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Ruby Tuesday, Inc. Reports Preliminary Third Quarter Diluted Earnings Per Share of $0.42

03/30/2005

MARYVILLE, Tenn.--(BUSINESS WIRE)--March 30, 2005--Ruby Tuesday, Inc. today reported preliminary net income of $27.6 million, or $0.42 per diluted share, for the company's third quarter ended March 1, 2005. This compares to net income of $32.4 million, or $0.48 per diluted share, for the third quarter of the prior year. Third quarter preliminary diluted earnings per share was slightly higher than the Company's $0.38-$0.41 guidance driven in part by lower than anticipated G&A costs resulting from the timing of the Company's television advertising and a lower than anticipated effective tax rate.

The Company also announced that, as of the date of this press release, the Company, like other companies in the restaurant and retail industries, is further reviewing with its independent external auditors and its Audit Committee its accounting for rent holidays and landlord/tenant incentives. The Company's review is based on the views expressed by the Office of the Chief Accountant of the Securities and Exchange Commission ("SEC") in a February 7, 2005 letter to the American Institute of Certified Public Accountants ("AICPA") which came to light subsequent to the filing of the Company's Form 10-Q for the quarter ended November 30, 2004.

Previously, in conjunction with the Company's second quarter fiscal 2005 results, the Company announced it had reviewed its accounting treatment for leases, and based on consultation with its independent external auditors, determined an adjustment was necessary to recognize the cumulative impact of correcting its accounting for the computation of straight line rent expense and accounting for subleases. Subsequent to the Company's announcement, the SEC expressed its views to the AICPA regarding the treatment of rent holidays and landlord/tenant incentives. The views expressed by the SEC in its February 7 letter to the AICPA have been the subject of much debate within the restaurant industry as well as retailers in general and have caused the Company to re-consider whether additional adjustments might be required and/or if the Company should restate previously issued financial statements.

The Company is working diligently to complete its final analysis specifically related to the accounting treatment of rent holidays and landlord/tenant incentives. However, the Company has yet to determine the final amount of any additional adjustments which might be required and if the additional adjustments will lead the Company to conclude a restatement is necessary. Once this review is completed, if necessary, the Company will restate its historical financial statements, including the financial results contained in this press release. Although any necessary adjustments related to rent holiday and landlord/tenant incentives may impact net income, they would not have any impact on previously reported revenues, cash balances or compliance with any debt covenants.

For the quarter, same-store sales at Company-owned Ruby Tuesday restaurants decreased 8.0%. The Company estimates third quarter same-store sales were negatively impacted by 3.5-4.0% resulting from the combination of more inclement weather in the current year and overlapping coupon redemptions from the prior year as the Company transitions to a media based advertising strategy. Same-store sales at domestic franchise Ruby Tuesday restaurants decreased 8.4% during the quarter.

    Other highlights for the quarter include:

    --  Total operating revenue increased 6.7% over the same period of
        the prior year.

    --  There were 11 new Ruby Tuesday restaurants opened during the
        quarter and 3 closed due to lease expirations.

    --  Franchisees opened 8 new Ruby Tuesday restaurants during the
        quarter and closed 5 (three of which were domestically
        franchised and were due to lease expirations).

    --  The Company released a new menu in mid-January and, based on
        subsequent research, the Company has seen improvement in all
        seven key categories measured.

    --  The Company began its more call-to-action television
        advertising campaign in late January featuring the Company's
        seafood promotion.

    --  Total management and team turnover remained low for the
        quarter at 23% and 115%, respectively.

Sandy Beall, Chairman and CEO, commented, "Excluding the negative impacts of inclement weather and overlapping our prior years' couponing strategies, second and third quarter underlying sales trends were similar. However, we have seen improvement in trends since December, which, factoring out weather and overlapping coupons, was our softest sales month of the quarter. The slight improvement in underlying trends (approximately 1.0-1.5%), which occurred in January and February combined, after rolling out a new menu, retraining all employees on guest obsession, flawless food and flawless service and beginning the second phase of our media advertising campaign, has further improved into March. Although we still have two more quarters of overlapping our prior couponing efforts, we are pleased with the underlying data points we are seeing and remain confident we are doing the right things for the long-term success of the business."

Authorization of Additional Stock Repurchases

The Company also announced its Board of Directors authorized the repurchase of an additional 5.0 million shares in accordance with the Company's ongoing share repurchase program. This brings the total number of shares authorized for repurchase under the Company's program to 7.1 million shares.

Fiscal 2005 Guidance

The Company anticipates fourth quarter same-store sales growth at Company-owned restaurants will be in the negative 6.0-7.0% range. Fourth quarter same-store sales at Company-owned restaurants were down 10.2% for the first four weeks of the quarter. The Company estimates the winter storms in the northeast, overlapping heavy coupon redemptions from the prior year and the timing of Easter weekend negatively impacted same-store sales by a total of 7.0-8.0% for the first four weeks of the fourth quarter. Same-store sales at domestic franchise Ruby Tuesday restaurants, which have been negatively impacted by an estimated 2.0% due to winter weather and the shift in Easter weekend, were down 13.1% during the same four week period.

The Company is projecting fourth quarter diluted earnings per share of $0.40-$0.43 versus the previous guidance of $0.42-$0.47. Regarding its fourth quarter guidance, the Company notes that approximately $0.5 million in production costs related to its television marketing program, which was originally anticipated to be incurred during its third quarter, will be incurred during the fourth quarter and the Company will likely spend more on television advertising during the quarter than previously projected. The Company anticipates eighteen Company-owned restaurant openings during its fourth quarter, and anticipates its franchisees (including both domestic and international) will open 12-14 Ruby Tuesday restaurants during the same period.

Fiscal 2006 Guidance

For the first quarter of fiscal 2006, the Company anticipates diluted earnings per share of $0.37-$0.42 based on negative same-store sales of 4.5-6.0% at Company-owned Ruby Tuesday restaurants. As previously announced, the Company will be overlapping its couponing efforts from the prior year through the first quarter of fiscal 2006. Thus, the Company anticipates same-store sales at Company-owned restaurants will remain negative through the first quarter. In addition, the Company anticipates higher cost of sales and advertising expenses on a year over year basis through the end of the first quarter. For the balance of fiscal 2006, the Company anticipates positive same-store sales growth and anticipates a return to diluted earnings per share growth (excluding the impact of stock option expensing, which will be applicable to the Company beginning in its second quarter) at its goal of approximately 15%. Fiscal 2006 will be a 53-week year for the Company, so its fourth quarter will include 14 weeks as compared to 13 weeks in the fourth quarter of its current year. The Company's plans for fiscal 2006 include approximately 60 Company-owned openings and 35-40 franchise openings.

    Year-to-Date Highlights:

    --  Sales at franchise partnership and traditional franchise Ruby
        Tuesday restaurants (which is the basis for determining
        royalty fees included in franchise income on the Company's
        income statement) totaled $321,268,000 and $329,696,000 for
        the third quarter year-to-date of fiscal 2005 and fiscal 2004,
        respectively.

    --  Thirty-seven Company-owned Ruby Tuesday restaurants were
        opened and four were closed due to normal lease expiration. In
        addition, 35 Ruby Tuesday restaurants were acquired from
        franchisees during the Company's second quarter.

    --  Seventeen franchise restaurants were opened and nine were
        closed, five of which were domestically franchised and were
        closed due to lease expirations and three of which were
        internationally franchised.

    --  The Company has repurchased 1.7 million shares of its common
        stock during fiscal 2005. 7.1 million shares remain authorized
        for repurchase.

Ruby Tuesday, Inc. has Company-owned, and/or franchise Ruby Tuesday brand restaurants in 42 states, the District of Columbia, Puerto Rico, and 12 foreign countries. As of March 1, 2005, the Company owned and operated 552 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 188 and 37 locations, 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 tomorrow morning at 8:30 Eastern Time. The call will be available live at the following websites:

    http://www.fulldisclosure.com

    http://www.rubytuesday.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 unit growth (both Company-owned and franchised), future capital expenditures, future borrowings and repayment of debt, payment of dividends, stock repurchase, and restaurant acquisitions. The Company cautions 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 casual dining restaurant market; weather conditions in the regions in which Company-owned and franchised restaurants are operated; guests' acceptance of our 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 terrorist attacks in the United States; and general economic conditions.

RUBY TUESDAY, INC.

Preliminary(a) Financial Results
For the Third Quarter of Fiscal Year 2005
(Amounts in thousands except per share amounts)


                          13 Weeks          13 Weeks
                            Ended             Ended
                           March 1, Percent  March 2, Percent  Percent
                             2005   of Sales   2004   of Sales Change
                           ----------------- ----------------- -------

Revenue:
   Restaurant sales and
    operating revenue      $285,552    98.8  $266,438    98.3
   Franchise revenue          3,611     1.2     4,527     1.7
                           ---------         ---------
      Total operating
       revenue              289,163   100.0   270,965   100.0     6.7

Operating Costs and
 Expenses:
   (as a percent of
    Restaurant sales and
    operating revenue)
       Cost of merchandise   74,244    26.0    67,419    25.3
       Payroll and related
        costs                88,245    30.9    81,909    30.7
       Other restaurant
        operating costs      49,243    17.2    43,666    16.4
       Depreciation and
        amortization         16,191     5.7    13,907     5.2
   (as a percent of Total
    operating revenue)
       Selling, general and
        administrative, net  19,879     6.9    15,594     5.8
       Equity in (earnings)
        of unconsolidated
        franchises             (836)   (0.3)   (2,610)   (1.0)
                           ---------         ---------
Total operating costs and
 expenses                   246,966           219,885
                           ---------         ---------

Earnings before Interest
 and Taxes                   42,197    14.6    51,080    18.9   (17.4)

   Interest expense, net      1,361     0.5       773     0.3
                           ---------         ---------

Pre-tax Profit               40,836    14.1    50,307    18.6

   Provision for income
    taxes                    13,225     4.6    17,902     6.6
                           ---------         ---------

Net Income                  $27,611     9.5   $32,405    12.0   (14.8)
                           =========         =========



Earnings Per Share:
Basic                         $0.43             $0.49           (12.2)
                           =========         =========
Diluted                       $0.42             $0.48           (12.5)
                           =========         =========

Shares:
Basic                        64,168            65,914
                           =========         =========
Diluted                      65,063            67,614
                           =========         =========


                          39 Weeks          39 Weeks
                            Ended             Ended
                           March 1, Percent  March 2, Percent  Percent
                             2005   of Sales   2004   of Sales  Change
                           ----------------- ----------------- -------

Revenue:
   Restaurant sales and
    operating revenue      $803,070    98.5  $753,178    98.3
   Franchise revenue         11,834     1.5    12,643     1.7
                           ---------         ---------
      Total operating
       revenue              814,904   100.0   765,821   100.0     6.4

Operating Costs and
 Expenses:
   (as a percent of
    Restaurant sales and
    operating revenue)
       Cost of merchandise  208,287    25.9   193,015    25.6
       Payroll and related
        costs               249,437    31.1   237,487    31.5
       Other restaurant
        operating costs     148,004    18.4   126,488    16.8
       Depreciation and
        amortization         46,870     5.8    40,109     5.3
   (as a percent of Total
    operating revenue)
       Selling, general and
        administrative, net  52,408     6.4    46,710     6.1
       Equity in (earnings)
        of unconsolidated
        franchises           (2,381)   (0.3)   (3,879)   (0.5)
                           ---------         ---------
Total operating costs and
 expenses                   702,625           639,930
                           ---------         ---------

Earnings before Interest
 and Taxes                  112,279    13.8   125,891    16.4   (10.8)

   Interest expense, net      3,120     0.4     3,288     0.4
                           ---------         ---------

Pre-tax Profit              109,159    13.4   122,603    16.0

   Provision for income
    taxes                    37,179     4.6    43,643     5.7
                           ---------         ---------

Net Income                  $71,980     8.8   $78,960    10.3    (8.8)
                           =========         =========


Earnings Per Share:
Basic                         $1.11             $1.21            (8.3)
                           =========         =========
Diluted                       $1.09             $1.18            (7.6)
                           =========         =========

Shares:
Basic                        64,672            65,322
                           =========         =========
Diluted                      65,742            66,889
                           =========         =========

(a) These results do not reflect any potential adjustments that may be
    required based on the Company's completion of its analysis of the
    accounting treatment of rent holidays and landlord/tenant
    incentives discussed in this press release.


RUBY TUESDAY, INC.

Preliminary(a) Financial Results
For the Third Quarter of Fiscal Year 2005
(Amounts in thousands)

                                               March 1,       June 1,
CONDENSED BALANCE SHEETS                         2005          2004
--------------------------------------------- -----------    ---------
Assets
   Cash and Short-Term Investments                $8,044      $19,485
   Accounts and Notes Receivable                   8,700        9,978
   Inventories                                    16,081       13,647
   Deferred Income Taxes                           1,494        1,975
   Income Tax Receivable                               0        2,941
   Prepaid Rent                                    3,612        2,173
   Assets Held for Disposal                        4,021        3,030
   Other Current Assets                            6,318        6,450
                                              -----------    ---------

     Total Current Assets                         48,270       59,679

   Property and Equipment, Net                   851,376      753,319
   Goodwill, Net                                  12,550        7,845
   Notes Receivable, Net                          27,056       33,366
   Other Assets                                   68,541       64,324
                                              -----------    ---------

     Total Assets                             $1,007,793     $918,533
                                              ===========    =========

Liabilities
   Current Liabilities                           $94,449      $90,542
   Long-Term Debt, including Capital Leases      208,252      168,087
   Deferred Income Taxes                          49,513       51,310
   Other Deferred Liabilities                     97,605       81,810
                                              -----------    ---------

     Total Liabilities                           449,819      391,749

Shareholders' Equity                             557,974      526,784
                                              -----------    ---------

     Total Liabilities and
       Shareholders' Equity                   $1,007,793     $918,533
                                              ===========    =========

(a) These amounts do not reflect any potential adjustments that may be
    required based on the Company's completion of its analysis of the
    accounting treatment of rent holidays and landlord/tenant
    incentives discussed in this press release.

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

    SOURCE: Ruby Tuesday, Inc.