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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION   FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 28, 2004 Commission file number 0-19924 RARE Hospitality International, Inc.  Georgia
(State or other jurisdiction of
incorporation or organization)
    
    58-1498312
(I. R. S. Employer
Identification No.)
 8215 Roswell Rd; Bldg. 600; Atlanta, GA
(Address of principal executive offices)
    
    30350
(Zip Code)
 (770) 399-9595
(Registrants telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 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. [XX]
 Yes     [   ]  No Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [XX]
 Yes     [   ]  No As of May 29, 2004, there were 33,982,988 shares of common stock of the
Registrant outstanding.




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RARE Hospitality International, Inc. and Subsidiaries Index PagePart I - Financial InformationItem 1. Consolidated Financial Statements:Consolidated Balance Sheets as of March 28, 2004 and December 28, 2003
    
    
    1Consolidated Statements of Earnings for the quarters ended March 28, 2004
and March 30, 2003
    
    
    2Consolidated Statement of Shareholders Equity
and Comprehensive Income for the quarter ended
March 28, 2004
    
    
    3Condensed Consolidated Statements of Cash Flows
for the quarters ended March 28, 2004
and March 30, 2003
    
    
    4Notes to the Consolidated Financial Statements
    
    
    5-7Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    8-12Item 3. Quantitative and Qualitative Disclosures About
Market Risk
    
    
    12Item 4. Controls and Procedures
    
    
    13Part II - Other InformationItem 1. Legal Proceedings
    
    
    13Item 2. Changes in Securities and Use of Proceeds
    
    
    13Item 3. Defaults Upon Senior Securities
    
    
    13Item 4. Submission of Matters to a Vote of Securities
Holders
    
    
    13Item 5. Other Information
    
    
    13Item 6. Exhibits and Reports on Form 8-K
    
    
    14Signatures
    
    
    14EX-31.(A) SECTION 302 CERTIFICATION OF CEOEX-31.(B) SECTION 302 CERTIFICATION OF CFOEX-32.(A) SECTION 906 CERTIFICATION OF CEOEX-32.(B) SECTION 906 CERTIFICATION OF CFO




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RARE Hospitality International, Inc. and Subsidiaries 
 March 28,
    
    December 28,2004
    
    2003AssetsCurrent assets:Cash and cash equivalents
    
    $
    14,830
    
    
    $
    20,508Short-term investments
    
    
    33,138
    
    
    
    24,036Accounts receivable
    
    
    8,819
    
    
    
    8,730Inventories
    
    
    17,039
    
    
    
    16,558Prepaid expenses
    
    
    4,524
    
    
    
    5,039Refundable income taxes
    
    
    736
    
    
    
    2,162Deferred income taxes
    
    
    5,847
    
    
    
    4,887Total current assets
    
    
    84,933
    
    
    
    81,920Property & equipment, less accumulated
depreciation
    
    
    382,720
    
    
    
    354,448Goodwill, net
    
    
    19,187
    
    
    
    19,187Other
    
    
    10,557
    
    
    
    8,987Total assets
    
    $
    497,397
    
    
    $
    464,542Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    19,152
    
    
    $
    18,729Accrued expenses
    
    
    52,086
    
    
    
    55,218Current installments of obligations under
capital leases
    
    
    176
    
    
    
    124Total current liabilities
    
    
    71,414
    
    
    
    74,071Obligations under capital leases, net
of current installments
    
    
    39,053
    
    
    
    27,462Deferred income taxes
    
    
    9,963
    
    
    
    5,452Other
    
    
    4,910
    
    
    
    4,131Total liabilities
    
    
    125,340
    
    
    
    111,116Minority interest
    
    
    1,391
    
    
    
    1,371Shareholders equity:Preferred stock
    
    
    
    
    
    
    Common stock
    
    
    207,497
    
    
    
    203,624Unearned compensation-restricted stock
    
    
    (1,392
    )
    
    
    (1,303
    )Retained earnings
    
    
    169,550
    
    
    
    154,723Treasury stock at cost; 293 shares
in 2004 and 2003
    
    
    (4,989
    )
    
    
    (4,989
    )Total shareholders equity
    
    
    370,666
    
    
    
    352,055Total liabilities and shareholdersequity
    
    $
    497,397
    
    
    $
    464,542
 See accompanying notes to consolidated financial statements 1




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RARE Hospitality International, Inc. and Subsidiaries 
 13 Weeks EndedMarch 28,
    
    March 30,2004
    
    2003Revenues:Restaurant sales:LongHorn Steakhouse
    
    $
    145,159
    
    
    $
    118,659The Capital Grille
    
    
    29,837
    
    
    
    23,455Bugaboo Creek Steak House
    
    
    24,286
    
    
    
    20,235Specialty concepts
    
    
    1,736
    
    
    
    1,709Total restaurant sales
    
    
    201,018
    
    
    
    164,058Franchise revenues
    
    
    99
    
    
    
    91Total revenues
    
    
    201,117
    
    
    
    164,149Costs and expenses:Cost of restaurant sales
    
    
    72,574
    
    
    
    58,640Operating
expenses - restaurants
    
    
    85,673
    
    
    
    70,626Depreciation
and amortization - restaurants
    
    
    7,179
    
    
    
    6,257Pre-opening
expense - restaurants
    
    
    1,594
    
    
    
    1,057General and administrative expenses
    
    
    11,660
    
    
    
    9,871Total costs and expenses
    
    
    178,680
    
    
    
    146,451Operating income
    
    
    22,437
    
    
    
    17,698Interest expense, net
    
    
    116
    
    
    
    246Minority interest
    
    
    109
    
    
    
    118Earnings before income taxes
    
    
    22,212
    
    
    
    17,334Income tax expense
    
    
    7,385
    
    
    
    5,633Net earnings
    
    $
    14,827
    
    
    $
    11,701Weighted average common shares outstanding:Basic
    
    
    33,592
    
    
    
    32,869Diluted
    
    
    35,576
    
    
    
    34,609Basic earnings per common share
    
    $
    0.44
    
    
    $
    0.36Diluted earnings per common share
    
    $
    0.42
    
    
    $
    0.34
 See accompanying notes to consolidated financial statements 2




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RARE Hospitality International, Inc. and Subsidiaries 
 Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedOther
    
    TotalRestricted
    
    Retained
    
    Treasury
    
    Comprehensive
    
    ShareholdersShares
    
    Amount
    
    Stock
    
    Earnings
    
    Stock
    
    Income (Loss)
    
    EquityBalance, December 28, 2003
    
    
    34,042
    
    
    $
    203,624
    
    
    $
    (1,303
    )
    
    $
    154,723
    
    
    $
    (4,989
    )
    
    $
    
    
    
    $
    352,055Net earnings and other
comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,827
    
    
    
    
    
    
    
    
    
    
    
    14,827Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    258
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    258Issuance of shares pursuant
to restricted stock award
    
    
    14
    
    
    
    347
    
    
    
    (347
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of shares pursuant
to exercise of stock
options
    
    
    209
    
    
    
    2,235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,235Tax benefit of stock options
exercised
    
    
    
    
    
    
    1,291
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,291Balance, March 28, 2004
    
    
    34,265
    
    
    $
    207,497
    
    
    $
    (1,392
    )
    
    $
    169,550
    
    
    $
    (4,989
    )
    
    $
    
    
    
    $
    370,666
 See accompanying notes to consolidated financial statements 3




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RARE Hospitality International, Inc. and Subsidiaries 
 13 Weeks EndedMarch 28,
    
    March 30,2004
    
    2003Cash flows from operating activities:Net earnings
    
    $
    14,827
    
    
    $
    11,701Adjustments to reconcile net earnings to
net cash provided by operating activities:Depreciation and amortization
    
    
    7,798
    
    
    
    6,637Changes in working capital accounts
    
    
    (7,866
    )
    
    
    (8,254
    )Minority interest
    
    
    109
    
    
    
    118Deferred tax expense
    
    
    3,551
    
    
    
    2,765Purchase of short-term investments
    
    
    (9,102
    )
    
    
    (5,066
    )Net cash provided by operating activities
    
    
    9,317
    
    
    
    7,901Cash flows from investing activities:Purchase of property and equipment
    
    
    (24,133
    )
    
    
    (15,041
    )Net cash used by investing activities
    
    
    (24,133
    )
    
    
    (15,041
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    2,235
    
    
    
    2,791Distributions to minority partners
    
    
    (89
    )
    
    
    (85
    )Purchase of common stock for treasury
    
    
    
    
    
    
    (2,625
    )Increase in checks outstanding included in accounts
payable and accrued liabilities
    
    
    7,017
    
    
    
    5,422Principal payments on capital leases
    
    
    (25
    )
    
    
    (15
    )Net cash provided by financing activities
    
    
    9,138
    
    
    
    5,488Net decrease in cash and cash equivalents
    
    
    (5,678
    )
    
    
    (1,652
    )Cash and cash equivalents, beginning of period
    
    
    20,508
    
    
    
    13,732Cash and cash equivalents, end of period
    
    $
    14,830
    
    
    $
    12,080Supplemental disclosure of cash flow information
Cash paid for income taxes
    
    $
    1,118
    
    
    $
    184Cash paid for interest net of amounts capitalized
    
    $
    227
    
    
    $
    240Supplemental disclosure of non-cash financing and
investing activities:Assets acquired under capital lease
    
    $
    11,668
    
    
    $
    
 See accompanying notes to consolidated financial statements 4




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##### Table of Contents



RARE Hospitality International, Inc. 
  1.
    
    Basis of Presentation The consolidated financial statements of RARE Hospitality International, Inc.
and subsidiaries (the Company) as of March 28, 2004 and December 28, 2003 and
for the quarters ended March 28, 2004 and March 30, 2003 have been prepared by
the Company, pursuant to the rules and regulations of the Securities and
Exchange Commission. The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments), which are, in the
opinion of management, necessary to fairly present the operating results for
the respective periods. Certain information and footnote disclosures normally
presented in annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Companys Annual Report on Form
10-K for the year ended December 28, 2003. The Company records revenues for normal recurring sales upon the performance of
services. Revenues from the sales of franchises are recognized as income when
substantially all of the Companys material obligations under the franchise
agreement have been performed. Continuing royalties, which are a percentage of
net sales of franchised restaurants, are accrued as income when earned. The Company operates on a 52 or 53 week fiscal year ending on the last Sunday
in December. The fiscal quarters ended March 28, 2004 and March 30, 2003 each
contained 13 weeks and are referred to hereafter as the first quarter of 2004
and the first quarter of 2003, respectively.  2.
    
    New Accounting Pronouncements In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,
which addresses consolidation by business enterprises of variable interest
entities (VIEs) either: (1) that do not have sufficient equity investment at
risk to permit the entity to finance its activities without additional
subordinated financial support, or (2) in which the equity investors lack an
essential characteristic of a controlling financial interest. In December 2003,
the FASB issued modifications to FIN 46 (Revised Interpretations) resulting
in multiple effective dates based on the nature as well as the creation date of
the VIE. VIEs created after January 31, 2003, but prior to January 1, 2004, may
be accounted for either based on the original interpretation or the Revised
Interpretations. However, the Revised Interpretations must be applied no later
than the first quarter of 2004. VIEs created after January 1, 2004 must be
accounted for under the Revised Interpretations. Non-Special Purpose Entities
created prior to February 1, 2003, should be accounted for under the revised
interpretations provisions no later than the first quarter of fiscal 2004. 5




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The
Company has adopted FIN 46 and the Revised Interpretations, neither of which
had an impact on the Companys consolidated financial statements.  3.
    
    Shareholders Equity and Stock Based Compensation The Company has stock option plans that provide for the granting of incentive
and non-qualified stock options to employees, officers, directors, consultants,
and advisors. Under the plans, options are granted at an exercise price equal
to the fair market value of the underlying common stock on the date of grant.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans as permitted under SFAS 123 and SFAS 148.
Accordingly, no compensation cost has been recognized for the Companys stock
option plans. Had the
compensation cost for the Companys stock option plans been determined based on
the fair value at the grant dates for awards under those plans consistent with
the fair value methodology of SFAS 123, the Companys net income and earnings
per share would have been as follows (in thousands, except per share data): 13 Weeks EndedMarch 28,
    
    March 30,2004
    
    2003Net earnings, as reported
    
    $
    14,827
    
    
    $
    11,701Stock-based compensation expense
determined under fair value method
for all awards, net of tax
    
    
    989
    
    
    
    835Proforma net earnings
    
    $
    13,838
    
    
    $
    10,866Earnings per share:Basic  as reported
    
    $
    0.44
    
    
    $
    0.36Basic  proforma
    
    $
    0.41
    
    
    $
    0.33Diluted  as reported
    
    $
    0.42
    
    
    $
    0.34Diluted  proforma
    
    $
    0.39
    
    
    $
    0.32
  4.
    
    Long-Term Debt At March 28, 2004, no borrowings were outstanding under the Companys $100.0
million revolving credit agreement, and the Company was in compliance with all
of its compliance provisions. Interest expense is reported net of $119,000 and
$91,000 of interest income in the first quarter of 2004 and 2003, respectively.
Interest capitalized in the first quarter of 2004 and 2003 was $417,000 and
$230,000, respectively.  5.
    
    Income Taxes Income tax expense for the first quarter of 2004 has been provided for based on
an estimated 33.25% effective tax rate expected to be applicable for the full
2004 fiscal year. The effective income tax rate differs from applying the
statutory federal income tax rate of 35% to pre-tax earnings primarily due to
employee FICA tip tax credits and work opportunity tax credits (both are a
reduction in income tax expense) partially offset by state income taxes. 6




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6.
    
    Earnings Per Share Basic earnings per common share equals net earnings divided by the weighted
average number of common shares outstanding and does not include the dilutive
effect of stock options or restricted stock. Diluted earnings per common share
equals net earnings divided by the weighted average number of common shares
outstanding, after giving effect to dilutive stock options and restricted
stock. A reconciliation between basic and diluted weighted average shares
outstanding and the related earnings per share calculation is presented below
(in thousands, except per share amounts): 13 Weeks EndedMarch 28,
    
    March 30,2004
    
    2003Net earnings
    
    $
    14,827
    
    
    $
    11,701Basic weighted average shares outstanding
    
    
    33,592
    
    
    
    32,869Dilutive effect of stock options
    
    
    1,781
    
    
    
    1,581Dilutive effect of restricted stock
    
    
    203
    
    
    
    159Diluted weighted average shares outstanding
    
    
    35,576
    
    
    
    34,609Basic earnings per common share
    
    $
    0.44
    
    
    $
    0.36Diluted earnings per common share
    
    $
    0.42
    
    
    $
    0.34
  7.
    
    Comprehensive Income For the quarters ended March 28, 2004 and March 30, 2003, there was no
difference between the Companys net earnings and comprehensive income. 7




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Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations Results of Operations First quarter 2004 compared to first quarter 2003 Revenues The Company currently derives all of its revenues from restaurant sales and
franchise revenues. Total revenues increased 22.5% to approximately $201.1
million for the first quarter of 2004 compared to approximately $164.1 million
for the first quarter of 2003.
Same store sales comparisons for each of the Companys restaurant concepts for
the first quarter of 2004, consist of sales at restaurants opened prior to July
1, 2002. LongHorn Steakhouse: Sales in the LongHorn Steakhouse restaurants increased 22.3% to approximately
$145.2 million for the first quarter of 2004 compared to approximately $118.7
million for the first quarter of 2003. The increase reflects a 11.0% increase
in restaurant operating weeks in the first quarter of 2004 as compared to the
same period of the prior year, resulting from an increase in the restaurant
base from 174 LongHorn Steakhouse restaurants at the end of the first quarter
of 2003 to 194 at the end of the first quarter of 2004. Average weekly sales
for all LongHorn Steakhouse restaurants in the first quarter of 2004 were
$58,602, a 10.2% increase as compared to $53,163 for the first quarter of 2003.
Same store sales for the comparable LongHorn Steakhouse restaurants increased
8.1% in the first quarter of 2004, as compared to the same period in 2003, due
to an increase in guest counts and average check. Average weekly sales
increased at a greater rate than same store sales due to the strong performance
of newer LongHorn Steakhouse restaurants not currently in the same store sales
base. The Capital Grille: Sales in The Capital Grille restaurants increased 27.2% to approximately $29.8
million for the first quarter of 2004, compared to approximately $23.5 million
for the same period in 2003. The increase reflects a 13.3% increase in
restaurant operating weeks in the first quarter of 2004 as compared to the same
period of the prior year, resulting from an increase in the restaurant base
from 15 The Capital Grille restaurants at the end of the first quarter of 2003
to 17 at the end of the first quarter of 2004. Average weekly sales for all The
Capital Grille restaurants in the first quarter of 2004 were $135,008, a 12.2%
increase, as compared to $120,279 for the comparable period in 2003. Same
store sales for the comparable The Capital Grille restaurants increased 13.9%
in the first quarter of 2004 as compared to the same period in 2003 primarily
due to an increase in guest counts and, to a lesser extent, an increase in
average check. 8




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Bugaboo Creek Steak House: Sales in the Bugaboo Creek Steak House restaurants increased 20.0% to
approximately $24.3 million for the first quarter of 2004, compared to
approximately $20.2 million for the same period in 2003. The increase reflects
a 16.8% increase in restaurant operating weeks in the first quarter of 2004 as
compared to the prior year, resulting from the increase in the restaurant base
from 22 Bugaboo Creek Steak House restaurants at the end of the first quarter
of 2003 to 26 at the end of the first quarter of 2004. The increase also
reflects a 2.8% increase in average weekly sales for all Bugaboo Creek Steak
House restaurants in the first quarter of 2004 to $72,713, from average weekly
sales of $70,753 for the comparable period of 2003. Same store sales for the
comparable Bugaboo Creek Steak House restaurants in the first quarter of 2004
increased 5.4% as compared to the same period in 2003 due to an increase in
average check partially offset by a slight decrease in customer counts. Franchise Revenue: Franchise revenues increased to $99,000 for the first quarter of 2004, from
$91,000 for the same period in 2003 reflecting increased sales at the Companys
three franchised restaurants. Costs and Expenses Cost of restaurant sales as a percentage of restaurant sales increased to 36.1%
for the first quarter of 2004 from 35.7% for the same period of 2003. Increased
contract pricing on commodities in 2004, particularly higher pricing with
respect to new beef contracts, was partially offset by a 2%  3% increase in
menu prices. The Company is currently under fixed price contracts with respect
to approximately 85-90% of its protein products for the remainder of 2004 and
into early 2005. The Company expects its cost of restaurant sales as a
percentage of restaurant sales in 2004 to be higher than the comparable quarter
of 2003 by 0.7% to 0.8% for the last three quarters of 2004. Many of the food
products, other than protein products, purchased by the Company are affected by
commodity pricing and are, therefore, subject to price
volatility caused by weather, production problems, delivery difficulties and
other factors, which are outside the control of the Company. Restaurant operating expense as a percentage of restaurant sales decreased to
42.6% for the first quarter of 2004 as compared to 43.0% for the same period of
2003. This decrease as a percentage of restaurant sales was due to greater
leverage of fixed and semi-fixed expenses resulting from increased sales at
existing restaurants in 2004, which were partially offset by increased bonus
compensation earned at the restaurant level.
Restaurant depreciation decreased to approximately 3.6% of restaurant sales in
the first quarter of 2004 from approximately 3.8% of restaurant sales in the
corresponding period of the prior year due to the favorable leveraging effect
of higher average weekly sales. Pre-opening expense for the first quarter of 2004 increased to $1,594,000, from
$1,057,000 in the same period of the prior year. The amounts charged to
pre-opening expense in any period are dependent upon the number of restaurants
opened and the restaurant concept. 9




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General and administrative expenses as a percentage of total revenues decreased
to 5.8% for the first quarter of 2004 as compared to 6.0% for the corresponding
period of the prior year. This decrease is primarily due to greater leverage
of fixed and semi-fixed expenses resulting from increased sales at existing
restaurants. As a result of the relationships between revenues and expenses discussed above,
the Companys operating income increased to approximately $22.4 million for the
first quarter of 2004 from approximately $17.7 million for the corresponding
period of the prior year. Interest expense, net decreased to $116,000 in the first quarter of 2004 from
$246,000 in the same period of the prior year. The decrease in interest
expense, net is primarily due to an increase in the dollar amount of interest
capitalized. The amount of interest capitalized follows the relative pace of
new restaurant construction. Minority interest expense decreased to $109,000 for the first quarter of 2004
from $118,000 for the same period of the prior year. Income tax expense for the first quarter of 2004 was 33.25% of earnings before
income taxes, based on the effective tax rate expected to be applicable for the
full 2004 fiscal year. This compares to 32.5% of earnings before income taxes
for the first quarter of 2003. The increased effective income tax rate
reflects the impact of state tax law changes and the adjustment of all previous
deferred tax liabilities to the new higher rates. The Companys effective
income tax rate differs from applying the statutory federal income tax rate of
35% to pre-tax income, primarily due to employee FICA tip tax credits and work
opportunity tax credits partially offset by state income taxes. Net earnings increased to $14.8 million for the first quarter of 2004 from net
earnings of $11.7 million for the first quarter of 2003, reflecting the net
effect of the items discussed above. Outlook for Future Operating Results
The Company expects 2004 diluted earnings per common share in a range of $1.39
to $1.41. This level of earnings per common share assumes same store sales
increases in a range of 3%  4% for each of the Companys growth concepts for
the last three quarters of 2004, as well as the projected restaurant openings
discussed below. Liquidity and Capital Resources: The Company requires capital primarily for the development of new restaurants,
the remodeling of existing restaurants and selected acquisitions. During the
first quarter of 2004 the Companys principal sources of working capital were
cash provided by operating activities ($9.3 million), an increase in checks
outstanding ($7.0 million) and proceeds from the exercise of employee stock
options ($2.2 million). For the first quarter of 2004, the principal use of
working capital was capital expenditures ($24.1 million) for new and improved
facilities. 10




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The Company intends to open 23 to 24 LongHorn Steakhouse restaurants, two or
three The Capital Grille restaurants and four Bugaboo Creek Steak House
restaurants in fiscal year 2004. The Company estimates that its capital
expenditures for fiscal year 2004 will be approximately $83 - 88 million.
During the first quarter of 2004, the Company opened seven LongHorn Steakhouse
restaurants and one Bugaboo Creek Steak House restaurant. Management believes
that available cash, cash provided by operations, and available borrowings
under the Companys $100.0 million revolving credit facility will provide
sufficient funds to finance the Companys expansion plans through the year
2006. Since substantially all sales in the Companys restaurants are for cash, and
accounts payable are generally due in seven to 30 days, the Company operates
with little or negative working capital. Forward-Looking Statements Statements contained in this report concerning liquidity and capital resources
and future operating results contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements include statements regarding the intent, belief or current
expectations of the Company and members of its management team, as well as
assumptions on which such statements are based. All forward-looking statements
in this Form 10-Q are based upon information available to the Company on the
date of this report. Forward-looking statements involve a number of risks and
uncertainties, and in addition to the factors discussed elsewhere in this Form
10-Q, other factors that could cause actual results, performance or
developments to differ materially from
those expressed or implied by those forward-looking statements include the
following: failure of facts to conform to necessary management estimates and
assumptions regarding financial and operating matters; the Companys ability to
identify and secure suitable locations for new restaurants on acceptable terms,
open the anticipated number of new restaurants on time and within budget,
achieve anticipated rates of same store sales, hire and train additional
restaurant personnel and integrate new restaurants into its operations; the
continued implementation of the Companys business discipline over a large
restaurant
base; unexpected increases in cost of sales or employee, pre-opening or
other expenses; the economic conditions in the new markets into which the
Company expands and possible uncertainties in the customer base in these areas;
fluctuations in quarterly operating results; seasonality; unusual weather
patterns or events; changes in customer dining patterns; the impact of any
negative publicity or public attitudes related to the consumption of beef;
disruption of established sources of product supply or distribution;
competitive pressures from other national and regional restaurant chains;
legislation affecting the restaurant industry; business conditions, such as
inflation or a recession, or other negative effect on dining patterns, or some
other negative effect on the economy, in general, including (without
limitation) war, insurrection and/or terrorist attacks on United States soil;
growth in the restaurant industry and the general economy; changes in monetary
and fiscal policies, laws and regulations; and the risks identified from time
to time in the Companys SEC reports, including the Companys Annual Report on
Form 10-K for 2003, registration statements and public announcements. The
Company undertakes no obligation to update or 11




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revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time. Item 3. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk The Company may be exposed to market risk from changes in interest rates on
debt. As of March 28, 2004, the Company had no borrowings outstanding under its
$100.0 million revolving credit facility. Amounts outstanding under such credit
facility bear interest at LIBOR plus a margin of 1.25% to 1.75% (the
applicable margin depending on the Companys leverage ratio), or the
administrative agents prime rate of interest at the Companys option.
Accordingly, the Company may be exposed to the impact of interest rate
movements. To achieve the Companys objective of managing its exposure to
interest rate changes, the Company may from time to time use interest rate
swaps. Investment Portfolio The Company invests portions of its excess cash, if any, in highly liquid
investments. At March 28, 2004, the Company had $11.6 million in high-grade
overnight repurchase agreements, and $33.1 million in short-term investments in
the form of federal, state, and municipal bonds. As of March 28, 2004, the
Company has classified all short-term investments as trading securities. The
market risk on such investments is minimal due to their short-term nature. 12




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Item 4. Controls and Procedures In accordance with the Securities Exchange Act Rules 13a-15 and 15d-15, the
Companys management, under the supervision of the Chief Executive Officer and
Chief Financial Officer, conducted an evaluation of the effectiveness of the
design and operation of the Companys disclosure controls and procedures as of
the end of the period covered by this report. Based on that evaluation, the
Companys Chief Executive Officer and Chief Financial Officer concluded that
the design and operation of the Companys disclosure controls and procedures
were effective. There have been no significant changes in internal controls
over financial reporting or in other factors that could significantly affect
internal controls over financial reporting subsequent to the date of such
evaluation. Part II - Other Information Item 1. Legal Proceedings None Item 2. Changes in Securities, Use of Proceeds and Issuer Repurchases of
Equity Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Securities Holders None Item 5. Other Information None 13




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Item 6. Exhibits and Reports on Form 8-K  (a)
    
    Exhibits Filed. 31(a)  Certification of Principal Executive Officer pursuant to Rule
13a-14(a) of the Exchange Act. 31(b)  Certification of Principal Financial Officer pursuant to Rule
13a-14(a) of the Exchange Act. 32(a)  Certification of Principal Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. (1). 32(b)  Certification of Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. (1).  (1)
    
    These exhibits are deemed to accompany this report and
are not filed as part of the report.  (b)
    
    Reports filed on Form 8-K.
None  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. Date: May 5, 2004
    /s/ W. Douglas BennW. Douglas BennExecutive Vice President, Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer) 14