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Ruby Tuesday, Inc. Reports Fourth Quarter and Fiscal 2006 Diluted Earnings Per Share of $0.53 and $1.65, Respectively; and Announces Increased Dividend

07/11/2006

MARYVILLE, Tenn.--(BUSINESS WIRE)--July 11, 2006--Ruby Tuesday, Inc. (NYSE:RI) today reported diluted earnings per share of $0.53 on net income of $31.7 million for the Company's fourth quarter of fiscal 2006 which ended on June 6, 2006. This represents a 33% increase as compared to $0.40 per diluted share on net income of $26.0 million for the fourth quarter of the prior year. The Company reminds investors that its fourth quarter of fiscal 2006 contained 14 weeks as compared to 13 weeks for the same quarter of the prior year due to the Company's 52/53 fiscal calendar. The Company estimates diluted earnings per share for the fourth quarter and fiscal year were positively impacted by approximately $0.04 as a result of the extra week. For the fiscal year ended June 6, 2006, the Company reported diluted earnings per share of $1.65 on net income of $101.0 million as compared to $1.56 on net income of $102.3 million for fiscal 2005. In addition, the Company announced its Board of Directors has approved a significant increase in its annual dividend from $0.045 per share to $0.50 per share to be paid on a semi-annual basis.

As previously released, same-restaurant sales at Company-owned Ruby Tuesday restaurants increased 2.9% and 1.4% for the fourth quarter and fiscal year, respectively. Same-restaurant sales at domestic franchise Ruby Tuesday restaurants increased 7.1% and 1.6% for the fourth quarter and fiscal year, respectively. For the fourth quarter, traffic decreased 0.5% at Company-owned restaurants, while increasing 4.0% at domestic franchise Ruby Tuesday restaurants.

Fourth quarter fiscal 2006 monthly period same-restaurant sales:

                       March -     April -     May -
                       Five weeks  Four weeks  Five weeks
                       ended       ended       ended       Fourth
                       April 4 (a) May 2 (a)   June 6      Quarter
                       ----------- ----------- ----------- -----------
Company-owned:
 Same-restaurant sales    5.7%        2.4%        0.5%        2.9%
Domestic Franchise:
 Same-restaurant sales    9.4%        7.3%        4.6%        7.1%


(a) - The Company notes that its five-week March period
same-restaurant sales were positively impacted and its four-week April
period same-restaurant sales were negatively impacted an estimated
1.0-1.5% due to the Easter holiday occurring during the Company's
April period in fiscal 2006 as opposed to its March period in fiscal
2005.

    Other highlights for the 14-week fourth quarter include:

    --  Total revenue increased 23.3% over the same period of the
        prior year.

    --  Average restaurant volumes at Company-owned Ruby Tuesday
        restaurants increased 3.0% over the same period of the prior
        year.

    --  The Company opened eleven new Ruby Tuesday restaurants during
        the quarter, while one was closed.

    --  Franchisees opened nine new Ruby Tuesday restaurants during
        the quarter, while one was closed.

    --  Sales at franchise Ruby Tuesday restaurants (which is the
        basis for determining royalty fees included in franchise
        income on the Company's income statement) totaled $127,780,000
        and $101,257,000 for the fourth quarter of fiscal 2006 and
        2005, respectively.

    --  Capital expenditures were $41.0 million for the quarter.

    --  The Company repurchased 1.0 million shares of its common stock
        during the fourth quarter at an average price of $28.94 per
        share. As of the end of the fourth quarter, 5.2 million shares
        remained authorized for repurchase under the Company's ongoing
        share repurchase program.

    --  The Company had 58.2 million shares of common stock
        outstanding at the end of the quarter.

    Fiscal Year 2006 Highlights

    --  Total revenue increased 17.6% over the prior year.

    --  Average restaurant volumes at Company-owned Ruby Tuesday
        restaurants increased 2.0% over the same period of the prior
        year.

    --  Fifty-six Company-owned Ruby Tuesday restaurants were opened,
        and six were closed.

    --  Thirty-two franchise restaurants were opened, and seven were
        closed.

    --  Sales at franchise Ruby Tuesday restaurants (which is the
        basis for determining royalty fees included in franchise
        income on the Company's income statement) totaled $458,712,000
        and $422,505,000 for fiscal 2006 and 2005, respectively. The
        Company reminds investors that 44 restaurants were acquired by
        the Company during fiscal 2005 from franchisees subsequent to
        the first quarter.

    --  Capital expenditures were $171.6 million for the year.

    --  Total annualized management turnover (including management
        trainees) was 19% as of the end of the year.

    --  The Company repurchased 7.8 million shares (approximately 12%)
        of its common stock during fiscal 2006 at an average price of
        $24.16 per share.

Sandy Beall, Chairman and CEO commented, "Fiscal 2006 was a good year for us in many respects, and we were pleased to get back to reporting positive same-restaurant sales and diluted earnings per share growth throughout the course of the year, which enabled us to end the year with both sales and earnings being positive. We completed our transition from a coupon-based marketing approach to one based on television advertising, including a combination of local network and national cable advertising. In addition, we made great strides in our food and service initiatives. We also continued our investments in our team members, which has resulted in all-time low management turnover of below 20% including management trainees. We believe we have laid a solid foundation during fiscal 2006 upon which we can build an even greater company, and we are very excited about the plans we have going forward."

Declaration of Dividend

As part of its commitment to returning excess capital to the Company's shareholders, the Company's Board of Directors approved a plan to pay a $0.50 per year cash dividend to be paid semi-annually. As part of this plan, the Board of Directors declared a $0.25 per share cash dividend, payable on August 8, 2006 to shareholders of record as of the close of business on July 24, 2006. This represents a significant increase from the previous $0.0225 per share semi-annual dividend amount, which the Company's Board of Directors believes is prudent based on the Company's continued projected and increasing free cash flow.

Acquisition of Franchise Market

As part of its previously communicated plans to acquire certain franchise markets in the eastern portion of the United States, the Company announced it is in the process of acquiring 17 restaurants from its Orlando, Florida franchisee. The effective date of the transaction will be July 12, 2006. Previously, the Company owned a 50% interest in its Orlando franchisee's business. The Company anticipates the acquisition will be accretive to diluted earnings per share for its fiscal 2007 year and believes Orlando represents a solid growth market for the Company.

Fiscal 2007 Guidance

For the Company's five-week June period ending July 11, 2006, period-to-date same-restaurant sales were down approximately 2.7% and 1.3% at Company-owned and domestic franchise restaurants, respectively, after same-restaurant sales started the first two weeks of the June period down approximately 5.0% and 1.5% at Company-owned and domestic franchise restaurants, respectively.

Beginning with the first quarter of fiscal 2007, the Company has adopted Statement of Financial Accounting Standards No. 123R, "Share-Based Payment" ("SFAS 123R"). The impact of this on fiscal 2007 diluted earnings per share is estimated to be $0.11 to $0.12 for the year. Including the impact of stock-based compensation expense, the Company is targeting diluted earnings per share of $0.34 to $0.38 for first quarter fiscal 2007 based on same-restaurant sales of flat to down two percent at Company-owned restaurants as the Company has experienced sales improvement since the first part of June. For fiscal 2007, the Company is targeting diluted earnings per share of $1.70 to $1.75 based on:

    --  1.0-2.0% same-restaurant sales growth at Company-owned
        restaurants

    --  45 to 50 Company-owned openings for the year

    --  The acquisition of 17 restaurants from a franchisee effective
        July 12th

    --  30 to 35 franchise openings for the year

    --  $145-$155 million in capital expenditures for the year

    --  Continued future investments in the areas of food and labor

    --  Stock-based compensation expense of $0.11 to $0.12 per diluted
        share

Beall commented, "We feel very good about the plans and strategies we have in place for fiscal 2007. During fiscal 2007, we plan to continue improvements in areas such as our menu, our service as well as our advertising. On the menu side, we have further enhancements planned revolving around higher levels of quality and freshness for both food and beverages, which consumers will see on both our July menu next week as well as our fall menu. Regarding service, we plan to continue investing in various labor and dining room initiatives to continue taking service up another notch. On the advertising side, we made tremendous strides during fiscal 2006, but still have great upside. We are buying much more efficiently, and the messages themselves continue getting better. In addition, during this fiscal year, we will begin incorporating other product messages into our advertising on top of our burger centric positioning. Also, while we have been running at a little lighter weight levels during the portion of June we have been on air, we are coming back with heavier weights in conjunction with our menu roll-out next week. The message will initially center around one of our great new products - our new triple prime burger. From a financial perspective, we look to fiscal 2007 as continuing the trends which developed throughout fiscal 2006 as far as it relates to generating positive sales and earnings. We believe we have the plans in place to do so and are grateful to the thousands of team members who make it happen each day."

Ruby Tuesday, Inc. has Company-owned, and/or franchise Ruby Tuesday brand restaurants in 42 states, the District of Columbia, Puerto Rico, and 13 foreign countries. As of June 6, 2006, the Company owned and operated 629 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 204 and 47 restaurants, respectively. Ruby Tuesday, Inc. is traded on the New York Stock Exchange (Symbol: RI).

The Company will host a conference call which will be a live web-cast this afternoon at 5:00 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, payment of dividends, stock repurchase, and restaurant and franchise acquisitions. The Company cautions the reader that a number of important factors and uncertainties 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: 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; 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; 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 Fourth Quarter of Fiscal Year 2006
(Amounts in thousands except per share amounts)



                        14 Weeks            13 Weeks
                          Ended               Ended
                         June 6,  Percent    May 31,  Percent  Percent
                          2006   of Revenue   2005   of Revenue Change
                         ---------------------------------------------
Revenue:
Restaurant sales and
 operating revenue      $359,785     98.8  $ 291,421     98.7
Franchise revenue          4,527      1.2      3,969      1.3
                         --------           ---------
Total revenue            364,312    100.0    295,390    100.0    23.3

Operating Costs and
 Expenses:
 (as a percent of
 Restaurant sales and
 operating revenue)
Cost of merchandise       94,210     26.2     76,137     26.1
Payroll and related
 costs                   109,353     30.4     91,458     31.4
Other restaurant
 operating costs          65,376     18.2     50,851     17.4
Depreciation and
 amortization
 (as a percent of
 Total revenue)           19,178      5.3     17,434      6.0
Selling, general and
 administrative, net      25,577      7.0     20,081      6.8
Equity in (earnings) of
 unconsolidated
 franchises               (1,016)    (0.3)      (348)    (0.1)
                         --------           ---------
Total operating costs
 and expenses            312,678             255,613
                         --------           ---------

Earnings before
 Interest and Taxes       51,634     14.2     39,777     13.5    29.8

Interest expense, net      4,297      1.2      1,222      0.4
                         --------           ---------

Pre-tax Profit            47,337     13.0     38,555     13.1

Provision for income
 taxes                    15,631      4.3     12,598      4.3
                         --------           ---------

Net Income              $ 31,706      8.7  $  25,957      8.8    22.1
                         ========           =========



Earnings Per Share:
Basic                   $   0.54           $    0.41             31.7
                         ========           =========
Diluted                 $   0.53           $    0.40             32.5
                         ========           =========

Shares:
Basic                     58,675              64,137
                         ========           =========
Diluted                   59,583              64,870
                         ========           =========



                      53 Weeks             52 Weeks
                        Ended                Ended
                       June 6,   Percent    May 31,   Percent  Percent
                        2006    of Revenue   2005   of Revenue  Change
                      ------------------------------------------------

Revenue:
Restaurant sales and
 operating revenue   $1,290,509     98.8  $1,094,491     98.6
Franchise revenue        15,731      1.2      15,803      1.4
                      ----------           ----------
Total revenue         1,306,240    100.0   1,110,294    100.0    17.6

Operating Costs and
 Expenses:
 (as a percent of
 Restaurant sales and
 operating revenue)
Cost of merchandise     342,604     26.5     284,424     26.0
Payroll and related
 costs                  398,636     30.9     340,895     31.1
Other restaurant
 operating costs        230,887     17.9     189,181     17.3
Depreciation and
 amortization
 (as a percent of
 Total revenue)          71,056      5.5      66,746      6.1
Selling, general and
 administrative, net    100,340      7.7      72,489      6.5
Equity in (earnings)
 of unconsolidated
 franchises                (948)    (0.1)     (2,729)    (0.2)
                      ----------           ----------
Total operating
 costs and expenses   1,142,575              951,006
                      ----------           ----------

Earnings before
 Interest and Taxes     163,665     12.5     159,288     14.3     2.7

Interest expense,
 net                     12,707      1.0       4,342      0.4
                      ----------           ----------

Pre-tax Profit          150,958     11.6     154,946     14.0

Provision for income
 taxes                   49,981      3.8      52,648      4.7
                      ----------           ----------

Net Income           $  100,977      7.7  $  102,298      9.2    (1.3)
                      ==========           ==========



Earnings Per Share:
Basic                $     1.67           $     1.59              5.0
                      ==========           ==========
Diluted              $     1.65           $     1.56              5.8
                      ==========           ==========

Shares:
Basic                    60,544               64,538
                      ==========           ==========
Diluted                  61,307               65,524
                      ==========           ==========



RUBY TUESDAY, INC.

Financial Results For the Fourth Quarter
of Fiscal Year 2006
(Amounts in thousands)


                                               June 6,       May 31,
CONDENSED BALANCE SHEETS                        2006          2005
------------------------                      ----------    ----------
Assets
   Cash and Short-Term Investments           $   22,365    $   19,787
   Accounts and Notes Receivable                 12,020         8,140
   Inventories                                   17,428        16,988
   Income Tax Receivable                            374             -
   Deferred Income Taxes                          2,343         2,490
   Assets Held for Sale                          12,833         5,342
   Prepaid Rent and Other Expenses               10,977        10,180
                                              ----------    ----------

     Total Current Assets                        78,340        62,927

   Property and Equipment, Net                  984,127       901,142
   Goodwill, Net                                 17,017        17,017
   Notes Receivable, Net                         21,009        24,589
   Other Assets                                  71,075        68,392
                                              ----------    ----------

     Total Assets                            $1,171,568    $1,074,067
                                              ==========    ==========

Liabilities
   Current Portion of Long-Term Debt,
    including Capital Leases                 $    1,461    $    2,326
   Other Current Liabilities                    106,537        98,042
   Long-Term Debt, including Capital
    Leases                                      375,639       247,222
   Deferred Income Taxes                         49,727        50,825
   Deferred Escalating Minimum Rents             37,535        37,471
   Other Deferred Liabilities                    73,511        74,958
                                              ----------    ----------

     Total Liabilities                          644,410       510,844

Shareholders' Equity                            527,158       563,223
                                              ----------    ----------

     Total Liabilities and
       Shareholders' Equity                  $1,171,568    $1,074,067
                                              ==========    ==========

CONTACT: Ruby Tuesday Inc., Maryville
Price Cooper, 865-379-5700

SOURCE: Ruby Tuesday, Inc.