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Ruby Tuesday, Inc. Reports First Quarter Fiscal 2009 Results; Reduces Debt $40 Million

10/08/2008

MARYVILLE, Tenn.--(BUSINESS WIRE)--

Ruby Tuesday, Inc. (NYSE: RT) today reported diluted earnings per share of $0.01 on net income of $285 thousand for the Company's first quarter of fiscal 2009, which ended September 2, 2008. This compares to diluted earnings per share of $0.21 on net income of $11.1 million for the first quarter of the prior year.

Quarterly Highlights

Same-restaurant sales for the first quarter decreased 10.8% and 7.9% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively, compared to a decline of 4.8% and 2.9%, respectively, in the first quarter of the prior year.

Sandy Beall, Founder and CEO, commented on the results, saying, "The first quarter continued to be challenging for us, the industry, and the consumer. With the weaker economy, housing crisis, and high energy prices, consumers are thinking differently and spending less as reflected in our and the industry's sales, especially in the South for us where we have the majority of our restaurants.

"In the face of these challenges, our excess cash flow was good. The real positive in this environment is our ability to generate excess cash. We reduced debt $40 million in the quarter and anticipate reducing debt a total of $80-90 million for the year. We also were able to continue to increase our guest satisfaction scores and manage our controllable costs relatively well. We implemented a new menu design during the quarter that has more personality than earlier ones, offers greater value to the guest, and has enabled us to essentially maintain our check (up approximately 1%) compared with last year. Price value is the key in this environment and we plan on promoting our price and value more aggressively in the coming months. With all of our recent initiatives in place, we believe we are well positioned and all of our resources are focused on attracting guests and strengthening our balance sheet by paying down debt."

First quarter fiscal 2009 same-restaurant sales:

                                     June   July  August First Quarter
                                    ------ ------ ------ -------------
Company-Owned                        -8.9% -12.9% -11.1%        -10.8%
Domestic Franchise                  - 8.3% - 8.8% - 6.3%        - 7.9%
    Other highlights for the 13-week first quarter:

    --  Total revenue decreased 6.6% from the same period of the prior
        year.

    --  The Company opened two new Ruby Tuesday restaurants while
        eight were closed during the quarter.

    --  Domestic and international franchisees opened four new Ruby
        Tuesday restaurants during the quarter and two were closed.

    --  Sales at domestic and international franchise Ruby Tuesday
        restaurants (which is the basis for determining royalty fees
        included in franchise income on the Company's income
        statement) totaled $99,666,000 and $113,371,000 for the first
        quarter of fiscal 2009 and 2008, respectively.

    --  Total capital expenditures were $6.2 million for the quarter.

    Fiscal Year 2009 Guidance

    --  Restaurant locations - We plan on opening two Company-owned
        restaurants during the remainder of fiscal 2009. At this time,
        we expect to close an additional 10 Company-owned restaurants
        due to lease expirations. Our domestic and international
        franchisees plan on opening 15-18 restaurants during the
        balance of the fiscal year.

    --  Same-restaurant sales are expected to decline at a rate in the
        mid-single digits for the year, improving sequentially
        throughout the year.

    --  Restaurant operating margins for the year are anticipated to
        be down reflecting higher labor and other operating costs.
        Food cost is expected to be down marginally.

    --  Other expenses - Depreciation is projected in the $79-$81
        million range and selling, general, and administrative
        expenses are targeted to be down 10-15% from a year earlier.

    --  Balance sheet - We continue to evaluate alternatives to
        strengthen our balance sheet and enhance our financial
        flexibility. Our most important focus, however, is
        strengthening our balance sheet by paying down debt from our
        strong internal cash flow, as we did in the first quarter.

    --  Earnings per share for the year are projected to be in the
        $0.30-0.35 range.

    --  Capital expenditures for the year are expected to be in the
        $23-25 million range.

    --  Operating free cash flow is estimated to be in the $80-90
        million range.

In closing, Mr. Beall said, "These are difficult times for all. We have made great investments in our brand and our operations teams have executed very well in bringing those investments to life, resulting in the best food, service, team members, and 5-star facilities ever. We are proactively and aggressively running our business to attract guests in to see the new Ruby Tuesday. We believe managing our business for the long term with a sense of urgency to stabilize same-restaurant sales and continuing our focus on paying down debt is the right course of action."

A FRESH NEW RUBY TUESDAY

Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby Tuesday brand restaurants in 45 states, the District of Columbia, Puerto Rico, Guam, and 14 foreign countries. As of September 2, 2008, the Company-owned and operated 715 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 171 and 55 restaurants, respectively. Ruby Tuesday, Inc. is traded on the New York Stock Exchange (Symbol: RT).

The Company will host a conference call, which will be a live web-cast, this afternoon at 5:00 p.m. Eastern Time. The call will be available live at the following websites:

    http://www.rubytuesday.com

    http://www.fulldisclosure.com

    Special Note Regarding Forward-Looking Information

This press release contains various forward-looking statements which represent the Company's expectations or beliefs concerning future events, including one or more of the following: future financial performance and restaurant growth (both Company-owned and franchised), future capital expenditures, future borrowings and repayment of debt, availability of debt financing on terms attractive to the Company, payment of dividends, stock repurchases, and restaurant and franchise acquisitions and re-franchises. The Company cautions the reader that a number of important factors and uncertainties could, individually or in the aggregate, cause our actual results to differ materially from those included in the forward-looking statements, including, without limitation, the following: changes in promotional, couponing and advertising strategies; guests' acceptance of changes in menu items; changes in our guests' disposable income; consumer spending trends and habits; mall-traffic trends; increased competition in the restaurant market; weather conditions in the regions in which Company-owned and franchised restaurants are operated; guests' acceptance of the Company's development prototypes and remodeled restaurants; laws and regulations affecting labor and employee benefit costs, including further potential increases in federally mandated minimum wage; costs and availability of food and beverage inventory; the Company's ability to attract qualified managers, franchisees and team members; changes in the availability and cost of capital; impact of adoption of new accounting standards; impact of food-borne illnesses resulting from an outbreak at either Ruby Tuesday or other restaurant concepts; effects of actual or threatened future terrorist attacks in the United States; significant fluctuations in energy prices; and general economic conditions.

RUBY TUESDAY, INC.

Financial Results For the First Quarter of Fiscal Year 2009
(Amounts in thousands except per share amounts)

                      13 Weeks             13 Weeks
                        Ended               Ended
                      Sept. 2,   Percent   Sept. 4,  Percent   Percent
                        2008    of Revenue   2007   of Revenue Change
                      -------------------- ------------------- -------

Revenue:
 Restaurant sales and
  operating revenue   $321,216       99.1  $342,994       98.9
 Franchise revenue       2,785        0.9     3,803        1.1
                      ---------            --------
   Total revenue       324,001      100.0   346,797      100.0   (6.6)

Operating Costs and
 Expenses:
 (as a percent of
  Restaurant sales
  and operating
  revenue)
   Cost of
    merchandise         87,631       27.3    92,693       27.0
   Payroll and
    related costs      109,798       34.2   109,941       32.1
   Other restaurant
    operating costs     70,494       21.9    66,887       19.5
   Depreciation and
    amortization        20,129        6.3    23,593        6.9
 (as a percent of
  Total revenue)
   Loss from
    Specialty
    Restaurant Group,
    LLC bankruptcy          26        0.0       164        0.0
   Selling, general
    and
    administrative,
    net                 26,260        8.1    29,753        8.6
   Equity in
    (earnings) losses
    of unconsolidated
    franchises            (499)      (0.2)      846        0.2
                      ---------            --------
Total operating costs
 and expenses          313,839              323,877
                      ---------            --------

Earnings before
 Interest and Taxes     10,162        3.1    22,920        6.6  (55.7)

 Interest expense,
  net                    9,800        3.0     7,099        2.0
                      ---------            --------

Pre-tax Profit             362        0.1    15,821        4.6  (97.7)

 Provision for income
  taxes                     77        0.0     4,731        1.4
                      ---------            --------

Net Income            $    285        0.1  $ 11,090        3.2  (97.4)
                      =========            ========



Earnings Per Share:
Basic                 $   0.01             $   0.21             (95.2)
                      =========            ========
Diluted               $   0.01             $   0.21             (95.2)
                      =========            ========

Shares:
Basic                   51,381               52,146
                      =========            ========
Diluted                 51,439               52,429
                      =========            ========
RUBY TUESDAY, INC.

Financial Results For the First Quarter of Fiscal Year 2009
(Amounts in thousands)

                                                  Sept. 2,   June 3,
CONDENSED BALANCE SHEETS                            2008       2008
------------------------------------------------ ---------- ----------
Assets
   Cash and Short-Term Investments                   $8,759    $16,032
   Accounts and Notes Receivable                      8,193     10,515
   Inventories                                       21,163     21,323
   Income Tax Receivable                              3,533      7,708
   Deferred Income Taxes                              4,962      4,525
   Assets Held for Disposal                          26,012     24,268
   Prepaid Rent and Other Expenses                   21,128     20,538
                                                 ---------- ----------

     Total Current Assets                            93,750    104,909

   Property and Equipment, Net                    1,069,479  1,088,356
   Goodwill, Net                                     18,927     18,927
   Notes Receivable, Net                              1,779      1,884
   Other Assets                                      55,823     57,861
                                                 ---------- ----------

     Total Assets                                $1,239,758 $1,271,937
                                                 ========== ==========

Liabilities
   Current Portion of Long Term Debt, including
    Capital Leases                                  $19,456    $17,301
   Other Current Liabilities                        106,600     97,852
   Long-Term Debt, including Capital Leases         545,756    588,142
   Deferred Income Taxes                             28,408     27,422
   Deferred Escalating Minimum Rents                 43,153     42,450
   Other Deferred Liabilities                        62,052     67,252
                                                 ---------- ----------

     Total Liabilities                              805,425    840,419

Shareholders' Equity                                434,333    431,518
                                                 ---------- ----------

     Total Liabilities and Shareholders' Equity  $1,239,758 $1,271,937
                                                 ========== ==========

Source: Ruby Tuesday, Inc.