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Ruby Tuesday, Inc. Reports Third Quarter Results

04/08/2003

* Reports Third Quarter Diluted EPS of $0.39 * Announces Private Sale of $150 Million of Notes * Comments on Consolidation of Its Domestic Franchise Partner System

MARYVILLE, Tenn., April 8 /PRNewswire-FirstCall/ -- Ruby Tuesday, Inc. (NYSE: RI) today reported results for its third quarter ended March 4, 2003. For the quarter, diluted earnings per share increased 14.7% to $0.39 from $0.34 a year ago, excluding the non-recurring charge recorded in fiscal 2002 to fully reserve the Specialty Restaurant Group, LLC ("SRG") note receivable. Reported diluted earnings per share for the third quarter of fiscal 2002, which includes the non-cash impact of fully reserving the SRG note receivable, was $0.07. Gross same-store sales at Company-owned Ruby Tuesday restaurants, calculated in a manner consistent with prior quarters, increased 1.0% for the quarter. The Company evaluates same-store sales performance based on gross sales, which does not include any reduction for the costs of sales building programs and discounts. The Company believes this to be a more meaningful measure of performance because it allows for more direct comparability of the Company's performance to its competitors due to the fact the Company has historically utilized sales building programs (the cost of which, under generally accepted accounting principles ("GAAP"), are netted out of sales in accordance with EITF 00-14) as opposed to advertising (the cost of which, under GAAP, is not charged directly against sales) as a means to generate customer trial and traffic. To comply with the SEC's recently effective Regulation G, the Company is required to provide net same-store sales information, which as calculated in accordance with GAAP, decreased 0.4% for the quarter. The attached Schedule A presents a quarterly and year-to-date comparison of reported Company-owned and domestic franchise partner Ruby Tuesday restaurant same-store sales growth based on gross sales as compared to same-store sales growth based on GAAP sales for fiscal years 2002 and 2003.

The Company also announced that on April 3, 2003 it completed the private sale of $150 million of Company promissory notes.

Margie Duffy, the Company's Senior Vice President and Chief Financial Officer commented, "We are very pleased with the terms we attained on the issuance of the private placement notes. The average term of the notes is just over eight years and the weighted average interest rate is 5.0%. The transaction permits us to diversify our overall capital structure at, historically, very favorable interest rates."

The Company also announced that based on its current analysis of FASB Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"), which was released in January 2003 and is effective for periods beginning after June 15, 2003, the Company is optimistic it will be allowed to consolidate its domestic franchise partner program on its books. The Company estimates the potential impact on its consolidated statements of income resulting from the consolidation of its domestic franchise partners could be a decrease of approximately $0.01 to $0.03 per share, excluding the impact of any cumulative effect of change in accounting principle that might be required as a result of the adoption of FIN 46. The Company does not anticipate any impact on either the availability of funds or the cost of such under its existing revolving credit facility or the private notes discussed above. Sandy Beall, the Company's Chairman and CEO commented, "We see consolidation as a real positive and look forward to adopting FIN 46 possibly as early as the first quarter of fiscal 2004. Consolidation of the franchise partner system would provide a much clearer picture of our Company and system performance, simplify our business, and eliminate several items that apparently are causing some confusion in the investment community. The effect on earnings per share would be negligible, there would be no effect on underlying cashflow, and revenues and return on equity would actually increase. The only negatives we see would be that book debt to capital increases, although the Company would not be liable for the franchisees' debt, and pre-tax margins decrease. We believe that consolidation with segment reporting would be very positive."

Beall commented on the quarter, "We are pleased with our financial results during the quarter and more importantly the momentum that exists in the Ruby Tuesday brand. Excluding the weeks affected by weather, same-store sales were solid throughout January and February and this sales momentum has continued into the fourth quarter. The plans we have implemented over the last year revolving around standards and service initiatives are producing results."

"We are excited about the direction of the brand," Beall continued. "A few weeks ago we rolled out one of our best menus yet and we are very pleased with the preliminary results we have seen from it. Additionally, we look forward to continue reaping rewards from the significant investments we have made in the business over the last year during which we have increased staffing levels, rolled out a new service initiative and limited the span of control of our district operators."

Outlook for Fiscal 2003

The Company's estimate for fourth quarter gross same-store sales growth at Company-owned Ruby Tuesday restaurants is 3.0-4.0% and based on this, the Company estimates fourth quarter diluted earnings per share will be approximately $0.37, which would result in FY03 diluted earnings per share growth of approximately 17% (excluding the non-recurring charge recorded in fiscal 2002 to fully reserve the SRG note receivable). Excluding the negative impact of approximately $0.05 per share due to additional depreciation resulting from refinancing the Company's bank-financed operating lease obligations during the current fiscal year, diluted earnings per share of $0.37 per share would result in approximately 21% earnings per share growth for the year.

Outlook for Fiscal 2004

The Company's goal for fiscal 2004 diluted earnings per share growth is 17-18% based on gross same-store sales growth of 2.0-3.0% and based on adopting FIN 46 during fiscal 2004. The 17-18% earnings per share growth goal excludes the impact of any cumulative effect of change in accounting principle that might be required as a result of the adoption of FIN 46.

    Third Quarter Highlights:

    * Diluted earnings per share increased 14.7% to $0.39 from $0.34,
      excluding a $17.5 million ($0.27 per share) after-tax charge recorded
      during the prior year in conjunction with fully reserving the SRG note
      receivable.
    * Net income, excluding the same $17.5 million charge, increased 12.5% to
      $25,392,000 from $22,574,000.
    * Pre-tax profit margins, excluding the same $17.5 million charge,
      increased 50 basis points to 16.7% from 16.2%.
    * System-wide Ruby Tuesday revenue increased 7.6% to $329,036,000 from
      $305,727,000.
    * Six Company-owned Ruby Tuesday restaurants were opened and none were
      closed.
    * Eight franchise units were opened and two were closed.

    Year-to-date Highlights:

    * Earnings per share increased 16.9% to $0.97 from $0.83, excluding a
      $17.5 million ($0.27 per share) after-tax charge recorded during the
      prior year in conjunction with fully reserving the SRG note receivable.
    * Net income, excluding the same $17.5 million charge, increased 15.9% to
      $63,166,000 from $54,499,000.
    * Pre-tax profit margins, excluding the same $17.5 million charge,
      increased 80 basis points to 14.5% from 13.7%.
    * System-wide Ruby Tuesday revenue increased 9.7% to $941,137,000 from
      $857,876,000.
    * Thirty-five Company-owned Ruby Tuesday restaurants were opened and five
      were closed.
    * Seventeen franchise units were opened and five were closed.
    * The Company exercised its right to acquire an additional 49% interest in
      four of its franchise partners.  The Company now has a 50% interest in
      nine franchise partners collectively operating 94 franchised Ruby
      Tuesday restaurants.

Ruby Tuesday, Inc. has Company-owned and/or franchised Ruby Tuesday restaurants located in 38 states, the District of Columbia, Puerto Rico and 10 foreign countries. As of March 4, 2003, the Company owned and operated 427 Ruby Tuesday restaurants. Franchise operations included 191 domestic units and 20 international units. Ruby Tuesday, Inc. is traded on the New York Stock Exchange (Symbol: 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 this afternoon at 4:00 Eastern Time. The call will be available live at the following websites:

http://www.companyboardroom.com

http://www.rubytuesday.com

The call will be archived on both sites through the close of business on April 15, 2003.

Additionally, on April 10, 2003, the Company will host an investor conference at the Restaurant Support Center in Maryville, Tennessee beginning at 7:30 a.m. Eastern Time. The conference, which is scheduled to conclude at 1:00 Eastern Time, will be available live at the following websites:

http://www.companyboardroom.comhttp://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 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; and general economic conditions.

                              Schedule A
    Company-owned Same-store Sales Reconciliation and Comparison

                     Gross         Effect of          Same-store sales
    Fiscal   Fiscal  same-store    Sales Incentives   increase/(decrease)
    Quarter  Year    sales         & Discounts       based on GAAP sales
                     increase/
                    (decrease)
      1      2002      2.0 %          0.7 %                  2.7 %
      2      2002      1.9 %          0.2 %                  2.1 %
      3      2002      2.5 %          0.9 %                  3.4 %
      4      2002      2.7 %          0.4 %                  3.1 %
    Total              2.3 %          0.5 %                  2.8 %

      1      2003      1.1 %          0.1 %                  1.2 %
      2      2003     -0.7 %          0.1 %                 -0.6 %
      3      2003      1.0 %         -1.4 %                 -0.4 %
    Year-to-date       0.5 %         -0.4 %                  0.1 %


       Franchise Partner Same-store Sales Reconciliation and Comparison

                     Gross         Effect of          Same-store sales
    Fiscal   Fiscal  same-store    Sales Incentives   increase/(decrease)
    Quarter   Year    sales        & Discounts        based on GAAP sales
                      increase/
                     (decrease)
       1     2002      2.8 %           0.1 %                  2.9 %
       2     2002     -1.0 %           0.4 %                 -0.6 %
       3     2002      1.0 %           0.5 %                  1.5 %
       4     2002      2.2 %           0.3 %                  2.5 %
     Total             1.3 %           0.4 %                  1.7 %

       1     2003     -0.6 %           0.2 %                 -0.4 %
       2     2003     -1.2 %          -0.1 %                 -1.3 %
       3     2003     -1.7 %          -0.2 %                 -1.9 %
    Year-to-date      -1.2 %           0.0 %                 -1.2 %


    RUBY TUESDAY, INC.

    Financial Results For the Third Quarter
    of Fiscal Year 2003 (unaudited)
    (Amounts in thousands except per share amounts)

                                                 March 4,        June 4,
    CONDENSED BALANCE SHEETS                       2003            2002
    Assets
       Cash and Short-Term Investments            $17,832         $32,699
       Accounts and Notes Receivable               12,772          14,410
       Inventories                                 12,268          10,276
       Deferred Income Taxes                        1,883           4,248
       Income Tax Receivable                        5,759          16,311
       Prepaid Rent                                 2,063           2,012
       Assets Held for Disposal                     6,053           3,242
       Other Current Assets                         4,958           5,678

         Total Current Assets                      63,588          88,876

       Property and Equipment, Net                634,527         351,921
       Goodwill, Net                                7,845           7,845
       Notes Receivable, Net                       36,808          35,655
       Other Assets                                42,026          36,030

         Total Assets                            $784,794        $520,327

    Liabilities
       Current Liabilities                        $88,373         $93,283
       Long-Term Debt                             213,335           7,626
       Deferred Income Taxes                       33,178          24,255
       Other Deferred Liabilities                  58,721          60,757

         Total Liabilities                        393,607         185,921

    Shareholders' Equity                          391,187         334,406

         Total Liabilities and
           Shareholders' Equity                  $784,794        $520,327

    RUBY TUESDAY, INC.

    Financial Results For the Third Quarter of Fiscal Year 2003 (unaudited)
    (Amounts in thousands except per share amounts)


                                                              Excluding
                                                                 Loss
                                                             on Valuation
                                                              of SRG Note

                                      13 Weeks          13 Weeks
                                       Ended   Percent   Ended   Percent
                                      March 4,   of     March 5,  of   Percent
                                        2003    Sales    2002    Sales Change
    System-Wide Ruby Tuesday Sales:
    Company-owned Ruby Tuesday
     revenue                          $228,834         $209,628
    Franchised revenue                 100,202           96,099
        Total system-wide Ruby
         Tuesday sales                $329,036         $305,727          7.6

    Revenues:
       Company restaurant revenues    $228,834   98.3  $209,628   98.1
       Franchise income                  4,022    1.7     4,108    1.9
          Total operating revenues     232,856  100.0   213,736  100.0   8.9

    Operating Costs and Expenses:
       (as a percent of Company
        restaurant revenues)
           Cost of merchandise          60,846   26.6    56,900   27.1
           Payroll and related costs    73,991   32.3    67,584   32.2
           Other                        36,900   16.1    37,392   17.8
           Depreciation and
            amortization                11,744    5.1     8,425    4.0
           Loss on valuation of SRG
            Note Receivable                 --    0.0        --    0.0
       (as a percent of Total
        operating revenues)
           Selling, general and
            administrative              11,000    4.7    10,972    5.1
           Equity in (earnings)/loss
            of unconsolidated
            franchises                  (1,534)  (0.7)     (601)  (0.3)
    Total operating costs and
     expenses                          192,947          180,672

    Earnings before Interest, Taxes
     and cumulative effect of change in
      accounting principle              39,909   17.1    33,064   15.5  20.7

       Interest expense (income), net      964    0.4    (1,662)  (0.8)

    Pre-tax Profit                      38,945   16.7    34,726   16.2

       Provision for income taxes       13,553    5.8    12,152    5.7

    Income before cumulative effect
     of change in
     accounting principle               25,392   10.9    22,574   10.6

    Cumulative effect of change in
     accounting principle, net              --               --

    Net Income                         $25,392   10.9   $22,574   10.6  12.5

    Earnings Per Share:

    Before cumulative effect of
     change in accounting principle:
    Basic                                $0.40            $0.35         14.3
    Diluted                              $0.39            $0.34         14.7

    After cumulative effect of change
     in accounting principle:
    Basic                                $0.40            $0.35         14.3
    Diluted                              $0.39            $0.34         14.7

    Shares:
    Basic                               64,056           64,465
    Diluted                             65,050           66,347


    RUBY TUESDAY, INC.

    Financial Results For the Third Quarter of Fiscal Year 2003 (unaudited)
    (Amounts in thousands except per share amounts)


                                           Including Loss
                                           on Valuation of
                                              SRG Note


                                          13 Weeks          39 Weeks
                                           Ended    Percent  Ended   Percent
                                          March 5,   of     March 4,   of
                                            2002    Sales    2003     Sales
    System-Wide Ruby Tuesday Sales:
    Company-owned Ruby Tuesday revenue    $209,628         $655,601
    Franchised revenue                      96,099          285,536
        Total system-wide Ruby Tuesday
         sales                            $305,727         $941,137

    Revenues:
       Company restaurant revenues        $209,628   98.1  $655,601   98.3
       Franchise income                      4,108    1.9    11,270    1.7
          Total operating revenues         213,736  100.0   666,871  100.0

    Operating Costs and Expenses:
       (as a percent of Company
        restaurant revenues)
           Cost of merchandise              56,900   27.1   175,159   26.7
           Payroll and related costs        67,584   32.2   219,255   33.4
           Other                            37,392   17.8   110,825   16.9
           Depreciation and amortization     8,425    4.0    33,347    5.1
           Loss on valuation of SRG Note
            Receivable                      28,856   13.8        --    0.0
       (as a percent of Total operating
        revenues)
           Selling, general and
            administrative                  10,972    5.1    32,361    4.9
           Equity in (earnings)/loss of
            unconsolidated franchises         (601)  (0.3)   (2,410)  (0.4)
    Total operating costs and expenses     209,528          568,537

    Earnings before Interest, Taxes and
      cumulative effect of change in
      accounting principle                   4,208    2.0    98,334   14.7

       Interest expense (income), net       (1,662)  (0.8)    1,455    0.2

    Pre-tax Profit                           5,870    2.7    96,879   14.5

       Provision for income taxes              823    0.4    33,713    5.1

    Income before cumulative effect of
     change in accounting principle          5,047    2.4    63,166    9.5

    Cumulative effect of change in
     accounting principle, net                  --               --

    Net Income                              $5,047    2.4   $63,166    9.5

    Earnings Per Share:

    Before cumulative effect of change in
    accounting principle:
    Basic                                    $0.08            $0.99
    Diluted                                  $0.07            $0.97

    After cumulative effect of change in
    accounting principle:
    Basic                                    $0.08            $0.99
    Diluted                                  $0.07            $0.97

    Shares:
    Basic                                   64,465           63,915
    Diluted                                 66,347           65,017


    RUBY TUESDAY, INC.

    Financial Results For the Third Quarter of Fiscal Year 2003 (unaudited)
    (Amounts in thousands except per share amounts)

                                              Excluding Loss   Including Loss
                                                on Valuation     on Valuation
                                                    of                 of
                                                  SRG Note          SRG Note

                                          39 Weeks                 39 Weeks
                                           Ended    Percent          Ended
                                           March 5,   of   Percent  March 5,
                                            2002     Sales  Change    2002
    System-Wide Ruby Tuesday Sales:
    Company-owned Ruby Tuesday revenue      $605,049                 $605,049
    Franchised revenue                       252,827                  252,827
        Total system-wide Ruby Tuesday
         sales                              $857,876            9.7  $857,876

    Revenues:
       Company restaurant revenues          $605,049   98.3          $605,049
       Franchise income                       10,656    1.7            10,656
          Total operating revenues           615,705  100.0     8.3   615,705

    Operating Costs and Expenses:
       (as a percent of Company restaurant
        revenues)
           Cost of merchandise               162,780   26.9           162,780
           Payroll and related costs         197,361   32.6           197,361
           Other                             117,281   19.4           117,281
           Depreciation and amortization      25,000    4.1            25,000
           Loss on valuation of SRG Note
            Receivable                            --    0.0            28,856
       (as a percent of Total operating
        revenues)
           Selling, general and
            administrative                    33,829    5.5            33,829
           Equity in (earnings)/loss of
            unconsolidated franchises           (353)  (0.1)             (353)
    Total operating costs and expenses       535,898                  564,754

    Earnings before Interest, Taxes and
      cumulative effect of change in
      accounting principle                    79,807   13.0    23.2    50,951

       Interest expense (income), net         (4,505)  (0.7)           (4,505)

    Pre-tax Profit                            84,312   13.7            55,456

       Provision for income taxes             29,755    4.8            18,428

    Income before cumulative effect of
     change in accounting principle           54,557    8.9            37,028

    Cumulative effect of change in
     accounting principle, net                    58                       58

    Net Income                               $54,499    8.9    15.9   $36,970

    Earnings Per Share:

    Before cumulative effect of change in
    accounting principle:
    Basic                                      $0.85           16.5     $0.58
    Diluted                                    $0.83           16.9     $0.56

    After cumulative effect of change in
    accounting principle:
    Basic                                      $0.85           16.5     $0.58
    Diluted                                    $0.83           16.9     $0.56

    Shares:
    Basic                                     63,787                   63,787
    Diluted                                   65,631                   65,631


    RUBY TUESDAY, INC.

    Financial Results For the Third Quarter of Fiscal Year 2003 (unaudited)
    (Amounts in thousands except per share amounts)


                                             Including Loss
                                             on Valuation of
                                                 SRG Note

                                                 Percent
                                                of sales
    System-Wide Ruby Tuesday Sales:
    Company-owned Ruby Tuesday revenue
    Franchised revenue
        Total system-wide Ruby Tuesday
        sales

    Revenues:
       Company restaurant revenues                98.3
       Franchise income                            1.7
          Total operating revenues               100.0

    Operating Costs and Expenses:
       (as a percent of Company restaurant
        revenues)
           Cost of merchandise                    26.9
           Payroll and related costs              32.6
           Other                                  19.4
           Depreciation and amortization           4.1
           Loss on valuation of SRG Note
            Receivable                             4.8
       (as a percent of Total operating
        revenues)
           Selling, general and
            administrative                         5.5
           Equity in (earnings)/loss of
            unconsolidated franchises             (0.1)
    Total operating costs and expenses

    Earnings before Interest, Taxes and
      cumulative effect of change in
      accounting principle                         8.3

       Interest expense (income), net             (0.7)

    Pre-tax Profit                                 9.0

       Provision for income taxes                  3.0

    Income before cumulative effect of
     change in accounting principle                6.0

    Cumulative effect of change in
     accounting principle, net

    Net Income                                     6.0

    Earnings Per Share:

    Before cumulative effect of change in
    accounting principle:
    Basic
    Diluted

    After cumulative effect of change in
    accounting principle:
    Basic
    Diluted

    Shares:
    Basic
    Diluted

SOURCE Ruby Tuesday, Inc.