Ruby Tuesday Reports Second Quarter Results - Costs Reduced and Property Portfolio Restructured to Strengthen the Company
MARYVILLE, Tenn.--(BUSINESS WIRE)--
Management took decisive action during the quarter to lower the Company's costs and improve the productivity and profitability of its assets in response to continuing soft sales and the deterioration in the overall economic climate by:
-- Reducing costs by an estimated
$40-45 millionannually, including lowering general and administrative and other expenses, and the benefit from our restructuring; -- Restructuring the Company's property portfolio including plans to close approximately 40 restaurants in the third quarter and an additional 30 over the next several years, and the write-down of properties held for sale to facilitate their disposal.
"While the actions we took in the second quarter are important, we understand that the best and most sustainable way to increase cash flow, reduce our debt, and address our financial position is through increasing same-restaurant sales. Our advertising dollars are focused on promoting value aggressively to generate traffic. We are also testing targeted marketing programs in the South, an area that has been especially soft for us.
Mr. Beall continued, "In the last several years we invested heavily to reimage all our restaurants through upgraded menu offerings, service standards, and remodels. With our system freshly updated and new restaurant development on hold, we have minimal capital needs. Therefore, nearly all our cash flow will be used for debt pay-down.
"In addition, proceeds from the sales of the properties held for sale, the carrying value of which we wrote down in the second quarter, will be used to retire our debt.
"We are generating substantial free cash flow, have the liquidity to repay debt, and are in compliance with our debt covenants. We believe the actions we are taking, including our cost reduction efforts, will help us to remain in compliance with our debt covenants going forward.
"The bar grill segment is highly competitive and the supply of restaurants far exceeds the level of demand. Many observers believe the entire segment will need to invest to improve quality, overall value, and find ways to differentiate themselves. We have already accomplished this through our quality improvement initiatives and remodeling program that we commenced three years ago and completed towards the end of fiscal 2008. Consequently, we believe we are well-positioned to gain market share when consumer spending recovers," Mr. Beall concluded.
Second Quarter Highlights
-- Same-restaurant sales at Company-owned
Ruby Tuesdayrestaurants decreased 10.8%, while same-restaurant sales at domestic franchise Ruby Tuesdayrestaurants decreased 6.2%, as compared to a decrease of 10.8% and a decrease of 8.7% at Company-owned and domestic franchise Ruby Tuesdayrestaurants, respectively, in the second quarter of the prior year.
Second quarter fiscal 2009 same-restaurant sales:
Second September October November December Quarter Company-Owned -9.4% -10.4% -12.7% -10.8% -9.1% Domestic Franchise -5.1% -6.9% -6.9% -6.2% -9.9%
-- Total revenues were down 9.7% primarily reflecting the decline in same-restaurant sales. A net of one restaurant closed during the quarter, and there was a net decrease of 7 restaurants from the same quarter of the prior year. -- Sales at domestic and international franchise
Ruby Tuesdayrestaurants (which are the basis for determining royalty fees included in franchise income on the Company's operating statement) totaled $90,698,000and $98,173,000for the second quarter of fiscal 2009 and 2008, respectively. Fiscal 2009 sales at franchise restaurants were reduced due to the acquisition of the Michiganfranchisees in October 2007and the lower same-restaurant sales. -- The Company's effective tax rate was impacted by our goodwill charges and tax credits. -- Capital expenditures were $5.0 million, compared with $40.8 milliona year earlier reflecting the Company's decision to use cash flow to retire debt and the completion of its remodeling program in the fourth quarter of fiscal 2008. -- The Company was in compliance with its debt covenants as of the end of the second quarter: the leverage ratio was 4.22, versus a maximum requirement of 4.50; the fixed charge coverage ratio was 2.48, compared with a minimum threshold of 2.25; and net worth exceeded the minimum requirement by $13.6 million. -- The Company had 52.8 million shares outstanding at the end of the quarter.
Impairments and Goodwill Charges
The Company's pre-tax
The Company also incurred a
Fiscal 2009 Guidance
Restaurant locations - we plan to open one Company-owned restaurant in the third quarter and close approximately 40. Our franchisees expect to open 12-15 restaurants during the second half of the year, including six to eight domestic and six to seven international.
Same-restaurant sales are expected to decline 9% to 10% for the year.
Other expenses - depreciation is projected to be in the
Lease reserve - we anticipate incurring a pre-tax lease-related charge
After giving effect to the second quarter pre-tax restructuring and
goodwill charges of
Capital expenditures for the year are expected to be in the
Debt pay-down is expected to total
Mr. Beall commented, "Fiscal 2009 is the most difficult year since our founding nearly 37 years ago. We are highly focused on improving cash flow and expect to be profitable in the second half of the year. Our entire team is committed to taking the appropriate steps to restore shareholder value."
The Company will host a conference call, which will be a live web-cast,
this afternoon at
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 on 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 our 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 state and federally mandated minimum wages; 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
RUBY TUESDAY, INC.Financial Results For the Second Quarter of Fiscal Year 2009 (Amounts in thousands except per share amounts) 13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended December 2, Percent December 4, Percent Percent December 2, Percent December 4, Percent Percent 2008 of 2007 of Change 2008 of 2007 of Change Revenue Revenue Revenue Revenue Revenue: Restaurant sales and $ 287,697 99.3 $ 317,393 98.9 $ 608,913 99.2 $ 660,387 98.9 operating revenue Franchise 2,081 0.7 3,530 1.1 4,866 0.8 7,333 1.1 revenue Total revenue 289,778 100.0 320,923 100.0 (9.7 ) 613,779 100.0 667,720 100.0 (8.1 ) Operating Costs and Expenses: (as a percent of Restaurant sales and operating revenue) Cost of 78,847 27.4 89,018 28.0 166,478 27.3 181,711 27.5 merchandise Payroll and 105,239 36.6 109,525 34.5 215,037 35.3 219,466 33.2 related costs Other restaurant 64,785 22.5 68,157 21.5 133,301 21.9 134,194 20.3 operating costs Depreciation and 19,326 6.7 25,140 7.9 39,455 6.5 48,733 7.4 amortization (as a percent of Total revenue) Loss from Specialty Restaurant 28 0.0 (7 ) 0.0 54 0.0 157 0.0 Group, LLCbankruptcy Selling, general and 24,815 8.6 32,734 10.2 51,075 8.3 62,487 9.4 administrative, net Closures and 37,207 12.8 1,629 0.5 39,185 6.4 2,479 0.4 Impairments Goodwill 18,957 6.5 0 0.0 18,957 3.1 0 0.0 Impairment Equity in losses of 577 0.2 1,612 0.5 78 0.0 2,458 0.4 unconsolidated franchises Total operating costs and 349,781 327,808 663,620 651,685 expenses Earnings/(Loss) before Interest (60,003 ) (20.7 ) (6,885 ) (2.1 ) (771.5 ) (49,841 ) (8.1 ) 16,035 2.4 (410.8 ) and Taxes Interest 9,888 3.4 8,281 2.6 19,688 3.2 15,380 2.3 expense, net Pre-tax Profit/ (69,891 ) (24.1 ) (15,166 ) (4.7 ) (360.8 ) (69,529 ) (11.3 ) 655 0.1 (10,715.1 ) (Loss) Provision for (32,472 ) (11.2 ) (4,815 ) (1.5 ) (32,395 ) (5.2 ) (84 ) 0.0 income taxes Net Income/ $ (37,419 ) (12.9 ) $ (10,351 ) (3.2 ) (261.5 ) $ (37,134 ) (6.1 ) $ 739 0.1 (5,124.9 ) (Loss) Earnings/(Loss) Per Share: Basic $ (0.73 ) $ (0.20 ) (265.0 ) $ (0.72 ) $ 0.01 (7,300.0 ) Diluted $ (0.73 ) $ (0.20 ) (265.0 ) $ (0.72 ) $ 0.01 (7,300.0 ) Shares: Basic 51,395 51,380 51,388 51,763 Diluted 51,395 51,380 51,388 51,964
RUBY TUESDAY, INC.Financial Results For the Second Quarter of Fiscal Year 2009 (Amounts in thousands) December 2, June 3, CONDENSED BALANCE SHEETS 2008 2008 Assets Cash and Short-Term Investments $ 6,926 $ 16,032 Accounts and Notes Receivable 8,378 10,515 Inventories 22,325 21,323 Income Tax Receivable 12,186 7,708 Deferred Income Taxes 8,763 4,525 Assets Held for Disposal 27,940 24,268 Prepaid Rent and Other Expenses 18,385 20,538 Total Current Assets 104,903 104,909 Property and Equipment, Net 1,015,718 1,088,356 Goodwill, Net 0 18,927 Notes Receivable, Net 2,001 1,884 Other Assets 50,927 57,861 Total Assets $ 1,173,549 $ 1,271,937 Liabilities Current Portion of Long Term Debt, including $ 18,228 $ 17,301 Capital Leases Other Current Liabilities 99,210 97,852 Long-Term Debt, including Capital Leases 546,701 588,142 Deferred Income Taxes 7,840 27,422 Deferred Escalating Minimum Rents 43,781 42,450 Other Deferred Liabilities 59,773 67,252 Total Liabilities 775,533 840,419 Shareholders' Equity 398,016 431,518 Total Liabilities and Shareholders' Equity $ 1,173,549 $ 1,271,937