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Ruby Tuesday, Inc. Reports Third Quarter Results

04/02/2008

MARYVILLE, Tenn.--(BUSINESS WIRE)--April 2, 2008--Ruby Tuesday, Inc. today reported diluted earnings per share of $0.23 on net income of $11.7 million for the Company's third quarter of fiscal 2008, which ended on March 4, 2008. This compares to diluted earnings per share of $0.49 on net income of $28.7 million for the third quarter of the prior year. The diluted earnings per share impact of costs associated with the Company's remodel initiative in the third quarter of fiscal 2008 was $0.06.

Quarterly Highlights

Third quarter fiscal 2008 same-restaurant sales at Company-owned Ruby Tuesday restaurants decreased 12.7%, while same-restaurant sales at domestic franchise Ruby Tuesday restaurants decreased 12.0%, as compared to a decrease of 1.0% and an increase of 1.8% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively, in the third quarter of the prior year. The Company estimates the third quarter of fiscal 2008 was negatively impacted by approximately 0.6% and 0.8% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively, due to heavier winter weather than in the same period of the prior year.

Third quarter fiscal 2008 same-restaurant sales:

                               December January February Third Quarter
                               -------- ------- -------- -------------
Company-Owned                   -12.5%  -14.2%   -11.5%     -12.7%
Domestic Franchise              -12.7%  -13.4%   -9.8%      -12.0%
    Other highlights for the 13-week third quarter:

    --  Total revenue decreased 7.1% from the same period of the prior
        year.

    --  The Company opened six new Ruby Tuesday restaurants while six
        were closed during the quarter.

    --  Domestic and international franchisees opened two new Ruby
        Tuesday restaurants during the quarter and four 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 income
        statement) totaled $100,256,000 and $121,725,000 for the third
        quarter of fiscal 2008 and 2007, respectively. Fiscal 2008
        sales at franchise restaurants were reduced due to the
        acquisitions of the Michigan and West Palm Beach franchisees
        subsequent to the second quarter of fiscal 2007.

    --  Capital expenditures for new restaurants and routine
        capitalized improvements at existing restaurants were $11.8
        million for the quarter.

    --  Capital expenditures related to the Company's remodel
        initiative were $13.2 million for the quarter.

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

    --  As noted in our press release dated March 5, 2008, we obtained
        a waiver of our existing debt covenants and are working with
        our lending group to amend our credit facilities to modify our
        debt covenants going forward. We have reached an agreement in
        principal with our lenders on the amended terms and are
        currently working on completing documentation of an amendment
        to our current credit facilities. Until those documents are
        completed, most of our long term debt is reflected as current
        in accordance with US GAAP.

Sandy Beall, Founder and CEO, commented, "We are nearing the end of a very busy year for Ruby Tuesday. As of March 4, we have completed the reimage of 468 Company-owned restaurants and substantially completed the reimage of an additional 200 Company-owned restaurants. We have significantly improved and upgraded the Ruby Tuesday brand through our core strategies: uncompromising quality and freshness, gracious hospitality, compelling value, a fresh new look. In the last year, we remodeled substantially all of our Company-owned restaurants, bringing their look and feel to a level that compliments our food and service.

"It has been a very challenging year for consumers who have reduced spending in many areas, including eating at restaurants, and we have certainly felt the impact of that lower spending. However, through this time, we have continued to execute on our plan to differentiate Ruby Tuesday from our traditional bar and grill competitors while continuously monitoring our guest feedback to be sure our changes are resonating with them. Our guests tell us, now more than ever, that they like what we have done, will return again, and will recommend Ruby Tuesday to others. Our food, service, and value ratings continue to climb. We are very excited to be going into next year with all of our major initiatives behind us and without distractions from our system-wide operational strategies. Our teams are fully focused on showcasing the fresh, more relevant Ruby Tuesday brand for our guests and providing memorable experiences that will drive long-term shareholder value with increased frequency, new guest visits, and thus, improved sales.

"Our teams responded to the weak sales environment with increased focus on cost and profit controls, and even despite sales which were weaker than we anticipated due primarily to a lower than projected traffic, we were able to out-perform our third quarter earnings expectations and set the stage for future profits. With regard to the check, we were able to regain the majority of the drop that occurred in the second quarter and the variance compared to prior year improved each month. We believe the third quarter may be a turning point in profitability as we better manage both check and costs. Sales this quarter were impacted by both heavier winter weather and reduced advertising expenditures. We had ten weeks of no television advertising during the third quarter of the current year during the more volatile winter weather months. Our focus is firmly on sales, profitability, and cash flow as we move forward, and based on the significant improvement in all our qualitative measures, sales should inevitably follow. We truly believe we are in a better position than ever to drive sales, profits, cash flow, and long-term shareholder value."

Fiscal 2008 Guidance

For fiscal 2008, the Company is targeting diluted earnings per share of $0.40 to $0.50 based on same-restaurant sales of down 9.0% to 10.0% at Company-owned restaurants. The estimate for fiscal 2008 diluted earnings per share includes projected expenses incurred in our remodel initiative of $0.18 to $0.20 per diluted share, of which approximately $0.15 per diluted share is related to the accelerated depreciation of existing assets and $0.03 to $0.05 per diluted share is related to incremental depreciation on new assets net of the reduction from the related write-offs. Year-to-date through the Company's third fiscal quarter, approximately $0.18 per diluted share has been expensed for the remodel initiative. Additional assumptions used to determine the targeted range include the following:

    --  19 Company-owned Ruby Tuesday openings for the year;

    --  15 to 20 franchise openings for the year;

    --  $60-$65 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, Guam, and 11 foreign countries. As of March 4, 2008, the Company owned and operated 721 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 169 and 52 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 Third Quarter of Fiscal Year 2008
(Amounts in thousands except per share amounts)


                        13 Weeks           13 Weeks
                          Ended   Percent    Ended   Percent
                        March 4,    of     March 6,    of     Percent
                          2008     Revenue   2007     Revenue Change
                        ------------------ ------------------ -------

Revenue:
  Restaurant sales and
   operating revenue    $348,025     99.1  $374,192      99.0
  Franchise revenue        3,208      0.9     3,748       1.0
                        ---------          ---------
    Total revenue        351,233    100.0   377,940     100.0   (7.1)

Operating Costs and
 Expenses:
  (as a percent of
   Restaurant sales and
   operating revenue)
    Cost of merchandise   97,260     27.9   100,590      26.9
    Payroll and related
     costs               115,170     33.1   112,416      30.0
    Other restaurant
     operating costs      70,322     20.2    66,341      17.7
    Depreciation and
     amortization         24,288      7.0    19,400       5.2
  (as a percent of
   Total revenue)
    Loss from Specialty
     Restaurant Group,
     LLC bankruptcy           95      0.0     5,771       1.5
    Selling, general
     and
     administrative,
     net                  25,132      7.2    27,191       7.2
    Equity in losses
     (earnings) of
     unconsolidated
     franchises            1,118      0.3       (12)      0.0
                        ---------          ---------
Total operating costs
 and expenses            333,385            331,697
                        ---------          ---------

Earnings before
 Interest and Taxes       17,848      5.1    46,243      12.2  (61.4)

   Interest expense,
    net                    8,448      2.4     4,776       1.3
                        ---------          ---------

Pre-tax Profit             9,400      2.7    41,467      11.0  (77.3)

   (Benefit)/Provision
    for income taxes      (2,308)    (0.6)   12,812       3.4
                        ---------          ---------

Net Income              $ 11,708      3.3  $ 28,655       7.6  (59.1)
                        =========          =========



Earnings Per Share:
Basic                   $   0.23           $   0.49            (53.1)
                        =========          =========
Diluted                 $   0.23           $   0.49            (53.1)
                        =========          =========

Shares:
Basic                     51,381             58,124
                        =========          =========
Diluted                   51,411             58,595
                        =========          =========

                       39 Weeks             39 Weeks
                         Ended    Percent    Ended    Percent
                       March 4,     of      March 6,    of     Percent
                         2008      Revenue    2007     Revenue Change
                      -------------------- ------------------- -------

Revenue:
  Restaurant sales and
   operating revenue  $1,008,412     99.0  $1,042,319     98.9
  Franchise revenue       10,541      1.0      11,099      1.1
                      -----------          ----------
    Total revenue      1,018,953    100.0   1,053,418    100.0   (3.3)

Operating Costs and
 Expenses:
  (as a percent of
   Restaurant sales
   and operating
   revenue)
    Cost of
     merchandise         278,971     27.7     281,638     27.0
    Payroll and
     related costs       334,636     33.2     320,273     30.7
    Other restaurant
     operating costs     206,995     20.5     188,308     18.1
    Depreciation and
     amortization         73,021      7.2      56,775      5.4
  (as a percent of
   Total revenue)
    Loss from
     Specialty
     Restaurant Group,
     LLC bankruptcy          252      0.0       6,022      0.6
    Selling, general
     and
     administrative,
     net                  87,619      8.6      87,515      8.3
    Equity in losses
     (earnings) of
     unconsolidated
     franchises            3,576      0.4         626      0.1
                      -----------          ----------
Total operating costs
 and expenses            985,070              941,157
                      -----------          ----------

Earnings before
 Interest and Taxes       33,883      3.3     112,261     10.7  (69.8)

   Interest expense,
    net                   23,828      2.3      13,659      1.3
                      -----------          ----------

Pre-tax Profit            10,055      1.0      98,602      9.4  (89.8)

   (Benefit)/Provision
    for income taxes      (2,392)    (0.2)     31,668      3.0
                      -----------          ----------

Net Income            $   12,447      1.2  $   66,934      6.4  (81.4)
                      ===========          ==========



Earnings Per Share:
Basic                 $     0.24           $     1.15           (79.1)
                      ===========          ==========
Diluted               $     0.24           $     1.14           (78.9)
                      ===========          ==========

Shares:
Basic                     51,635               58,353
                      ===========          ==========
Diluted                   51,779               58,794
                      ===========          ==========
RUBY TUESDAY, INC.

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

                                                  March 4,   June 5,
CONDENSED BALANCE SHEETS                            2008       2007
------------------------------------------------ ---------- ----------
Assets
   Cash and Short-Term Investments                   $7,121    $25,892
   Accounts and Notes Receivable                      7,841     14,773
   Inventories                                       22,347     20,032
   Income Tax Receivable                              3,233          -
   Deferred Income Taxes                              6,550      5,239
   Assets Held for Disposal                          36,332     20,368
   Prepaid Rent and Other Expenses                   18,147     15,551
                                                 ---------- ----------

     Total Current Assets                           101,571    101,855

   Property and Equipment, Net                    1,086,166  1,033,336
   Goodwill, Net                                     18,927     16,935
   Notes Receivable, Net                              3,685      9,212
   Other Assets                                      57,115     68,918
                                                 ---------- ----------

     Total Assets                                $1,267,464 $1,230,256
                                                 ========== ==========

Liabilities
   Current Portion of Long Term Debt, including
    Capital Leases                                 $569,706     $1,779
   Income Tax Payable                                     -      5,730
   Other Current Liabilities                        109,852    117,258
   Long-Term Debt, including Capital Leases          42,580    512,559
   Deferred Income Taxes                             28,899     37,507
   Deferred Escalating Minimum Rents                 41,945     39,824
   Other Deferred Liabilities                        64,461     76,273
                                                 ---------- ----------

     Total Liabilities                              857,443    790,930

Shareholders' Equity                                410,021    439,326
                                                 ---------- ----------

     Total Liabilities and Shareholders' Equity  $1,267,464 $1,230,256

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

SOURCE: Ruby Tuesday, Inc.