Ryan's Announces Third Quarter 2005 Results

GREER, S.C., Oct. 19  /PRNewswire-FirstCall/ -- Ryan's Restaurant Group, Inc. (NASDAQ:RYAN) reported third quarter 2005 results today.

Third quarter restaurant sales were $202,967,000 in 2005 compared to $205,331,000 for the comparable quarter in 2004.  Net earnings for the quarter amounted to $4,164,000 in 2005 and $9,226,000 in 2004.  Earnings per share (diluted) amounted to 10 cents in 2005 compared to 22 cents in 2004.

For the nine months ended September 28, 2005, restaurant sales amounted to $628,116,000 compared to $633,534,000 for the comparable period in 2004.  Net earnings were $22,237,000 in 2005 and $38,756,000 in 2004.  Earnings per share (diluted) were 52 cents in 2005 compared to 89 cents in 2004.

Commenting on the quarter, Charles D. Way, CEO of the Company, said "Ryan's was challenged during the third quarter with lower sales and higher costs.  Same-store sales decreased by 3.7% during the quarter.  We believe that high gasoline and utility costs continue to adversely affect our customers' disposable income, resulting in lower dining-out expenditures. Furthermore, third quarter sales were impacted by Hurricanes Katrina and Rita, not only in the areas of immediate landfall but also in many of our other operating areas.  During the quarter, we lost 243 restaurant-days, representing less than 1.0% of total available restaurant-days, at 41 locations due to the hurricanes.  Except for three locations that are still closed, the affected restaurants re-opened quickly and have generally enjoyed very good business since that time due to high demand from repair and emergency crews and returning residents.  We are very grateful for the heroic efforts of our construction and maintenance personnel and our dedicated restaurant managers and hourly team members, many of whom also suffered significant property loss from the hurricanes.  Restaurant sales in southern and mid-Atlantic states generally were adversely affected by the heavy storms that resulted after the immediate landfalls and by gasoline pricing and shortages.  We believe that these factors as well as the related extensive television coverage decreased dining visits by our customers."

"Our third quarter's profits were also impacted by higher cost of sales, particularly higher payroll, utility and store closing costs.  Food and beverage costs decreased compared to the prior year's comparable quarter aided by lower beef costs, which decreased year-over-year by 9%.  However, similar to the first and second quarters of 2005, hourly labor increased by 1% of sales as we increased staffing at our restaurants to improve customer service and retain sales.  We also paid over $200,000 of disaster assistance to store personnel at restaurants closed by the hurricanes.  Utility costs also continued their rise, and we saw electricity and natural gas costs increase by a combined 0.6% of sales due to higher unit prices and warmer temperatures. Finally, we had property write-downs amounting to $2.6 million ($1.9 million in accelerated depreciation and $700,000 in other restaurant expenses) during the quarter related to five underperforming stores, which have been closed. These write-downs were partially offset by a $700,000 net change in the gain on sale of closed properties, which is reflected in "Other income, net" in the accompanying financial statements."

"As we look at the remainder of 2005 and 2006, we are concerned about the forecasted significant increases in utility costs that have been publicized by the media and the related impact on consumer spending.  Over time we believe that consumers will adjust their spending and eat out more often since dining- out is so ingrained in many daily routines and represents a relatively inexpensive form of entertainment, especially with the excellent price/value relationship at Ryan's.  Our plan for building and retaining sales is to provide great dining experiences to our customers so that we are top-of-mind when they choose a restaurant.  As mentioned earlier, our increased restaurant staffing levels are designed to improve customer service.  Also, we are implementing weekend seafood nights and are aggressively continuing to add weekend breakfast at our restaurants.  We are particularly excited about breakfast as it represents an excellent means to increase sales at existing locations with minimal capital investment.  At the end of September, there were 38 locations serving breakfast, and our plans call for breakfast at approximately 160 locations by year-end."

"Our plans for 2006 and 2007 focus on building sales at existing locations.  We intend to reduce the number of new restaurants to around four new restaurants per year for these two years so that our operations management can concentrate their efforts on operational improvements and local marketing initiatives.  Our remodeling efforts will be slightly scaled back to about 12 locations per year as we refine and test our conversion designs.  We are also aggressively looking for opportunities to reduce costs, both at our restaurants and at our corporate office.  These measures should significantly increase our free cash flow, enabling us to reduce our outstanding debt. Current projections indicate we can reduce debt from current levels by approximately $75 million, including scheduled debt payments, through the end of 2007.  Our Board of Directors and senior management enthusiastically endorse this plan and look forward to being well-positioned to pursue growth opportunities in the future."

Management notes that it is continuing discussions with the Company's lenders to amend current debt agreements in light of the Company not meeting covenant requirements regarding the fixed charge coverage ratio calculation. The Company was not in compliance with this ratio requirement at the end of the second quarter, and, as anticipated by all parties, this non-compliance continued at the end of the third quarter.  Management is optimistic that an agreement with the Company's lenders will be reached, and that such agreement will permit the capital expenditure plans for 2006 and 2007 as noted above. Until the credit agreements are amended, the Company's outstanding debt must be classified as a current liability in accordance with generally accepted accounting principles and is presented as such in the accompanying financial statements.  Management expects that the amendments will be executed prior to the filing of the Company's quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission on or around November 2, 2005.

At September 28, 2005, the Company owned and operated 339 restaurants, including the three locations that continue to be closed as a result of Hurricane Katrina.

In connection with this press release, members of Ryan's executive management will be holding a conference call with investment analysts today at 4:00 p.m. EDT.  The public can listen to a live webcast of this call by logging on to the web at http://www.ryans.com/ and following the appropriate links.

Certain matters discussed in this press release are forward-looking statements within the meaning of the federal securities laws and are subject to uncertainties and risks, including, but not limited to, general economic conditions, including consumer confidence levels; competition; developments affecting the public's perception of buffet-style restaurants; real estate availability; food, utility and labor supply costs; food and labor availability; an adverse food safety event; weather fluctuations; interest rate fluctuations; stock market conditions; political environment (including acts of terrorism and wars); and other such risks described from time to time in the Company's reports filed with the Securities and Exchange Commission.

                      RYAN'S RESTAURANT GROUP, INC.
                   CONSOLIDATED STATEMENTS OF EARNINGS
                               (Unaudited)

                                            Quarter Ended
                                    September 28,      September 29,
                                         2005             2004

  Restaurant sales                    $202,967,000     205,331,000

  Cost of sales:
    Food and beverage                   70,169,000      72,880,000
    Payroll and benefits                68,187,000      67,455,000
    Depreciation                        10,524,000       8,857,000
    Other restaurant expenses           35,190,000      29,879,000
      Total cost of sales              184,070,000     179,071,000

  General and administrative
   expenses                             11,270,000      10,185,000
  Interest expense                       2,378,000       2,598,000
  Royalties from franchised restaurants    (35,000)       (265,000)
  Other income, net                     (1,127,000)       (238,000)

  Earnings before income taxes           6,411,000      13,980,000
  Income taxes                           2,247,000       4,754,000

  Net earnings                          $4,164,000       9,226,000

  Net earnings per common share:
    Basic                                 $    .10             .22
    Diluted                                    .10             .22

  Weighted-average shares:
    Basic                               41,934,000      41,679,000
    Diluted                             42,592,000      42,849,000



                      RYAN'S RESTAURANT GROUP, INC.
                   CONSOLIDATED STATEMENTS OF EARNINGS
                               (Unaudited)

                                           Nine Months Ended
                                     September 28,    September 29,
                                        2005            2004

  Restaurant sales                  $ 628,116,000    633,534,000

  Cost of sales:
    Food and beverage                 219,133,000    221,653,000
    Payroll and benefits              205,915,000    203,500,000
    Depreciation                       27,661,000     25,602,000
    Other restaurant expenses         100,654,000     88,046,000
      Total cost of sales             553,363,000    538,801,000

  General and administrative
   expenses                            37,501,000     30,762,000
  Interest expense                      7,143,000      8,032,000
  Royalties from franchised restaurants  (344,000)      (951,000)
  Other income, net                    (2,889,000)    (1,697,000)

  Earnings before income taxes         33,342,000     58,587,000
  Income taxes                         11,105,000     19,831,000

    Net earnings                     $ 22,237,000     38,756,000

  Net earnings per common share:
    Basic                                   $ .53            .93
    Diluted                                   .52            .89

  Weighted-average shares:
    Basic                              41,941,000     41,800,000
    Diluted                            42,742,000     43,339,000



                      RYAN'S RESTAURANT GROUP, INC.
                       CONSOLIDATED BALANCE SHEETS

                                              September 28,    December 29,
                                                   2005          2004
  ASSETS                                        (Unaudited)
  Current assets:
    Cash and cash equivalents                 $ 11,117,000     7,354,000
    Receivables                                  4,700,000     4,639,000
    Inventories                                  5,663,000     5,611,000
    Prepaid expenses                             1,569,000     1,016,000
    Deferred income taxes                        7,277,000     5,110,000
      Total current assets                      30,326,000    23,730,000
  Property and equipment:
    Land and improvements                      170,267,000   162,082,000
    Buildings                                  508,584,000   480,781,000
    Equipment                                  285,424,000   271,431,000
    Construction in progress                    30,923,000    31,531,000
                                               995,198,000   945,825,000
    Less accumulated depreciation              319,574,000   295,852,000
      Net property and equipment               675,624,000   649,973,000
  Other assets                                  10,593,000    10,643,000
      Total assets                           $ 716,543,000   684,346,000

  LIABILITIES AND SHAREHOLDERS' EQUITY
  Current liabilities:
    Accounts payable                             6,681,000     5,963,000
    Current portion of long-term debt          180,250,000    18,750,000
    Income taxes payable                         2,989,000     1,842,000
    Accrued liabilities                         51,655,000    42,569,000
      Total current liabilities                241,575,000    69,124,000
  Long-term debt                                        -    164,250,000
  Other long-term liabilities                    5,714,000     7,692,000
  Deferred income taxes                         50,826,000    47,674,000
      Total liabilities                        298,115,000   288,740,000

  Shareholders' equity:
    Common stock of $1.00 par value;
     authorized 100,000,000 shares;
     issued 41,977,000 shares in 2005
     and 41,890,000 shares in 2004              41,977,000    41,890,000
    Additional paid-in capital                   4,376,000     3,878,000
    Retained earnings                          372,075,000   349,838,000
      Total shareholders' equity               418,428,000   395,606,000

  Commitments and contingencies
    Total liabilities and
     shareholders' equity                   $  716,543,000   684,346,000



                      RYAN'S RESTAURANT GROUP, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (Unaudited)

                                                   Nine Months Ended
                                              September 28,    September 29,
                                                    2005            2004
  Cash flows from operating activities:
    Net earnings                               $  22,237,000    38,756,000
    Adjustments to reconcile net earnings to
     net cash provided by operating activities:
         Depreciation and amortization            29,012,000    26,936,000
         Loss (gain) on sale of property
          and equipment                             (622,000)      253,000
          Tax benefit from exercise of
           stock options                             789,000     2,820,000
          Deferred income taxes                      985,000       252,000
          Decrease (increase) in:
              Receivables                            (61,000)      285,000
              Inventories                            (52,000)     (338,000)
              Prepaid expenses                      (553,000)      111,000
              Other assets                           (94,000)   (2,066,000)
          Increase (decrease) in:
              Accounts payable                       718,000     2,251,000
              Income taxes payable                 1,147,000     2,026,000
              Accrued liabilities                  9,086,000     2,051,000
              Other long-term liabilities         (1,978,000)      506,000
  Net cash provided by operating activities       60,614,000    73,843,000

 Cash flows from investing activities:
   Proceeds from sale of property
    and equipment                                  6,854,000    6,403,000
  Capital expenditures                           (60,751,000) (51,108,000)
  Net cash used in investing activities          (53,897,000) (44,705,000)
  Cash flows from financing activities:
    Repayment of senior notes                    (18,750,000)           -
    Net borrowings from (repayment of)
     revolving credit facility                    16,000,000   (9,000,000)
    Proceeds from stock options exercised          1,648,000    5,360,000
    Purchase of common stock                      (1,852,000) (18,207,000)
   Net cash used in financing activities          (2,954,000) (21,847,000)
  Net increase in cash and cash equivalents        3,763,000    7,291,000

  Cash and cash equivalents -
   beginning of period                             7,354,000    8,617,000

  Cash and cash equivalents - end of period     $ 11,117,000   15,908,000

  Supplemental disclosures
  Cash paid during period for:
    Interest, net of amount capitalized         $  9,032,000    9,853,000
    Income taxes                                   8,751,000   15,413,000


DATASOURCE: Ryan's Restaurant Group



CONTACT:  Fred T. Grant, Jr., Senior Vice President - Finance of Ryan's

Restaurant Group, [phone]



Web site:  http://www.ryans.com/ 

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