement, as amended by this Amendment; and (d) After giving effect to this Amendment, the representations and warranties of the Company contained in each Note Agreement and in the other Financing Documents are true and correct in all material respects, except that disclosure schedules have not been updated from those previously provided to the holders of the Notes, and no Default or Event of Default under the Note Agreements has occurred and is continuing as of the date hereof or would be caused hereby. 4. Acknowledgment of Perfection of Security Interest. The Company hereby acknowledges that, as of the date hereof, the security interests and liens granted to the Noteholders under the Note Agreements and the other Financing Documents are in full force and effect, are properly perfected and are enforceable in accordance with the terms of the Note Agreements and the other Financing Documents. 5. Reference to and Effect on the Note Agreements. (a) Defined terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Note Agreements. (b) Except as expressly provided in this Amendment, the Note Agreements shall remain unchanged and in full force and effect, except that each reference in the Note Agreements, and in any agreements, certificates and notices simultaneously herewith or hereafter executed under or pursuant to the Note Agreements, as amended hereby, to the "Note Agreement" or "Note Agreements", "this Agreement", "hereof", "herein" and similar terms referring to the Note Agreements, shall be deemed to refer to the Note Agreements as amended by this Amendment. (c) The execution, deliver and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any holder of a Note under any Note Agreement or the Notes, nor constitute a waiver of any provision of any of the foregoing. 6. Costs and Expenses. The Company agrees to pay on demand all costs and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Purchasers or any other permitted holder of a Note in connection with this Amendment and the transactions contemplated hereby. The Company further agrees to pay on demand all costs and expense, if any, incurred by the Purchasers or any other permitted holder of a Note in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Amendment, including, without limitation, fees and expenses of counsel in connection with the enforcement of rights under this paragraph 6. 7. No Default or Claims. To induce the Purchasers to enter into this Amendment, the Company hereby acknowledges and agrees that, as of the date hereof, and after giving effect to the terms hereof, there exists (i) no Default or Event of Default, (ii) no right of offset, recoupment, defense, counterclaim, claim or objection in favor of the Company arising out of or with respect to any of the Notes or other obligations of the Company owed to any holder of a Note, and (iii) each Purchaser has acted in good faith and has conducted its relationships with the Company in a commercially reasonable manner in connection with the negotiations, execution and delivery of this Amendment and in all respects in connection with the Note Agreements, the Company hereby waiving and releasing any such claims to the contrary that may exist as of the date of this Amendment. 8. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 9. Governing Law. This Amendment shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice- of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than New York. [Remainder of page intentionally left blank; next page is signature page.] CONSENT AND REAFFIRMATION OF GUARANTORS The undersigned, as guarantors, in favor of the parties to the Note Agreements referred to in the foregoing Amendment, hereby consent to such Amendment and hereby confirm and agree that each of the Subsidiary Guarantees (and each Guaranty provided therein) is, and shall continue to be, in full force and effect and is hereby confirmed and ratified in all respects except that, upon the effectiveness of, and on and after the date of, said Amendment, all references in the Subsidiary Guarantee and the Amended and Restated Pledge Agreement to the Note Agreements, "thereunder", "thereof", or words of like import referring to the Note Agreements shall mean the Note Agreements as amended by said Amendment. The undersigned, as pledgors, in favor of the parties to the Note Agreements, hereby acknowledge that, as of the date hereof, the security interests and liens granted to the Noteholders under the Note Agreements and the other Financing Documents are in full force and effect, are properly perfected and are enforceable in accordance with the terms of the Note Agreements and the other Financing Documents. IN WITNESS WHEREOF, the undersigned have executed this Consent as of the day and year first set forth above. Annex 1 CURRENT HOLDERS AND PRINCIPAL AMOUNTS Name of Current Holder Aggregate Principal Amount of Notes Held The Prudential Insurance Company of $30,000,000 America J. Romeo & Co. (MONY) $11,250,000 United of Omaha Life Insurance Company $3,000,000 Mutual of Omaha Insurance Company $3,000,000 Companion Life Insurance Company $1,500,000 Nationwide Life Insurance Company $2,250,000 Nationwide Life and Annuity Insurance $1,500,000 Company BankBoston, N.A. $3,750,000
EX-10.24.2 4 secondamendnpa.txt SECOND AMENDMENT TO NPA EXECUTION COPY SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT This SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT (hereinafter, the "Amendment") is entered into as of November 7, 2005 among Ryan's Restaurant Group, Inc. (formerly known as Ryan's Family Steak Houses, Inc.), a South Carolina corporation (the "Company") and the Purchasers. WHEREAS, the Company issued and sold One Hundred Million Dollars ($100,000,000) in aggregate principal amount of its 4.65% Senior Notes due July 25, 2013 (as they may be amended, restated or otherwise modified from time to time, the "Notes") pursuant to that certain Note Purchase Agreement dated as of July 25, 2003, as amended by the First Amendment to Note Purchase Agreement dated as of December 20, 2004, between the Company and the purchasers identified on Schedule A thereto (as amended, modified or supplemented from time to time to the date hereof, the "Note Agreement"; capitalized terms used and not otherwise defined herein shall have the same meaning as ascribed to such terms in the Note Agreement). WHEREAS, the register for the registration and transfer of the Notes indicates that the Persons named in Annex 1 hereto are currently the holders of the entire outstanding principal amount of the Notes. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendments. The Note Agreement is hereby amended in the following respects: (a) Section 10.4 of the Note Agreement is hereby amended and restated in its entirety to read as follows: "10.4 Fixed Charge Coverage Ratio. The Company shall not permit the Fixed Charge Coverage Ratio, as of the last day of each fiscal quarter of the Company to be less than (i) 1.55:1.00 for each fiscal quarter period ending on or before September 27, 2006 (including, without limitation, for the fiscal quarter period ended September 28, 2005), (ii) 1.60:1.00 for each fiscal quarter period ending after September 27, 2006 and on or before January 3, 2007, (iii) 1.65:1.00 for each fiscal quarter period ending after January 3, 2007 and on or before April 4, 2007, (iv) 1.75:1.00 for each fiscal quarter period ending after April 4, 2007 and on or before July 4, 2007, and (v) 2.25:1.00 for each fiscal quarter thereafter; provided, however, that if scheduled principal payments are due and payable with respect to both the Notes and the 2000 Senior Notes during the four fiscal quarter period of the Company included in any calculation of the Fixed Charge Coverage Ratio for a fiscal quarter period ending after July 4, 2007, the minimum Fixed Charge Coverage Ratio required by this clause (v) of Section 10.4 as of the last day of such four fiscal quarter period shall be 2.00:1.00. " (b) Section 10.5 of the Note Agreement is hereby amended and restated in its entirety to read as follows: "10.5. Restricted Payments and Restricted Investments. (a) The Company will not, and will not permit any of its Subsidiaries to, declare, make or incur any liability to declare or make any Restricted Payment or any Restricted Investment except that (i) any Subsidiary may declare and make Restricted Payments to its parent and (ii) the Company may make Restricted Payments and Restricted Investments if, immediately prior, and immediately after giving effect, to the making of such Restricted Payment or Restricted Investment, no Default or Event of Default would exist and, with respect to Restricted Payments, immediately after giving effect to such action, the aggregate amount of such Restricted Payments of the Company and its Subsidiaries declared or made during any fiscal year would not exceed $15,000,000 minus the amount of the aggregate Unused Restricted Payment Allowance allocated to the Carryforward Capital Expenditure Basket as provided in subsection (b) below, provided, however, if the Company is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 10.4, the aggregate amount of such Restricted Payments of the Company and its Subsidiaries declared or made during the period commencing with the first day of fiscal year 2008 and ending on the date such Restricted Payment is declared or made, inclusive, shall not exceed the sum of: (1) $25,000,000, plus (2) 50% of Net Income for each quarter in such period (or minus 100% of Net Income for such period if Net Income for such period is a loss), plus (3) the aggregate amount of net proceeds arising from sales of the Company's Capital Stock during such period, plus (4) the Carryforward Restricted Payment Basket, minus (5) the amount of the aggregate Unused Restricted Payment Allowance allocated to the Carryforward Capital Expenditure Basket as provided in subsection (b) below. (b) Within 90 days after the end of each fiscal year of the Company, commencing with 90 days after the end of fiscal year 2006, after or with delivery of the audited annual financial statements in respect of the immediately preceding fiscal year of the Company, the Company shall notify the holders of Notes of (i) the Unused Restricted Payment Allowance for such immediately preceding fiscal year and (ii) whether or not the Company will allocate any portion of such Unused Restricted Payment Allowance to the Carryforward Capital Expenditure Basket, whereupon the Carryforward Capital Expenditure Basket shall be immediately increased by the amounts allocated thereto. Notwithstanding the foregoing, the Carryforward Capital Expenditure Basket may not be increased in any fiscal year by more than $10,000,000." (c) Section 10.13 of the Note Agreement is hereby amended and restated in its entirety to read as follows: "10.13. Capital Expenditures. (a) The Company will not permit Capital Expenditures (A) in fiscal year 2005 to exceed the sum of (i) $94,000,000 plus the amount of net cash proceeds received in such fiscal year from the sale of stores in accordance with Section 10.9 plus (ii) the Carryforward Capital Expenditure Basket, plus (iii) the amount of insurance proceeds received in such fiscal year for losses, damages or casualties related to Hurricane Katrina or Hurricane Rita and (B) in any fiscal year, commencing with the fiscal year ending January 3, 2007, to exceed the sum of (i) $36,000,000 (the "Initial Capital Expenditure Basket") plus (ii) the amount of net cash proceeds received in such fiscal year from the sale of stores in accordance with Section 10.9 plus (iii) the Carryforward Capital Expenditure Basket, provided, however, that such sum amount for a fiscal year may be increased by the amount of insurance proceeds received in such fiscal year for losses, damages or casualties related to Hurricanes Katrina or Rita, provided further that if the Company is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 10.4, commencing with fiscal year 2008 the Initial Capital Expenditure Basket for purposes of calculating the sum amount hereinabove shall be as follows: Fiscal year Amount 2008 $106,000,000 2009 $110,000,000 2010 $114,000,000 2011 $119,000,000 2012 $124,000,000 2013 $129,000,000
(b) If the Company is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 10.4, within 90 days after the end of each fiscal year of the Company, commencing with 90 days after the end of fiscal year 2007, after or with delivery of the audited annual financial statements in respect of the immediately preceding fiscal year of the Company, the Company shall notify the holders of Notes of (i) the Unused Capital Expenditure Allowance for such immediately preceding fiscal year and (ii) the Company's allocation of such Unused Capital Expenditure Allowance in whole or in part to the Carryforward Capital Expenditure Basket and/or the Carryforward Restricted Payment Basket, whereupon the Carryforward Capital Expenditure Basket and Carryforward Restricted Payment Basket shall be immediately increased by the amounts allocated thereto. If the Company fails to deliver such notice to the holders of Notes in the time required, the Unused Capital Expenditure Allowance shall be allocated first to the Carryforward Restricted Payment Basket and then to the Carryforward Capital Expenditure Basket. Notwithstanding the foregoing, (x) the Carryforward Capital Expenditure Basket may not be increased in any fiscal year by more than $10,000,000, and (y) if the Company is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 10.4, (i) the Carryforward Restricted Payment Basket, if any, may not be increased in any fiscal year by more than $25,000,000, and (ii) no increase in the Carryforward Restricted Payment Basket shall be permitted if the aggregate amount of Capital Expenditures made in the immediately preceding fiscal year was less than $40,000,000." (d) Schedule B of the Note Agreement is hereby amended as follows: (i) by amending and restating in its entirety the definition of "EBITDA" as follows: "EBITDA" means, for any period with respect to the Obligors and their Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Net Income for such period (excluding the effect of non-cash losses or any extraordinary or other non-recurring gains) plus (b) an amount which, in the determination of Net Income for such period has been deducted for (i) Interest Expense for such period, (ii) total Federal, state, foreign or other income taxes for such period and (iii) all depreciation and amortization for such period plus (c) costs and charges incurred during such period associated with the settlement of the wage and hour lawsuit in the Middle District Court of Tennessee in the aggregate amount of up to $12,000,000 to the extent accrued during such period, all as determined in accordance with GAAP. (ii) by amending and restating in its entirety the definition of "EBITR" as follows: "EBITR" means, for any period with respect to the Obligors and their Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Net Income for such period (excluding the effect of any non-cash losses or extraordinary or other non-recurring gains) plus (b) an amount which, in the determination of Net Income for such period, has been deducted for (i) Interest Expense for such period, (ii) total Federal, state, foreign or other income taxes for such period and (iii) Rent Expense for such period plus (c) costs and charges incurred during such period associated with the settlement of the wage and hour lawsuit in the Middle District Court of Tennessee in the aggregate amount of up to $12,000,000 to the extent accrued during such period. (iii) by amending and restating in its entirety the definition of "Carryforward Capital Expenditure Basket" as follows: "Carryforward Capital Expenditure Basket" means the aggregate, if any, of (i) the Unused Restricted Payment Allowance allocated by the Company pursuant to Section 10.5(b) for Capital Expenditures in future fiscal years and (ii) if the Company is in compliance with the Fixed Charge Coverage Ratio for the fiscal quarter ended October 3, 2007 set forth in Section 10.4, commencing with fiscal year 2007, the Unused Capital Expenditure Allowance allocated by the Company pursuant to Section 10.13(b) for Capital Expenditures in future fiscal years; notwithstanding the foregoing, the Carryforward Capital Expenditure Basket may not be increased in any fiscal year by more than $10,000,000. (iv) by amending and restating in its entirety the definition of "Carryforward Restricted Payment Basket" as follows: "Carryforward Restricted Payment Basket" means the portion, if any, of all Unused Capital Expenditure Allowance allocated by the Company pursuant to Section 10.13(b) for permitted Restricted Payments in future fiscal years. (v) by amending and restating in its entirety the definition of "Unused Capital Expenditure Allowance" as follows: "Unused Capital Expenditure Allowance" means, for any fiscal year, commencing with fiscal year ending January 2, 2008, the amount by which the Initial Capital Expenditure Basket for such fiscal year exceeds the aggregate amount of Capital Expenditures actually made by the Company and its Subsidiaries during such fiscal year. 2. Conditions Precedent. The effectiveness of this Amendment is conditioned on: (a) Receipt by the Required Holders of duly executed counterparts of this Amendment from the Required Holders and the Company; (b) Delivery to the Required Holders of the consent and reaffirmation attached hereto, duly executed by each Subsidiary Guarantor; (c) Receipt by the Required Holders of resolutions of the Company and each Subsidiary Guarantor approving and adopting the Amendment and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of such Person to be true and correct and in force and effect as of the date hereof; (d) Receipt by the Required Holders of a favorable legal opinion from counsel to the Credit Parties; and (e) Delivery to the Required Holders of a duly executed copy of a similar amendment to the Credit Documents and the 2000 Note Agreements (each as defined by the Note Agreement as amended hereby), certified by a Responsible Officer as true and complete, together with such other documents, instruments, approvals or opinions as the Required Holders may reasonably request, each in form and substance reasonably satisfactory to the Required Holders. 3. Representations and Warranties. To induce you to enter into this Amendment and to consent to the Amendment, the Company represents and warrants as follows: (a) The execution, delivery and performance by the Company of this Amendment (i) are within such Person's power and authority; (ii) have been duly authorized by all necessary corporate action; (iii) are not in contravention of any provision of such Person's certificate of incorporation agreement or other organizational documents; (iv) do not violate any law or regulation, or any order or decree of any governmental authority; (v) do not violate, contravene or conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound, the violation of which would have or be reasonably expected to have a Material Adverse Effect; (vi) do not result in the creation or imposition of any Lien upon any of the property of the Company or any of its Subsidiaries; and (vii) do not require the consent or approval of any governmental authority or any other person; (b) This Amendment has been duly executed and delivered for the benefit of or on behalf of the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors' rights and remedies in general; (c) There are no pending or threatened actions, suits or proceedings affecting the Company or any of its Subsidiaries or the properties of the Company or any of its Subsidiaries before any court, governmental agency or arbitrator, that would reasonably be expected, if adversely determined, to have a Material Adverse Effect or to affect the legality, validity or enforceability of the Note Agreement, as amended by this Amendment; and (d) After giving effect to this Amendment, the representations and warranties of the Company contained in the Note Agreement and in the other Financing Documents are true and correct in all material respects, except that disclosure schedules have not been updated from those previously provided to the holders of the Notes, and no Default or Event of Default under the Note Agreement has occurred and is continuing as of the date hereof or would be caused hereby. 4. Acknowledgment of Perfection of Security Interest. The Company hereby acknowledges that, as of the date hereof, the security interests and liens granted to the holders of Notes under the Note Agreement and the other Financing Documents are in full force and effect, are properly perfected and are enforceable in accordance with the terms of the Note Agreement and the other Financing Documents. 5. Reference to and Effect on the Note Agreement. (a) Defined terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Note Agreement. (b) Except as expressly provided in this Amendment, the Note Agreement shall remain unchanged and in full force and effect, except that each reference in the Note Agreement, and in any agreements, certificates and notices simultaneously herewith or hereafter executed under or pursuant to the Note Agreement, as amended hereby, to the "Note Agreement", "this Agreement", "hereof", "herein" and similar terms referring to the Note Agreement, shall be deemed to refer to the Note Agreement as amended by this Amendment. (c) The execution, deliver and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any holder of a Note under the Note Agreement or the Notes, nor constitute a waiver of any provision of any of the foregoing. 6. Costs and Expenses. The Company agrees to pay on demand all costs and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Purchasers or any other permitted holder of a Note in connection with this Amendment and the transactions contemplated hereby. The Company further agrees to pay on demand all costs and expense, if any, incurred by the Purchasers or any other permitted holder of a Note in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Amendment, including, without limitation, fees and expenses of counsel in connection with the enforcement of rights under this paragraph 6. 7. No Default or Claims. To induce the Purchasers to enter into this Amendment, the Company hereby acknowledges and agrees that, as of the date hereof, and after giving effect to the terms hereof, there exists (i) no Default or Event of Default, (ii) no right of offset, recoupment, defense, counterclaim, claim or objection in favor of the Company arising out of or with respect to any of the Notes or other obligations of the Company owed to any holder of a Note, and (iii) each Purchaser has acted in good faith and has conducted its relationships with the Company in a commercially reasonable manner in connection with the negotiations, execution and delivery of this Amendment and in all respects in connection with the Note Agreement, the Company hereby waiving and releasing any such claims to the contrary that may exist as of the date of this Amendment. 8. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 9. Governing Law. This Amendment shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice- of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than New York. [Remainder of page intentionally left blank; next page is signature page.] CONSENT AND REAFFIRMATION OF GUARANTORS The undersigned, as guarantors, in favor of the parties to the Note Agreement referred to in the foregoing Amendment, hereby consent to such Amendment and hereby confirm and agree that each of the Subsidiary Guarantee (and each Guaranty provided therein) is, and shall continue to be, in full force and effect and is hereby confirmed and ratified in all respects except that, upon the effectiveness of, and on and after the date of, said Amendment, all references in the Subsidiary Guarantee and the Amended and Restated Pledge Agreement to the Note Agreement, "thereunder", "thereof", or words of like import referring to the Note Agreement shall mean the Note Agreement as amended by said Amendment. The undersigned, as pledgors, in favor of the parties to the Note Agreement, hereby acknowledge that, as of the date hereof, the security interests and liens granted to the holders of Notes under the Note Agreement and the other Financing Documents are in full force and effect, are properly perfected and are enforceable in accordance with the terms of the Note Agreement and the other Financing Documents. IN WITNESS WHEREOF, the undersigned have executed this Consent as of the day and year first set forth above. Annex 1 CURRENT HOLDERS AND PRINCIPAL AMOUNTS Name of Current Holder Aggregate Principal Amount of Notes Held The Prudential Insurance Company of $12,550,000 America Pruco Life Insurance Company of New $1,598,000 Jersey Pruco Life Insurance Company $6,144,000 Baystate Investments, LLC $9,900,000 General Electric Capital Assurance $13,300,000 Company RGA Reinsurance Company $7,650,000 USG Annuity & Life Company $6,600,000 The Prudential Insurance Company of $34,715,000 America Gibralter Life Insurance Co., Ltd. $7,543,000
EX-31.1 5 cdwcert302.txt 302 CERTIFICATION Exhibit 31.1 Ryan's Restaurant Group, Inc. Chief Executive Officer Section 302 Certification I, Charles D. Way, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ryan's Restaurant Group, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 7, 2005 /s/ Charles D. Way Charles D. Way Chairman and Chief Executive Officer EX-31.2 6 ftgcert302.txt 302 CERTIFICATION Exhibit 31.2 Ryan's Restaurant Group, Inc. Chief Financial Officer Section 302 Certification I, Fred T. Grant, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ryan's Restaurant Group, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 7, 2005 /s/ Fred T. Grant, Jr. Fred T. Grant, Jr. Senior Vice President - Finance and Treasurer and Assistant Secretary EX-32.1 7 cdwcert906.txt 906 CERTIFICATION Exhibit 32.1 Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350 For purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Charles D. Way, the chief executive officer of Ryan's Restaurant Group, Inc. (the "Company"), hereby certifies that, to his knowledge: (i) the Quarterly Report on Form 10-Q of the Company for the quarter ended September 28, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: November 7, 2005 /s/ Charles D. Way Charles D. Way Chairman and Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to Ryan's Restaurant Group, Inc. and will be retained by Ryan's Restaurant Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-32.2 8 ftgcert906.txt 906 CERTIFICATION Exhibit 32.2 Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350 For purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Fred T. Grant, Jr., the chief financial officer of Ryan's Restaurant Group, Inc. (the "Company"), hereby certifies that, to his knowledge: (i) the Quarterly Report on Form 10-Q of the Company for the quarter ended September 28, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: November 7, 2005 /s/ Fred T. Grant, Jr. Fred T. Grant, Jr. Senior Vice President - Finance, Treasurer and Assistant Secretary A signed original of this written statement required by Section 906 has been provided to Ryan's Restaurant Group, Inc. and will be retained by Ryan's Restaurant Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----