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Ruby Tuesday, Inc. Reports Second Quarter Results

01/09/2008

MARYVILLE, Tenn.--(BUSINESS WIRE)--Jan. 9, 2008--Ruby Tuesday, Inc. (NYSE: RT) today reported a diluted loss per share of $0.20 on a net loss of $10.4 million for the Company's second quarter of fiscal 2008, which ended on December 4, 2007. This compares to diluted earnings per share of $0.28 on net income of $16.7 million for the second quarter of the prior year. The diluted per share impact of costs associated with the Company's remodel initiative in the second quarter of fiscal 2008 was $0.07.

Quarterly Highlights

As previously reported, second quarter fiscal 2008 same-restaurant sales at Company-owned Ruby Tuesday restaurants decreased 10.8%, while same-restaurant sales at domestic franchise Ruby Tuesday restaurants decreased 8.7%, as compared to a decrease of 0.2% and an increase of 4.0% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively, in the second quarter of the prior year.

Second quarter fiscal 2008 same-restaurant sales:


                                                               Second
                                    September October November Quarter
                                    --------- ------- -------- -------
Company-Owned                          -10.4%  -10.8%   -11.3%  -10.8%
Domestic Franchise                      -8.0%   -7.5%   -10.7%   -8.7%

    Other highlights for the 13-week second quarter:

    --  Total revenue decreased 4.7% over the same period of the prior
        year.

    --  Average restaurant volumes at Company-owned Ruby Tuesday
        restaurants decreased 10.2% from the same period of the prior
        year.

    --  The Company opened five new Ruby Tuesday restaurants during
        the quarter and acquired twenty-five restaurants from two
        Michigan franchisees. No restaurants were closed during the
        quarter.

    --  Aside from the restaurants sold to the Company, domestic and
        international franchisees opened four new Ruby Tuesday
        restaurants during the quarter and none 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 operating
        statement) totaled $98,173,000 and $114,791,000 for the second
        quarter of fiscal 2008 and 2007, respectively. Fiscal 2008
        sales at franchise restaurants were reduced due to the
        acquisitions of the Michigan franchisees in the second quarter
        of fiscal 2008, and the prior acquisitions of the West Palm
        Beach franchisee on the first day of fiscal 2008, and the
        South Florida franchisee in the third quarter of fiscal 2007.

    --  Capital expenditures for new restaurants and routine
        capitalized improvements at existing restaurants were $20.0
        million for the quarter.

    --  Capital expenditures related to the Company's remodel
        initiative were $20.6 million for the quarter.

    --  The Company had 51.7 million shares of common stock
        outstanding at the end of the quarter.

    --  Based on the uncertainty of sales, our current models reflect
        that we may be in violation of debt covenants in the next 12
        months. We are not currently in default but, because of
        accounting rules, we have reclassified much of our long-term
        debt as current. We will be working with our lenders to obtain
        a modification of covenants for future periods and expect a
        favorable outcome.

    Dividend Policy

The Board of Director's revised the Company's dividend policy to provide for an annual dividend payment which the Board will review for payment in August 2008. The Board remains committed to a dividend policy as previously stated but believes moving to an annual payment to be prudent based on current operating performance and the economic outlook.

Sandy Beall, Founder and CEO, commented, "We do believe we have the right plans and strategies in place to build a much stronger concept and brand for the long-term. We do not think this is a brand issue and our guest research confirms that our food, service, and restaurants are better than they have ever been and improving.

We do have a segment and sales issue, and we also have an earnings issue which we will get corrected. We do not believe we have an operations or free cash flow issue. While timing has not been perfect considering the industry, we will have the majority of our investments in our food and service initiatives as well as the reimaging of over 650 restaurants behind us after this year. We believe we will be very well positioned for solid earnings, free cash flow, and performance in the future."

Fiscal 2008 Guidance

For fiscal 2008, the Company is now targeting diluted earnings per share of $0.40 to $0.60 based on same-restaurant sales of down 6.0% to 8.5% at Company-owned restaurants. The estimate for fiscal 2008 diluted earnings per share includes projected expenses incurred in our remodel initiative of $0.16 to $0.18, of which $0.13 to $0.15 is related to the accelerated depreciation of existing assets and approximately $0.03 is related to incremental depreciation on new assets net of the reduction from the related write-offs. Year to date through the Company's second fiscal quarter, approximately $0.12 has been expensed for the remodel initiative. Additional assumptions used to determine the targeted range include the following:

    --  Approximately 20 Company-owned openings for the year;

    --  15 to 20 franchise openings for the year;

    --  Investments in labor and food cost;

    --  $65-$75 million in capital expenditures for the year for new
        restaurants and routine capitalized improvements at existing
        restaurants; and

    --  $50-$55 million in capital expenditures for the
        above-mentioned remodeling of Company restaurants during the
        fiscal year.

Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby Tuesday brand restaurants in 45 states, the District of Columbia, Puerto Rico, and 12 foreign countries. As of December 4, 2007, the Company owned and operated 721 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 169 and 54 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 at 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 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 Second Quarter of Fiscal Year 2008
(Amounts in thousands except per share amounts)


                      13 Weeks             13 Weeks
                        Ended    Percent     Ended    Percent
                     December 4,    of    December 5,    of    Percent
                        2007     Revenue     2006     Revenue  Change
                     -------------------- -------------------- -------

Revenue:
  Restaurant sales
   and operating
   revenue             $317,393     98.9     $333,316     99.0
  Franchise revenue       3,530      1.1        3,503      1.0
                     -----------          -----------
     Total revenue      320,923    100.0      336,819    100.0   (4.7)

Operating Costs and
 Expenses:
  (as a percent of
   Restaurant sales
   and operating
   revenue)
      Cost of
       merchandise       89,018     28.0       91,378     27.4
      Payroll and
       related costs    109,525     34.5      104,314     31.3
      Other
       restaurant
       operating
       costs             69,786     22.0       60,823     18.2
      Depreciation
       and
       amortization      25,140      7.9       18,993      5.7
  (as a percent of
   Total revenue)
Loss from Specialty
 Restaurant Group,
 LLC bankruptcy              (7)     0.0          163      0.0
Selling, general and
 administrative, net     32,734     10.2       30,897      9.2
Equity in losses of
 unconsolidated
 franchises               1,612      0.5          706      0.2
                     -----------          -----------
Total operating
 costs and expenses     327,808               307,274
                     -----------          -----------

(Loss)/Earnings
 before Interest and
 Taxes                   (6,885)    (2.1)      29,545      8.8 (123.3)

  Interest expense,
   net                    8,281      2.6        4,589      1.4
                     -----------          -----------

Pre-tax
 (Loss)/Profit          (15,166)    (4.7)      24,956      7.4 (160.8)

  Provision for
   income taxes          (4,815)    (1.5)       8,227      2.4
                     -----------          -----------

Net (Loss)/Income      $(10,351)    (3.2)    $ 16,729      5.0 (161.9)
                     ===========          ===========



(Loss)/Earnings Per
 Share:
Basic                  $  (0.20)             $   0.28          (171.4)
                     ===========          ===========
Diluted                $  (0.20)             $   0.28          (171.4)
                     ===========          ===========

Shares:
Basic                    51,380                58,793
                     ===========          ===========
Diluted                  51,380                59,266
                     ===========          ===========


                      26 Weeks             26 Weeks
                        Ended    Percent     Ended    Percent
                     December 4,    of    December 5,    of    Percent
                        2007     Revenue     2006     Revenue  Change
                     -------------------- -------------------- -------

Revenue:
  Restaurant sales
   and operating
   revenue             $660,387      98.9    $668,127     98.9
  Franchise revenue       7,333       1.1       7,351      1.1
                     -----------          -----------
     Total revenue      667,720     100.0     675,478    100.0   (1.1)

Operating Costs and
 Expenses:
  (as a percent of
   Restaurant sales
   and operating
   revenue)
      Cost of
       merchandise      181,711      27.5     181,048     27.1
      Payroll and
       related costs    219,466      33.2     207,857     31.1
      Other
       restaurant
       operating
       costs            136,673      20.7     121,967     18.3
      Depreciation
       and
       amortization      48,733       7.4      37,375      5.6
  (as a percent of
   Total revenue)
Loss from Specialty
 Restaurant Group,
 LLC bankruptcy             157       0.0         251      0.0
Selling, general and
 administrative, net     62,487       9.4      60,324      8.9
Equity in losses of
 unconsolidated
 franchises               2,458       0.4         638      0.1
                     -----------          -----------
Total operating
 costs and expenses     651,685               609,460
                     -----------          -----------

(Loss)/Earnings
 before Interest and
 Taxes                   16,035       2.4      66,018      9.8  (75.7)

  Interest expense,
   net                   15,380       2.3       8,883      1.3
                     -----------          -----------

Pre-tax
 (Loss)/Profit              655       0.1      57,135      8.5  (98.9)

  Provision for
   income taxes             (84)      0.0      18,856      2.8
                     -----------          -----------

Net (Loss)/Income      $    739       0.1    $ 38,279      5.7  (98.1)
                     ===========          ===========



(Loss)/Earnings Per
 Share:
Basic                  $   0.01              $   0.65           (98.5)
                     ===========          ===========
Diluted                $   0.01              $   0.65           (98.5)
                     ===========          ===========

Shares:
Basic                    51,763                58,467
                     ===========          ===========
Diluted                  51,964                58,894
                     ===========          ===========

RUBY TUESDAY, INC.

Financial Results For the Second Quarter
of Fiscal Year 2008
(Amounts in thousands)

                                             December 4,     June 5,
CONDENSED BALANCE SHEETS                        2007           2007
------------------------------------------   -----------    ----------
Assets
   Cash and Short-Term Investments                $7,886       $25,892
   Accounts and Notes Receivable                  10,384        14,773
   Inventories                                    22,712        20,032
   Income Tax Receivable                             888             -
   Deferred Income Taxes                           4,772         4,839
   Assets Held for Disposal                       36,878        20,368
   Prepaid Rent and Other Expenses                14,850        14,542
                                             -----------    ----------

     Total Current Assets                         98,370       100,446

   Property and Equipment, Net                 1,091,639     1,033,336
   Goodwill, Net                                  18,927        16,935
   Notes Receivable, Net                           4,956         9,212
   Other Assets                                   69,162        69,927
                                             -----------    ----------

     Total Assets                             $1,283,054    $1,229,856
                                             ===========    ==========

Liabilities
   Current Portion of Long Term Debt,
    including Capital Leases                    $548,068        $1,779
   Income Tax Payable                                  -         5,730
   Other Current Liabilities                     148,067       116,249
   Long-Term Debt, including Capital
    Leases                                        43,673       512,559
   Deferred Income Taxes                          28,358        37,107
   Deferred Escalating Minimum Rents              40,991        39,824
   Other Deferred Liabilities                     78,056        77,282
                                             -----------    ----------

     Total Liabilities                           887,213       790,530

Shareholders' Equity                             395,841       439,326
                                             -----------    ----------

     Total Liabilities and
     Shareholders' Equity                     $1,283,054    $1,229,856
                                             ===========    ==========

CONTACT: Ruby Tuesday, Inc.
Shannon Hepp, 865-379-5700

SOURCE: Ruby Tuesday, Inc.