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--Restaurant-Level Operating Margin Improvement of 400 Basis Points
Ruby Tuesday, Inc. (RT) today reported financial results for the
fiscal first quarter ended September 4, 2012.
Results for first quarter 2013 compared to first quarter 2012 include:
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Same-restaurant sales increased 1.9% at Company-owned Ruby Tuesday
restaurants
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Restaurant-level operating margin of 19.7%, compared to 15.7% for the
prior year, an improvement of 400 basis points primarily driven by our
restaurant-level margin cost savings. These savings, in addition to
lower coupon expense, are largely funding our television marketing
programs.
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Net income of $2.6 million, or net income of $2.9 million excluding
CEO transition expenses primarily related to search fees. This
compares to prior-year net income of $3.1 million. We have included a
reconciliation of these items and the related earnings per share
impact on the Investor Relations page of the Ruby Tuesday website: www.rubytuesday.com.
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Diluted earnings per share of $0.04, or diluted earnings per share of
$0.05 excluding the impact of the item noted above, compared to
diluted earnings per share of $0.05 for the prior year
Sandy Beall, Founder, Chairman, and CEO, commented on the quarterly
results, saying, "We were very pleased with our positive same-restaurant
sales in the first quarter, in line with our guidance of approximately
2%, and our first positive sales quarter in the last seven quarters. Our
first quarter sales results are encouraging, in particular as we have
significantly reduced our level of couponing while supporting and
building our television marketing programs. We believe we are well
positioned to grow our sales and continue to build upon all the
groundwork we laid over the past year."
Other highlights from our first quarter results include:
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Total revenue increased 0.8% from the prior-year first quarter
primarily due to our Ruby Tuesday same-restaurant sales increase in
addition to revenue growth in our Lime Fresh and Marlin & Ray’s
concepts, which was partially offset by 27 permanently closed
Company-owned restaurants
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Opened three Lime Fresh restaurants during the quarter (two
Company-owned and one franchise), and now have 15 Company-owned Lime
Fresh locations and five franchised locations
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Operated 11 Company-owned Marlin & Ray’s seafood restaurants as of the
end of the quarter and opened one Marlin & Ray’s restaurant conversion
subsequent to quarter end
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Permanently closed one and temporarily closed one Company-owned Ruby
Tuesday restaurant in anticipation of conversion to Marlin & Ray’s
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Domestic and international franchisees opened one and closed two Ruby
Tuesday restaurants
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Repurchased 364,000 shares of our common stock at an average price of
$6.45 per share during the quarter. Subsequent to quarter end, we
repurchased another 173,000 shares at an average price of $6.73.
Currently, 5.4 million shares remain authorized for repurchase under
the Company’s share repurchase program.
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Amended our Revolving Credit Facility to enable us to repurchase up to
$15 million annually of our high yield bonds. Subsequent to the end of
the first quarter, we repurchased $1.5 million of our bonds at
approximately a 5% discount to par.
--
Closed sale leaseback transactions on nine restaurants during the
quarter resulting in $20.2 million of gross proceeds. Subsequent to
the end of the quarter, we closed sale leaseback transactions on an
additional three restaurants resulting in $7.5 million of gross
proceeds. Since the third quarter of fiscal 2012, we have completed
sale leaseback transactions on 22 restaurants, resulting in $50.0
million of gross proceeds.
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Total capital expenditures were $6.4 million
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Total book debt of $322 million at the end of the first quarter
compared to $347 million for the prior-year quarter, a decrease of $25
million. Additionally, we had $65 million of cash on the balance sheet
at quarter end compared to $8 million in the prior year.
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Continued our Board of Directors transition with the appointment of
Lane Cardwell, Jr. and Jeff O’Neill, both of whom have extensive
restaurant industry experience in the areas of marketing and operations
Mr. Beall added, "We enter our second quarter with good momentum and
remain focused on the following four key initiatives:
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Increasing Ruby Tuesday Same-Restaurant Sales - We are very
pleased with the traction we are building with our television
marketing program now that we are spending at more competitive levels
with our peer group. Our balanced approach of television advertising
and promotional activities, in particular more targeted direct mail
campaigns, was key to our improved traffic and sales trends in the
first quarter. During the quarter, we continued the successful
promotion of our Fresh Endless Garden Bar and fresh-baked garlic
cheese biscuits, both complimentary with over 20 entrees starting at
$9.99. We carried this momentum into the second quarter with the
introduction of our new limited-time Steak & Lobster promotion priced
at $14.99.
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Improving Restaurant-Level Margins - We have now identified and
implemented approximately $40-$45 million of cost savings which are
largely funding our television marketing program. Our objective going
forward is to enhance our restaurant-level margins as we drive
incremental traffic into our restaurants with our television
advertising and promotional programs.
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New Growth Focused on High-Return Locations - We continue to
focus on potential high-return growth with our Lime Fresh and Marlin &
Ray’s brands. Lime Fresh is our primary concept for new unit growth
and we believe it has good potential given its positioning as a hybrid
of high quality fast casual and casual dining. Additionally, we
believe Marlin & Ray’s represents conversion opportunity for select
existing Ruby Tuesday restaurants.
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Strengthening Our Balance Sheet and Allocating Capital to Maximize
Returns - Our new long-term capital structure gives us good
flexibility to execute our strategic plans. We will continue to invest
an appropriate amount of capital in our Ruby Tuesday brand and our two
new brands, and plan on utilizing our excess cash to lower our debt
levels and opportunistically repurchase our stock."
Fiscal Year 2013 Guidance
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Same-Restaurant Sales - We estimate same-restaurant sales for
Company-owned restaurants will be in the range of flat to 2.0% for the
year.
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Company-Owned Restaurant Development - We plan to open 12 to 16
Lime Fresh restaurants, convert five to seven Company-owned Ruby
Tuesday restaurants to Marlin & Ray’s, and close four to six
Company-owned Ruby Tuesday restaurants (excluding conversions)
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Franchise Restaurant Development - We estimate our franchisees
will open 10 to 12 restaurants, up to 10 of which will be
international, and close two to four restaurants
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Restaurant Operating Margins - We estimate margins will improve
approximately 150-200 basis points due to cost savings initiatives
coupled with fixed cost leverage on incremental sales. This range is
higher than our previous guidance in part due to approximately 20-25
basis points of improved margin related to the reporting
reclassification of projected fourth quarter pension expense from
restaurant payroll expenses to selling, general, and administrative
expense.
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Depreciation - Estimated to be in the range of $62-$64 million
for the year
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Selling, General, and Administrative Expenses - Advertising
expense is estimated to be in the range of $80-$85 million for the
year compared to $47.9 million in fiscal 2012 primarily due to
incremental television advertising expense which is largely funded by
our cost savings initiatives. Excluding advertising expense, selling,
general, and administrative expenses are estimated to be relatively
flat primarily due to lower consulting fees and other cost savings
initiatives being offset by the reporting reclassification of
projected fourth quarter pension expense noted above.
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Interest Expense - Estimated to be $25-$27 million for the year
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Tax Benefit - Based on our lower pre-tax income coupled with
our employment-related tax credits, we anticipate a net tax benefit of
$5 to $10 million for the year
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Diluted Earnings Per Share - Diluted earnings per share for the
year are estimated to be in the $0.20 to $0.30 range including the CEO
pension settlement expense and new CEO transition expenses. Excluding
the impact of these items, diluted earnings per share for the year are
estimated to be in the $0.24 to $0.34 range. Fully-diluted weighted
average shares outstanding are estimated to be approximately 63-64
million for the year.
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Capital Expenditures - Estimated to be $44-$50 million for the
year
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Free Cash Flow - Estimated to be $20-$30 million for the year.
On an adjusted basis, free cash flow is estimated to be $31-$41
million after excluding the impact of the CEO pension payout
(approximately $8 million) and estimated lease reserve settlements
from restaurants closed in the fourth quarter of fiscal year 2012
(approximately $3 million) as we view these items as infrequent in
occurrence.
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Sale-Leaseback - Given the success we have realized with our
sale leaseback program and the compression we are seeing in cap rates,
we estimate we will pursue sale leaseback transactions on up to 20
additional properties with estimated gross proceeds of approximately
$40-$45 million
In closing, Mr. Beall said, "We have good momentum as a company as many
of the investments we made in the brand last year are beginning to pay
off. Our sales are starting to stabilize, we are making steady progress
on both of our new brands, and our capital structure has significant
flexibility and capacity. The Board continues to make good progress on
the search for a Chief Executive Officer and hopes an announcement will
be made later this calendar year. All of these positive developments
signal a momentum change and even though we anticipate continued
economic headwinds, we are excited about our plans to create long-term
value for our shareholders."
Reporting Reclassification to Prior-Year Financial Statements
We completed an income statement reporting reclassification for the
prior-year quarter to better align our financial statement presentation
with our peer group. The reclassification, which had no effect on
pre-tax or net income for the previous quarter, was in two key areas: 1)
Deferred loan fees and revolving credit facility commitment fees of $0.4
million in the prior-year quarter were reclassified from other operating
costs to interest expense; and 2) General and administrative personnel
payroll taxes, accident & health insurance, and retirement expenses of
$2.1 million in the prior-year quarter were reclassified from payroll
expenses to selling, general, and administrative expense where the
corresponding salary expenses are reported. In the current year quarter,
these amounts were $0.6 million and $1.9 million, respectively.
ABOUT RUBY TUESDAY
Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby Tuesday brand
restaurants in 45 states, the District of Columbia, 12 foreign
countries, and Guam. As of September 4, 2012, we owned and operated 712
Ruby Tuesday restaurants and franchised 78 Ruby Tuesday restaurants,
comprised of 34 domestic and 44 international restaurants. Our
Company-owned and operated restaurants are concentrated primarily in the
Southeast, Northeast, Mid-Atlantic, and Midwest of the United States,
which we consider to be our core markets.
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 repayments of debt,
availability of financing on terms attractive to the Company, payment of
dividends, stock and bond repurchases, restaurant acquisitions,
conversions of Company-owned restaurants to other dining concepts, and
changes in senior management and in the Board of Directors. 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 the benefits of our television marketing), including,
without limitation, the following: general economic conditions; changes
in promotional, couponing and advertising strategies; changes in our
guests’ disposable income; consumer spending trends and habits;
increased competition in the restaurant market; laws and regulations
affecting labor and employee benefit costs, including further potential
increases in state and federally mandated minimum wages, and healthcare
reform; guests’ acceptance of changes in menu items; guests’ acceptance
of our development prototypes, remodeled restaurants, and conversion
strategy; mall-traffic trends; changes in the availability and cost of
capital; weather conditions in the regions in which Company-owned and
franchised restaurants are operated; costs and availability of food and
beverage inventory; our ability to attract and retain qualified
managers, franchisees and team members; impact of adoption of new
accounting standards; impact of food-borne illnesses resulting from an
outbreak at either Ruby Tuesday or other restaurant concepts; our
ability to successfully integrate acquired companies; our ability to
complete our planned sale-leaseback transactions; 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 2013
(Amounts in thousands except per share amounts)
(Unaudited)
CONDENSED STATEMENTS OF INCOME
13 Weeks 13 Weeks
Ended Ended
September 4, Percent August 30, Percent Percent
2012 of Revenue 2011 of Revenue Change
------------------ ----------- -------------- ---------- ----------
Revenue:
Restaurant sales and operating revenue $ 331,265 99.5 $ 328,854 99.5
Franchise revenue 1,656 0.5 1,491 0.5
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Total revenue 332,921 100.0 330,345 100.0 0.8
Operating Costs and Expenses:
(as a percent of Restaurant sales and operating revenue)
Cost of merchandise 89,525 27.0 97,575 29.7
Payroll and related costs 109,234 33.0 110,861 33.7
Other restaurant operating costs 67,156 20.3 68,737 20.9
Depreciation 15,392 4.6 16,286 5.0
(as a percent of Total revenue)
Selling, general and administrative, net 43,429 13.0 28,387 8.6
Closures and impairments 1,124 0.3 445 0.1
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Total operating costs and expenses 325,860 322,291
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Earnings before Interest and Taxes 7,061 2.1 8,054 2.4 (12.3 )
Interest expense, net 6,790 2.0 4,397 1.3
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Pre-tax profit 271 0.1 3,657 1.1 (92.6 )
(Benefit)/provision for income taxes (2,328 ) (0.7 ) 564 0.2
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Net Income $ 2,599 0.8 $ 3,093 0.9 (16.0 )
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Earnings Per Share:
Basic $ 0.04 $ 0.05 (20.0 )
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Diluted $ 0.04 $ 0.05 (20.0 )
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Shares:
Basic 62,813 63,755
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Diluted 62,956 64,476
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RUBY TUESDAY, INC.
Financial Results For the First Quarter
of Fiscal Year 2013
(Amounts in thousands)
(Unaudited)
September 4, June 5,
CONDENSED BALANCE SHEETS 2012 2012
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Assets
Cash and Cash Equivalents $ 65,488 $ 48,184
Accounts Receivable 8,422 4,700
Inventories 35,423 29,030
Income Tax Receivable - 837
Deferred Income Taxes 24,892 27,134
Prepaid Rent and Other Expenses 14,297 13,670
Assets Held for Sale 7,855 4,713
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Total Current Assets 156,377 128,268
Property and Equipment, Net 939,710 966,605
Goodwill 9,022 7,989
Other Assets 70,400 70,675
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Total Assets $ 1,175,509 $ 1,173,537
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Liabilities
$ 11,477 $ 12,454
Current Portion of Long Term Debt, including Capital Leases
Income Tax Payable 1,786 -
Other Current Liabilities 123,926 119,770
Long-Term Debt, including Capital Leases 310,634 314,209
Deferred Income Taxes 26,792 37,567
Deferred Escalating Minimum Rents 45,629 45,259
Other Deferred Liabilities 77,786 68,054
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Total Liabilities 598,030 597,313
Shareholders’ Equity 577,479 576,224
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$ 1,175,509 $ 1,173,537
Total Liabilities and Shareholders’ Equity
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SOURCE: Ruby Tuesday, Inc.
Ruby Tuesday, Inc.
Greg Ashley, 865-379-5700
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