Ruby Tuesday, Inc. Reports First Quarter Fiscal 2010 Results

October 7, 2009 4:05 PM EDT

Improving Profitability and Same-Restaurant Sales Trends Continue; Positive Guest Traffic; Pays Down $107 Million of Debt

MARYVILLE, Tenn.--(BUSINESS WIRE)-- Ruby Tuesday, Inc. today reported diluted earnings per share of $0.11 on net income of $6.1 million for the Company's first quarter of fiscal 2010, which ended on September 1, 2009. This compares to diluted earnings per share of $0.01 on net income of $285 thousand for the first quarter of the prior year.

Same-restaurant sales for the first quarter decreased 3.1% and 6.5% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively, compared to the same quarter of the prior year. Guest traffic at Company-owned same-restaurants was up in the quarter and built on the positive momentum of the fiscal 2009 fourth quarter.

Sandy Beall, Founder and CEO, commented on the results, saying, "Although the environment remains challenging, we are pleased that the momentum we established in the second half of fiscal 2009 through our marketing strategies and cost savings initiatives continued in the first quarter. Highlights from our first quarter results include:

    --  Same-restaurant guest counts increased for the second consecutive
        quarter;
    --  Same-restaurant sales and guest counts continued to outperform our peers
        as measured by Knapp-TrackTM;
    --  Same-restaurant sales were down 3.1%;
    --  Solid profitability improvement;
    --  We paid down $107.0 million of debt during the quarter, boosted by
        applying the net proceeds of approximately $73 million from our equity
        offering in July to debt retirement.

"Our top priorities for the remainder of the year remain unchanged. First, get guests in seats, thereby increasing restaurant traffic and ultimately sales. Our guests are responding to our strategic focus on Compelling Value as evidenced by our positive traffic. Second, we remain highly focused on maximizing our cash flow and reducing debt. Our third priority is to further strengthen and differentiate our brand through quality and remaining true to our core operating strategies: Uncompromising Freshness and Quality of our food; service with Gracious Hospitality; a Fresh New Look for our restaurants; and offering Compelling Value. We are confident in these strategies and believe that our team's unwavering focus on them is contributing to our momentum."

Highlights for the 13-week first quarter included:

    --  Total revenue decreased 7.2% from the same period of the prior year
        primarily because of 45 fewer restaurants in operation and the decrease
        in same-restaurant sales.
    --  The Company closed two restaurants and did not open any.
    --  Domestic and international franchisees closed three restaurants and did
        not open any.
    --  Sales at domestic and international franchise Ruby Tuesday restaurants
        (which is the basis for determining royalty fees included in franchise
        revenue on the Company's statement of operations) totaled $94.8 million
        and $99.7 million for the first quarter of fiscal 2010 and 2009,
        respectively.
    --  Total capital expenditures were $3.8 million.
    --  Debt was reduced by $107.0 million.
    --  The Company sold 11.5 million common shares, raising a net of
        approximately $73 million which was used to pay down debt.
    --  The Company had approximately 64 million shares of common stock
        outstanding at the end of the quarter.

Fiscal Year 2010 Guidance

    --  New restaurant development - No new Company-owned Ruby Tuesday
        restaurants will be opened in fiscal 2010 and a total of 15 are
        projected to close as part of our previously announced plan to close 30
        restaurants over time when their leases expire. We project our
        franchisees will open 6 restaurants, 3 of which will be international.
    --  Same-restaurant sales -Weestimate same-restaurant sales for the year for
        Company-owned restaurants will be in the range of down 1% to down 3%.
    --  Restaurant operating margins are anticipated to be down primarily
        reflecting the impact of our marketing strategy to emphasize Compelling
        Value and its impact on food costs as a percentage of sales and some
        loss of leverage from the anticipated decline in same-restaurant sales.
        The cost of our food products is expected to remain favorable compared
        with the prior year.
    --  Other expenses -Depreciation is projected in the $62-65 million range
        and selling, general, and administrative expenses are targeted to be
        down approximately 10% from a year earlier. Interest expense is
        projected to be $18-20 million and the tax rate is estimated to be
        10-20%. Fully diluted weighted average shares outstanding are estimated
        to be approximately 62 million for the year.
    --  Diluted earnings per share for the year are projected to be in the
        $0.50-0.60 range.
    --  Capital expenditures for the year are estimated to be $18-20 million.

In closing, Mr. Beall said, "While we are pleased with our results in the first quarter, our team is determined to work harder and smarter with a continued focus on our restaurant operations and our core operating strategies I mentioned earlier. We will continue to differentiate the Ruby Tuesday brand and execute on our mission statement: to consistently deliver a memorable, high-quality casual dining experience with compelling value. We continue to have challenges ahead, but our recent trends are encouraging and I believe the worst is behind us. We believe the decisions we have made over the last year have clearly resulted in positive momentum and we believe they have positioned us well for the long term."

Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby Tuesday brand restaurants in 46 states, the District of Columbia, Guam, and 13 foreign countries. As of September 1, 2009, the Company owned and operated 670 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 171 and 55 restaurants, respectively. For more information on Ruby Tuesday, please visit our company website at www.rubytuesday.com. 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.earnings.com

Special Note Regarding Forward-Looking Information

This press release contains various forward-looking statements which represent our 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 refranchises. We caution 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 (such statements include, but are not limited to, statements relating to cost savings that we estimate may result from any programs we implement, our estimates of future capital spending and free cash flow, our targets for annual growth in same-restaurant sales and average annual sales per restaurant, and our strategy to obtain the equivalent of an investment-grade bond rating), including, without limitation, the following: general economic conditions; changes in promotional, couponing and advertising strategies; guests' acceptance of changes in menu items; guests' acceptance of our development prototypes and remodeled restaurants; 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; 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; our 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; and significant fluctuations in energy prices.

RUBY TUESDAY, INC.

Financial Results For the First Quarter of Fiscal Year 2010

(Amounts in thousands except per share amounts)

                  13 Weeks                 13 Weeks

                  Ended                    Ended

                  September   Percent      September 2,   Percent      Percent
                  1,

                  2009        of Revenue   2008           of Revenue   Change

Revenue:

Restaurant
sales and         $ 299,301   99.6         $ 321,216      99.1
operating
revenue

Franchise           1,311     0.4            2,785        0.9
revenue

Total revenue       300,612   100.0          324,001      100.0        (7.2    )

Operating Costs
and Expenses:

(as a percent
of Restaurant
sales and
operating
revenue)

Cost of             90,327    30.2           87,631       27.3
merchandise

Payroll and         100,459   33.6           109,798      34.2
related costs

Other
restaurant          60,877    20.3           68,611       21.4
operating costs

Depreciation
and                 16,281    5.4            20,129       6.3
amortization

(as a percent
of Total
revenue)

Selling,
general and         19,020    6.3            26,260       8.1
administrative,
net

Closures and        590       0.2            1,909        0.6
impairments

Equity in
losses/
(earnings) of       228       0.1            (499    )    (0.2  )
unconsolidated
franchises

Total operating
costs and           287,782                  313,839
expenses

Earnings before
Interest and        12,830    4.3            10,162       3.1          26.3
Taxes

Interest            5,388     1.8            9,800        3.0
expense, net

Pre-tax Profit      7,442     2.5            362          0.1          1,955.8

Provision for       1,298     0.4            77           0.0
income taxes

Net Income        $ 6,144     2.0          $ 285          0.1          2,055.8

Earnings Per
Share:

Basic             $ 0.11                   $ 0.01                      1,000.0

Diluted           $ 0.11                   $ 0.01                      1,000.0

Shares:

Basic               56,127                   51,381

Diluted             56,295                   51,439

RUBY TUESDAY, INC.

Financial Results For the First Quarter of Fiscal Year 2010

(Amounts in thousands)

                                               September 1,   June 2,

CONDENSED BALANCE SHEETS                       2009           2009

Assets

Cash and Short-Term Investments                $ 5,822        $ 9,760

Accounts and Notes Receivable                    8,481          8,095

Inventories                                      20,545         21,025

Income Tax Receivable                            17,548         8,632

Deferred Income Taxes                            15,796         15,918

Assets Held for Sale                             10,898         16,120

Prepaid Rent and Other Expenses                  13,143         13,423

Total Current Assets                             92,233         92,973

Property and Equipment, Net                      975,266        985,099

Notes Receivable, Net                            572            713

Other Assets                                     45,749         45,411

Total Assets                                   $ 1,113,820    $ 1,124,196

Liabilities

Current Portion of Long Term Debt, including   $ 14,280       $ 16,841
Capital Leases

Other Current Liabilities                        101,150        97,158

Long-Term Debt, including Capital Leases         372,090        476,566

Deferred Income Taxes                            30,716         20,706

Deferred Escalating Minimum Rents                41,379         41,010

Other Deferred Liabilities                       54,026         55,549

Total Liabilities                                613,641        707,830

Shareholders' Equity                             500,179        416,366

Total Liabilities and Shareholders' Equity     $ 1,113,820    $ 1,124,196

    Source: Ruby Tuesday, Inc.

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