Ruth's Hospitality Group (RUTH) Tops Q4 EPS by 6c, Beats on Revenues; Offers FY18 Fiscal Outlook

Nnote: EPS may not be comparable

Ruth's Hospitality Group (NASDAQ: RUTH) reported Q4 EPS of $0.44, $0.06 better than the analyst estimate of $0.38. Revenue for the quarter came in at $124.1 million versus the consensus estimate of $120.38 million.

Highlights for the 14-week fourth quarter of 2017 compared to the 13-week fourth quarter of 2016 were as follows:

• The Company reported net income of $9.6 million, or $0.31 per diluted share, in the fourth quarter of 2017, compared to net income of $9.2 million, or $0.30 per diluted share, in the fourth quarter of 2016.
• Income from continuing operations in the fourth quarter of 2017 was $9.6 million, or $0.31 per diluted share, compared to income from continuing operations of $9.4 million, or $0.31 per diluted share, in the fourth quarter of 2016.
• The Company’s fourth quarter of 2017 consisted of 14 weeks compared to 13 weeks in the fourth quarter of 2016. The Company estimates that the extra week increased earnings in the fourth quarter of 2017 by approximately $0.06 per share.
• Net income in the fourth quarter of 2017 included a $3.9 million non-cash charge related to the impairment of assets at one restaurant location and $0.6 million in deal-related expenses associated with the acquisition of our Hawaiian franchisee.
• The Tax Cuts and Jobs Act, also known as H.R. 1, was signed into law on December 22, 2017. This act will significantly lower the Company’s tax rate and reduced the value of the Company’s deferred tax assets by $1.1 million. Additionally during the fourth quarter, the Company recorded income tax expense of $0.1 million related to other discrete state income tax items. Combined, these discrete income tax items reduced net income by $1.2 million, or $0.04 per diluted share.
• Excluding these adjustments, as well as the results from discontinued operations, non-GAAP diluted earnings per common share were $0.44 in the fourth quarter of 2017, compared to $0.31 in the fourth quarter of 2016. The Company believes that non-GAAP diluted earnings per common share provides a useful alternative measure of financial performance. Investors are advised to see the attached Reconciliation of non-GAAP Financial Measure table for additional information.

Financial Outlook

Based on current information, Ruth's Hospitality Group, Inc. is providing its full year 2018 outlook based on a 52 week year ending December 30, 2018, as follows:

• The 53rd week of 2017 made a particularly strong contribution to the Company’s earnings as it contained both Christmas Day and New Year’s Eve. Subsequently, the quarter to date fiscal comparison began the year approximately $3 million lower than 2017 and will lower fiscal comparable sales in the first quarter by approximately 300 basis points.
• The Easter holiday will shift back into the first quarter in 2018, from the second quarter in 2017. The Company believes that first quarter comparable sales last year decreased by approximately 70 basis points due to the shift of Easter.
• The Hawaiian restaurants produced sales of nearly $35 million in 2017, and also generated $1.7 million in royalty revenues. Additionally, this acquisition will add an incremental $3 million in annual depreciation driven by the purchase accounting for the assets and franchise territory rights.
• Food and beverage costs of 29.0% to 31.0% of restaurant sales with total beef inflation of 3-5%
• Restaurant operating expenses of 47.0% to 49.0% of restaurant sales
• Marketing and advertising costs of 3.8% to 4.0% of total revenue
• General and administrative expenses of $32 million to $34 million
• Effective tax rate of 19% to 21%
• Capital expenditures of $29 million to $31 million
• Fully diluted shares outstanding of 30.5 million to 31.0 million (exclusive of any future share repurchases under the Company's share repurchase program)

For earnings history and earnings-related data on Ruth's Hospitality Group (RUTH) click here.

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