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Ruby Tuesday, Inc. Reports First Quarter Results


* Diluted Earnings Per Share Up 19% * Same-Store Sales Building * Delays Fin 46 Adoption as FASB Proposes Changes

MARYVILLE, Tenn., Oct. 6 /PRNewswire-FirstCall/ -- Ruby Tuesday, Inc. (NYSE: RI) today reported results for its first quarter of fiscal 2004, which ended September 2, 2003. For the quarter, revenues increased 12.3% to $249.9 million, pre-tax profit margins increased 140 basis points to 15.3%, and diluted earnings per share increased 19.4% to $0.37. Sandy Beall, the Company's Chairman and Chief Executive Officer commented, "We continue making significant investments in our business through an improved facilities program and focusing on team quality, to-go sales and various other service initiatives. Through these initiatives, we continue raising the bar on our standards and achieving solid financial results. For fiscal 2004, we still anticipate 17-18% earnings per share growth, and for the second quarter we are estimating diluted earnings per share of $0.32 per share. These estimates do not reflect any one-time cumulative effect adjustment we may have to record when we adopt FIN 46."

Same-store sales at Company-owned Ruby Tuesday restaurants decreased 0.1% during the quarter. After being down approximately 1.0% the first five weeks of the quarter, July same-store sales were slightly positive and August same- store sales were up approximately 1.0%. That momentum has continued into the second quarter where Company-owned same-store sales growth is currently in excess of the Company's 2.5-3.0% goal for the second quarter. Same-store sales at Franchise Partnership restaurants decreased 0.5% during the quarter. After being down 1.5-2.0% for the first five weeks of the quarter, same-store sales at partnership restaurants improved throughout the quarter and were positive 1.5-2.0% in August. The positive sales momentum has continued and second quarter to-date franchise partnership same-store sales growth is also in excess of the 2.5-3.0% goal for the second quarter.

Beall commented, "We are excited about the sales momentum, which is primarily being driven by the investments we have made in staffing, service initiatives, our new menu and our new supervisory system, as well as higher standards for operations. In addition, we have completed the roll-out of 'curb-side to-go(SM)' at 308 of the 325 Company-owned freestanding restaurants. The franchise partnerships will have to-go rolled out to their freestanding restaurants by the end of November, and both the Company and partnership system will complete the roll out of mall to-go delivery by the holidays. Based on the existing momentum, the positive impact of to-go, and the fact that Company and the franchise partnerships' September period same- store sales are both ahead of our second quarter goals, we are comfortable with the goals for second quarter same-store sales. And, for the fiscal year, we are estimating Company-owned same-store sales growth will be approximately 2.0% even after being slightly negative in the first quarter."

Due to the Financial Accounting Standards Board ("FASB") announcing the upcoming issuance of further interpretative guidance and proposing a delay in the effective date, the Company did not early adopt FASB Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51" ("FIN 46") under which the Company expected to consolidate its franchise partnership system during its first quarter. Recently the FASB proposed a delay in the effective date of FIN 46 for certain types of variable interest entities, including franchisees. The FASB has also released a number of proposed changes to the interpretation for which the FASB is awaiting comments before issuing final interpretive guidance on FIN 46. The Company believes it would not be prudent to adopt FIN 46 prior to issuance and review of the final guidance, as it is possible there could be further, unexpected modifications to FIN 46, including modifications that might lead the Company to conclude some or all the franchise partnerships should not be consolidated. Beall commented on the delay, "Since its release in late January, we have been out in front in explaining the potential impact of FIN 46 on the Company and providing a significant amount of information on both the partnership system and the effects of consolidation. We were on track to early adopt FIN 46 and consolidate the franchise partnerships this quarter, and this would have had no dilutive impact, other than the previously announced one-time cumulative effect adjustment. However, due to the fact the rules are not final, based on discussions with our board, we believe, and our auditors concur, that we should postpone adoption until the final interpretive guidance is released by the FASB. Whether we eventually consolidate or not, and if so, when, does not change how we or the partnerships run our businesses. We are focused on driving same-store sales, investing wisely in new restaurants, and continued earnings, margin and return growth. The rules regarding consolidation are outside of our control, but if required, consolidation should not negatively affect annual earnings, underlying recourse debt or cash flow. As always, we will continue providing quarterly updates on the performance of the system in an effort to assist the investor in assessing our entire system."

Highlights for the first quarter compared with the first quarter of fiscal 2003 are shown below:

                                                1Q fiscal 2004  1Q fiscal 2003
    Diluted earnings per share                        $0.37         $0.31
    Company-owned same-store sales change              (0.1%)         1.2%
    Company-owned average unit volume increase          1.4%          3.5%
    Total revenues                             $249,852,000  $222,512,000
    Pre-tax margins                                    15.3%         13.9%

    Additional First Quarter Highlights:
    * Diluted earnings per share increased 19.4% to $0.37 from $0.31.
    * Net income increased 21.4% to $24,513,000 from $20,189,000.
    * Ruby Tuesday restaurant revenues increased 12.4% to $245,774,000 from
      $218,713,000, while franchise sales (including franchise partnership
      sales) increased 8.2% to $103,441,000 from $95,627,000.
    * Eleven Company-owned Ruby Tuesday restaurants were opened and two were
      closed due to lease expirations.
    * Four franchise partnership units were opened and one was closed.
    * Three traditional franchise units were opened and none were closed
    * Ruby Tuesday, Inc. exercised its right to acquire an additional 49%
      interest in four of its franchise partnerships during the quarter.  As
      of September 2, 2003, Ruby Tuesday. Inc. held a 50% interest in thirteen
      of twenty-four franchise partnerships collectively operating 124 Ruby
      Tuesday restaurants.

Ruby Tuesday, Inc. has Company-owned, franchise partnership and/or traditional franchise Ruby Tuesday brand restaurants in 39 states, the District of Columbia, Puerto Rico and 13 foreign countries. As of September 2, 2003, the Company owned and operated 449 Ruby Tuesday restaurants while franchise partnerships and traditional franchisees operated 192 and 31 locations, respectively. Ruby Tuesday, Inc. is traded on the New York Stock Exchange (NYSE: RI).

For more information, contact: Phone: 865-379-5700 Price Cooper

The Company will host a conference call which will be a live web-cast tomorrow morning at 8:30 Eastern Time. The call will be available live at the following websites:



The call will be archived on both sites through the close of business on October 21, 2003.

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 the following: future financial performance and unit growth (both Company-owned and franchised), future capital expenditures, future borrowings and repayment of debt, and payment of dividends. The Company cautions that a number of important factors could, individually or in the aggregate, cause actual results to differ materially from those included in the forward-looking statements, including, without limitation, the following: consumer spending trends and habits; mall-traffic trends; increased competition in the casual dining restaurant market; weather conditions in the regions in which Company- owned and franchised restaurants are operated; consumers' acceptance of the Company's development prototypes; laws and regulations affecting labor and employee benefit costs; costs and availability of food and beverage inventory; the Company's ability to attract qualified managers, franchisees and team members; changes in the availability of capital; impact of adoption of new accounting standards; and general economic conditions.

    Financial Results For the First Quarter of Fiscal Year 2004 (unaudited)
    (Amounts in thousands except per share amounts)

                             13 Weeks             13 Weeks
                              Ended                 Ended
                           September 2, Percent  September 3, Percent  Percent
                               2003    of Sales     2002     of Sales  Change
    System-Wide Sales:
    Company-owned Ruby Tuesday
     revenue               $  245,774             $  218,713
    Franchised revenue        103,441                 95,627
        Total system-wide
         sales             $  349,215             $  314,340            11.1

     Company restaurant
      revenues             $  245,774   98.4      $  218,713    98.3    12.4
     Franchise income           4,078    1.6           3,799     1.7
        Total operating
         revenues             249,852  100.0         222,512   100.0    12.3

    Operating Costs and Expenses:
     (as a percent of Company
      restaurant revenues)
       Cost of merchandise     63,341   25.8          58,865    26.9
       Payroll and related
        costs                  77,688   31.6          74,439    34.0
       Other restaurant operating
        costs                  41,454   16.9          38,451    17.6
       Depreciation and
        amortization           12,887    5.2           9,999     4.6
     (as a percent of Total
      operating revenues)
       Selling, general and
        administrative         16,080    6.4          10,864     4.9
       Equity in (earnings) of
         franchises            (1,071)  (0.4)           (565)   (0.3)
    Total operating costs and
     expenses                 210,379                192,053

    Earnings before Interest
     and Taxes                 39,473   15.8          30,459    13.7    29.6

     Interest expense /
     (income), net              1,350    0.5            (506)   (0.2)

    Pre-tax Profit             38,123   15.3          30,965    13.9

     Provision for income
      taxes                    13,610    5.5          10,776     4.8

    Net Income             $   24,513    9.8      $   20,189     9.1    21.4

    Earnings Per Share:
    Basic                  $     0.38             $     0.32            18.8
    Diluted                $     0.37             $     0.31            19.4

    Basic                      64,809                 63,818
    Diluted                    66,170                 65,101


    Financial Results For the First Quarter
    of Fiscal Year 2004 (unaudited)
    (Amounts in thousands)

                                                  September 2,      June 3,
    CONDENSED BALANCE SHEETS                        2003             2003
     Cash and Short-Term Investments            $  21,427       $   8,662
     Accounts and Notes Receivable                  9,144          10,509
     Inventories                                   12,337          12,200
     Deferred Income Taxes                          3,467           3,155
     Income Tax Receivable                              0           2,485
     Prepaid Rent                                   2,093           2,136
     Assets Held for Disposal                       3,686           5,217
     Other Current Assets                           5,869           6,099

       Total Current Assets                        58,023          50,463

     Property and Equipment, Net                  689,880         660,897
     Goodwill, Net                                  7,845           7,845
     Notes Receivable, Net                         36,556          39,827
     Other Assets                                  55,954          46,035

       Total Assets                             $ 848,258       $ 805,067

     Current Liabilities                        $  87,974       $  81,321
     Long-Term Debt                               206,925         207,064
     Deferred Income Taxes                         36,330          32,627
     Other Deferred Liabilities                    71,105          69,527

       Total Liabilities                          402,334         390,539

    Shareholders' Equity                          445,924         414,528

       Total Liabilities and
        Shareholders' Equity                    $ 848,258       $ 805,067

SOURCE Ruby Tuesday, Inc.