Ruby Tuesday, Inc. Reports Fiscal Third Quarter 2016 Financial Results
Updates Guidance for Fiscal Year 2016
Fiscal Third Quarter 2016 Highlights (13 weeks ended
- Same-restaurant sales decreased 3.1%, which included a 140 basis point negative impact due to temporary store closures resulting from severe winter weather, compared to a 0.3% decline in the third quarter of the prior fiscal year.
Total revenue declined 5.1% to
$271.5 million, which included a net reduction of 20 corporate-owned restaurants.
- Restaurant level margin contracted 10 basis points to 17.1%.
Net loss was
$3.1 million, or ($0.05)per diluted share, compared to a net loss of $800,000, or ($0.01)per diluted share.
Adjusted Net Income* was
$1.6 million, or $0.03per diluted share, compared to Adjusted Net Income of $1.9 million, or $0.03per diluted share.
Adjusted EBITDA* was
$20.3 millioncompared to $21.5 millionin the prior year quarter.
The Company invested
$10.0 millionto repurchase 1.9 million shares of its common stock and $2.5 millionto repurchase bonds below par.
March 1, 2016, the Company had cash on hand of $52.5 million.
* Adjusted EBITDA, Adjusted Net (Loss)/ Income and Adjusted Net (Loss)/ Income per share are non-GAAP measures. Reconciliations of Adjusted EBITDA, Adjusted Net (Loss)/ Income and Adjusted Net (Loss)/ Income per share to the most directly comparable financial measures presented in accordance with GAAP are set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”
JJ Buettgen, Chairman of the Board, President, and Chief Executive Officer, commented, “Our third quarter was a volatile period affected by weather, softness in the casual dining industry, and increased promotional activity by our peers. Despite this challenging environment, we continue to believe that our key brand initiatives will drive an improvement in guest counts.”
Buettgen continued, “We are encouraged by our early results in
attracting and delighting women and young families with our Garden Bar
initiative and by the lift we are seeing so far at our remodeled
locations. We remain focused on better in-restaurant execution, refining
our media and targeting plans, and incorporating what we’ve learned from
our Garden Bar and remodel tests into our go forward strategy. This
gives us confidence that we can return to same-restaurant sales growth
and higher operating profitability. While not yet visible in our
results, we believe that we have the right framework in place to attract
more women and families and increase visits from our current
Fiscal Third Quarter 2016 Financial Results
Total revenue was
- Third quarter same-restaurant sales decrease of 3.1% was driven mainly by traffic declines resulting from temporary store closures due to inclement weather and increased discounting by competitors. Year-over-year guest counts were down 5.9% for the quarter while average check rose 2.8%.
Restaurant level margin, excluding franchise revenue, decreased to
Selling, general & administrative expenses (SG&A) decreased to
GAAP net loss was
Adjusted Net Income was
The Company ended the fiscal 2016 third quarter with cash and cash
As of March 1, 2016, there were 729
Fiscal Year 2016 Financial Outlook
The Company is updating its full-year Adjusted Net Income per share
- Same-Restaurant Sales – Fiscal 2016 same-restaurant sales down approximately 1% (vs. flat to up 1% previously).
Unit Development– A net reduction of 11-14 corporate-owned Ruby Tuesdayrestaurants.
- Restaurant Level Margin – Fiscal 2016 restaurant level margin of 16.7% to 17.0% (vs. 17.3% to 17.6% previously).
Selling, General, and Administrative Expense – Fiscal 2016 SG&A
$110 million to $112 million(vs. $114 million to $117 millionpreviously).
- Tax Rate – Adjusted Net Income is calculated using the statutory tax rate of 39.69%. This provides a more consistent tax rate to facilitate review and analysis of the Company’s financial performance. The Company is limited in the amount of tax credits that can be utilized each year based upon taxable income for that year and cannot recognize a full benefit of any year’s currently generated tax credits or tax credit carry-forwards due to the Company’s tax valuation allowance.
Capital Expenditures – Fiscal 2016 capital expenditures ranging
$34 million to $36 million(vs. $36 million to $38 millionpreviously).
Conference Call & Webcast
JJ Buettgen, Chairman of the Board, President, and Chief Executive
The conference call will also be webcast live and later archived on the Investor Relations page of Ruby Tuesday’s corporate website at www.rubytuesday.com under the ‘Events & Presentations’ section.
This press release contains various 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.
Forward-looking statements represent our expectations or beliefs
concerning future events, including one or more of the following: future
financial performance (including our estimates of changes in
same-restaurant sales, average unit volumes, operating margins,
expenses, and other items), future capital expenditures, the effect of
strategic initiatives (including statements relating to cost savings
initiatives and the benefits of our marketing), the opening or closing
of restaurants by us or our franchisees, sales of our real estate or
purchases of new real estate, future borrowings and repayments of debt,
availability of financing on terms attractive to the Company, compliance
with financial covenants in our debt instruments, payment of dividends,
stock and bond repurchases, restaurant acquisitions and dispositions,
and changes in senior management and in the Board of Directors. We
caution 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 risks and uncertainties described in
the Risk Factors included in Part I, Item A of our Annual Report on Form
10-K for the year ended
Non-GAAP Financial Measures
The Company believes excluding certain items from its financial results provides investors with a clearer understanding of the Company’s operating performance and comparison to prior-period results. In addition, management uses these non-GAAP financial measures and ratios to assess the results of the Company’s operations.
We have included EBITDA, Adjusted EBITDA, Adjusted Net (Loss)/ Income and Adjusted Net (Loss)/Income per share to provide investors with supplemental measures of our operating performance. We believe these are important supplemental measures of operating performance because they eliminate items that have less bearing on our Company-wide operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on financial measures in accordance with United States Generally Accepted Accounting Principles (GAAP). We also believe that securities analysts, investors and other interested parties frequently use EBITDA, Adjusted EBITDA, Adjusted Net (Loss)/ Income and Adjusted Net (Loss)/ Income per share in evaluating issuers. Because other companies in some cases calculate EBITDA, Adjusted EBITDA, Adjusted Net (Loss)/ Income, or Adjusted Net (Loss)/ Income per share differently from the way we calculate such measures, these metrics may not be comparable to similarly titled measures reported by other companies. Additionally, supplemental non-GAAP financial measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
The use of these measures permits a comparative assessment of the Company's operating performance relative to its performance based on GAAP results, while isolating the effects of certain items that vary from period to period without correlation to core operating performance and certain items that vary widely among similar companies. However, the inclusion of these adjusted measures should not be construed as an indication that future results will be unaffected by unusual or infrequent items or that the items for which the adjustments have been made are necessarily unusual or infrequent.
Available in this release is the reconciliation of Net (Loss)/ Income, the most directly comparable GAAP measure, to EBITDA, Adjusted EBITDA, Adjusted Net (Loss)/ Income and Adjusted Net (Loss)/ Income per share, all of which are non-GAAP financial measures. The Company defines EBITDA as income before interest, taxes, and depreciation and amortization and Adjusted EBITDA as EBITDA, excluding certain non-cash and/or non-recurring expenses/(income) including, but not limited to, Closures and Impairments, Trademark Impairment and Executive Transition. Adjusted Net (Loss)/ Income is defined as Net (Loss)/ Income, excluding certain non-cash and/or non-recurring expenses/(income) as detailed in Adjusted EBITDA, net of tax as well as adjustments related to Debt Prepayment Penalties, Deferred Financing Fees, and Income Tax (Benefit)/Provision Adjusted to the Statutory Rate. Adjusted Net (Loss)/ Income per share is defined as Adjusted Net (Loss)/ Income divided by diluted shares outstanding.
|Financial Results For the Third Quarter and First 39 Weeks of Fiscal Year 2016|
|(Amounts in thousands except per share amounts)|
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS|
|13 Weeks||13 Weeks||39 Weeks||39 Weeks|
|March 1,||Percent||March 3,||Percent||March 1,||Percent||March 3,||Percent|
|Restaurant sales and operating revenue||$||269,868||99.4||$||284,392||99.5||$||807,105||99.4||$||825,055||99.4|
|Operating Costs and Expenses:|
|(as a percent of Restaurant sales and operating revenue)|
|Cost of goods sold (excluding depreciation and amortization shown below)||75,143||27.8||77,796||27.4||221,689||27.5||224,589||27.2|
|Payroll and related costs||93,357||34.6||96,680||34.0||280,976||34.8||286,486||34.7|
|Other restaurant operating costs (1)||55,311||20.5||60,972||21.4||173,903||21.5||179,706||21.8|
Restaurant Level Margin (excludes franchise revenue) (1)
|Depreciation and amortization (1)||12,732||4.7||12,961||4.6||38,474||4.8||39,319||4.8|
|(as a percent of Total revenue)|
|Selling, general and administrative, net||27,378||10.1||28,948||10.1||84,622||10.4||87,141||10.5|
|Closures and impairments, net||6,123||2.3||3,991||1.4||18,908||2.3||6,548||0.8|
|Total operating costs and expenses||270,044||281,348||820,571||823,789|
|Earnings/(Loss) From Operations||1,426||0.5||4,565||1.6||(8,665||)||(1.1||)||5,965||0.7|
|Interest expense, net||5,005||1.8||5,446||1.9||16,110||2.0||16,783||2.0|
|Gain on extinguishment of debt||(10||)||-||-||-||(10||)||-||-||-|
|Loss before income taxes||(3,569||)||(1.3||)||(881||)||(0.3||)||(24,765||)||(3.1||)||(10,818||)||(1.3||)|
|Benefit for income taxes||(483||)||(0.2||)||(112||)||-||(1,686||)||(0.2||)||(3,341||)||(0.4||)|
|Net Loss Per Share:|
(1) Beginning in the first quarter of 2016, the Company reclassified its Amortization of intangible assets from “Other restaurant operating costs” to “Depreciation and amortization.” The Company believes this reclassification better aligns the Company with its peers and increased both current and prior period restaurant level margin by approximately 20 basis points. The schedule accompanying the condensed unaudited consolidated financial statements has been revised to reflect the reclassification of Amortization of intangible assets.
|Financial Results For the Third Quarter of Fiscal Year 2016|
|(Amounts in thousands)|
|March 1,||June 2,|
|CONDENSED BALANCE SHEETS||2016||2015|
|Cash and Cash Equivalents||$||52,458||$||75,331|
|Income Tax Receivable||2,958||-|
|Prepaid Rent and Other Expenses||11,520||12,398|
|Assets Held for Sale||3,402||5,453|
|Total Current Assets||98,791||118,880|
|Property and Equipment, Net||722,570||752,174|
|Deferred Income Taxes, Net||1,995||-|
|Current Portion of Long-Term Debt, including|
|Income Tax Payable||-||1,069|
|Deferred Income Taxes, Net||2,612||7|
|Other Current Liabilities||85,308||
|Total Current Liabilities||98,884||110,381|
|Long-Term Debt and Capital Leases||218,117||231,017|
|Deferred Income Taxes, Net||-||1,442|
|Deferred Escalating Minimum Rents||51,793||50,768|
|Other Deferred Liabilities||66,116||66,261|
|Total Liabilities and|
|Non-GAAP Reconciliation Table|
|Reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net (Loss)/Income, and Adjusted Net (Loss)/Income Per Share|
|(Amounts in thousands except per share amounts)|
|13 Weeks||13 Weeks||39 Weeks||39 Weeks|
|March 1,||March 3,||March 1,||March 3,|
|Depreciation and Amortization||12,732||12,961||38,474||39,319|
Interest Expense and Gain on Extinguishment of Debt
|Benefit for Income Taxes||(483||)||(112||)||(1,686||)||(3,341||)|
|Closures and Impairments, Net (1)||6,123||3,991||18,908||6,548|
|Trademark Impairment (2)||-||-||1,999||-|
|Executive Transition (3)||
|Closures and Impairments, Net (net of tax) (1)(5)||3,692||2,407||11,403||3,949|
|Trademark Impairment (net of tax) (2)(5)||-||-||1,205||-|
|Executive Transition (net of tax) (3)(5)||-||-||(768||)||-|
|Debt Prepayment Penalties & Deferred Financing Fees (net of tax) (4)(5)||36||-||690||293|
|Income Tax (Benefit)/Provision Adjusted to Statutory Rate (6)||933||238||8,143||953|
|Adjusted Net (Loss)/Income||$||1,575||$||1,876||$||(2,406||)||$||(2,282||)|
|Net Loss Per Share||$||(0.05||)||$||(0.01||)||$||(0.38||)||$||(0.12||)|
|Adjusted Net (Loss)/Income Per Share||$||0.03||$||0.03||$||(0.04||)||$||(0.04||)|
|Basic Shares Outstanding||60,918||60,643||61,239||60,532|
|Diluted Shares Outstanding (7)||61,232||61,506||61,239||60,532|
|(1) Includes property impairments, restaurant lease reserves, closing cost adjustments, and gain on the sale of surplus properties.|
|(2) In connection with the planned sale and closures of our Company-owned Lime Fresh restaurants, we recorded a $2.0 million trademark impairment charge representing a partial impairment of the Lime Fresh trademark during the second quarter of fiscal year 2016. The Lime Fresh trademark has a net book value of $0.9 million remaining at March 1, 2016.|
|(3) On July 25, 2015, our then President Ruby Tuesday Concept and Chief Operations Officer left the Company. Accordingly, included within our share-based compensation expense for the first quarter is a forfeiture credit of $1.3 million in connection with the forfeiture of 333,000 unvested stock options and 137,000 unvested shares of restricted stock.|
|(4) Debt prepayment penalties and the write-off of deferred financing fees are classified within Interest Expense and Gain on Extinguishment of Debt, which are already included in EBITDA calculation and therefore not a separate add-back for Adjusted EBITDA.|
|(5) Adjusted for income taxes based on a statutory tax rate of 39.69%.|
|(6) Represents the difference between the benefit for Taxes at the quarterly effective tax rate versus the statutory tax rate of 39.69%. Adjusted Net (Loss)/Income per share applies the statutory rate to pre-tax loss and adjustments to loss.|
|(7) Adjusted Net Income per share figures are calculated based on diluted shares outstanding whereas Net Loss and Adjusted Net Loss per share figures are calculated based on basic shares outstanding.|
|Ruby Tuesday, Inc.|
|Number of Restaurants at End of Period|
|March 1,||March 3,|