MARYVILLE, TN - August 11, 2016 - (BUSINESS WIRE) - Ruby Tuesday, Inc. (NYSE: RT) today announced fourth quarter and fiscal year 2016 financial results for the periods ended May 31, 2016 and provided a fiscal year 2017 outlook. The Company also announced plans to streamline the organization, improve financial profitability, and create long-term value for shareholders through its Fresh Start initiative.
The Fresh Start initiative will be achieved through the execution of several key strategies including an Asset Rationalization Plan along with programs to improve the food and beverage offering, dining environment and service at its namesake brand through a Fresh New Menu, Fresh New Garden Bar, and Fresh Experience. These initiatives will be rolled out in phases across multiple markets throughout the coming quarters.
JJ Buettgen, Chairman of the Board, President, and Chief Executive Officer, commented, “Our fourth quarter was impacted by softness in the casual dining industry and increased promotional activity by our peers. Given that we expect the macro environment to remain challenging for some time, we are taking the necessary steps to change the trajectory of our business.”
Buettgen continued, “Our Fresh Start Initiative has been designed to streamline our organization through asset rationalization, improve financial profitability, and ultimately create long-term value for shareholders. Our Fresh New Menu, Fresh New Garden Bar, and Fresh Experience initiatives will position us to accelerate traffic and will be supported by better in-restaurant execution, refining our media and targeting plans, and incorporating the insights from our Garden Bar and remodel tests into our go forward strategy. Through our goal of attracting more women and young families as well as increasing visits from our current Ruby Tuesday guests, we believe we can return to positive same-restaurant sales, expand restaurant level margins, and increase operating profit.”
Ruby Tuesday recently completed a comprehensive review of its corporate-owned restaurant portfolio and determined that it was in the Company’s best interest to close approximately 95 underperforming restaurants. These locations will cease operations by September 2016. As of May 31, 2016, Ruby Tuesday’s system included 724 restaurants, of which 646 were company-operated. This conclusion, followed a rigorous unit-level analysis of sales, cash flows and other key performance metrics, as well as site location, market positioning and lease status.
Buettgen concluded, "The decision to close restaurants is a difficult but necessary step as we take aggressive actions to strengthen our organization. Performance at each of these locations, despite the loyalty of valued guests and the efforts of our dedicated employees, was not meeting expectations. Full-time and part-time employees impacted by closures will be offered positions in nearby restaurants where possible.”
* Restaurant Level Margin, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share are non-GAAP measures. Reconciliations of Restaurant Level Margin, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share to the most directly comparable financial measures presented in accordance with United States Generally Accepted Accounting Principles (GAAP) are set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures” and “Condensed Consolidated Statements of Operations.”
Total revenue was $279.3 million, a decrease of 5.9% or $17.5 million from the fourth quarter of the prior fiscal year. This was due to a net reduction of 12 corporate-owned Ruby Tuesday restaurants and 17 corporate-owned Lime Fresh Mexican Grill restaurants during fiscal year 2016 and a same-restaurant sales decline of 3.7% at corporate-owned Ruby Tuesday restaurants.
The fourth quarter same-restaurant sales decrease was driven in part by traffic declines resulting from a challenging and competitive external environment. Year-over-year guest counts fell 4.6% while average check rose 0.9%.
Restaurant level margin*, excluding franchise revenue, decreased to $51.9 million from $55.2 million in the last fiscal year’s fourth quarter. As a percentage of corporate-owned restaurant sales, restaurant level margin held steady at 18.7% as increases in cost of goods sold along with payroll and related costs were offset by a reduction in other restaurant operating costs.
Selling, general & administrative expenses (SG&A) decreased to $25.0 million from $28.2 million in the prior fiscal year’s fourth quarter. As a percentage of total revenue, SG&A expenses declined 50 basis points to 9.0% from 9.5%. The decrease in SG&A was primarily due to lower incentive compensation expense and a slight decline in marketing spend.
Net Loss was $27.6 million, or ($0.46) per diluted share, compared to Net Income of $4.3 million, or $0.07 per diluted share in the last fiscal year’s fourth quarter.
Adjusted Net Income* was $6.3 million, or $0.10 per diluted share, in line with last fiscal year’s fourth quarter. Adjusted Net Income for the fourth quarter of fiscal year 2016 excluded after-tax adjustments of $33.9 million, primarily related to closure and impairment charges partially offset by the gain on sales of Lime Fresh Mexican Grill assets. Adjusted Net Income for the fourth quarter of fiscal year 2015 excluded after-tax adjustments of $2.1 million, primarily related to closure and impairment charges. A reconciliation between Net (Loss)/Income and Adjusted Net Income is included in the accompanying financial data.
Total revenue was $1.1 billion, a decrease of 3.1% or $35.3 million from last fiscal year, primarily due to a net reduction of 12 corporate-owned Ruby Tuesday restaurants and 17 corporate-owned Lime Fresh Mexican Grill restaurants and a same-restaurant sales decline of 1.4% at corporate-owned Ruby Tuesday restaurants. Year-over-year guest counts fell 3.9% for fiscal year 2016 while average check rose 2.5%.
Restaurant level margin*, excluding franchise revenue, decreased to $182.4 million from $189.5 million in the prior fiscal year. As a percentage of corporate-owned restaurant sales, restaurant level margin declined approximately 10 basis points to 16.8% from 16.9%. The decrease in margin rate was primarily driven by increases in cost of goods sold and payroll and related costs offset in part by improvement in other restaurant operating costs.
Selling, general & administrative expenses (SG&A) decreased to $109.6 million from $115.3 million in the prior fiscal year. As a percentage of total revenue, SG&A expenses declined 20 basis points to 10.0% from 10.2%. The decrease in SG&A was primarily due to lower incentive compensation expense, partially offset by increased marketing spend to support new initiatives.
Net Loss was $50.7 million, or ($0.83) per diluted share, compared to Net Loss of $3.2 million, or ($0.05) per diluted share in the last fiscal year.
Adjusted Net Income* was $3.9 million, or $0.06 per diluted share, a decline of $0.2 million compared to Adjusted Net Income of $4.1 million, or $0.07 per diluted share, in the prior fiscal year. Adjusted Net Income for fiscal year 2016 excluded after-tax adjustments of $54.6 million, primarily related to closure and impairment charges partially offset by a gain on sales of Lime Fresh Mexican Grill. Adjusted Net Income for fiscal year 2015 excluded after-tax adjustments of $7.2 million, primarily related to closure and impairment charges. A reconciliation between Net Loss and Adjusted Net Income is included in the accompanying financial data.
The Company ended fiscal year 2016 with cash and cash equivalents totaling $67.3 million and book debt of $223.7 million. This compares to cash and cash equivalents totaling $52.5 million and book debt of $229.1 million as of March 1, 2016.
As of May 31, 2016, there were 724 Ruby Tuesday restaurants system-wide, of which 646 were corporate-owned. During the fourth quarter, four corporate-owned Ruby Tuesday restaurants were closed and one was opened. Additionally, one domestic franchised Ruby Tuesday restaurant was closed. The Company also opened one and closed two international franchised Ruby Tuesday restaurants.
The Company is providing full-year Adjusted Net Income per share guidance of $0.05 to $0.09. Pre-tax charges related to the Asset Rationalization Plan and as outlined in this release are excluded from Adjusted Net Income per share guidance. The Company notes that fiscal year 2017 is a fifty-three week period ending June 6, 2017 compared to a fifty-two week period in fiscal year 2016 and expects the fifty-third week impact on Adjusted Net Income per share to be approximately $0.02. Fiscal year 2017 guidance is based on the following assumptions:
The forward-looking restaurant level margin and estimated impact to EBITDA related to the Asset Rationalization Plan included in the Fiscal Year 2017 Financial Outlook cannot be reconciled to the most comparable GAAP measure of net (loss)/income. Providing net (loss)/income guidance is potentially misleading and not practical given the difficulty of projecting event driven transactions and other operating items that are included in net (loss)/income.
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(1) With the exception of impairment charges which were substantially booked in FY16 Q4, the majority of pre-tax charges are expected to be realized in FY17.
(2) $39.2 million of non-cash impairment charges related to the Asset Rationalization Plan were recorded in Q4 FY16.
(3) Lease reserves estimate is stated net of deferred rent liability recorded as of 5/31/16. The actual amount of any cash payments made by the Company for lease contract termination costs will be dependent upon ongoing negotiations with the landlords of the leased restaurant properties and could be higher or lower than the amounts currently estimated.
The Company estimates that it will incur $72 million to $81 million in pre-tax charges related to the restaurant closures; with approximately $30 million to $37 million expected to be cash charges related to closing expenses, corporate restructuring, lease termination, holding and other costs. Additionally, the Company expects to receive cash proceeds of approximately $35 million to $45 million from the sale of corporate-owned properties closed as a part of the Asset Rationalization Plan. Proceeds from the sale of corporate-owned properties will be used to pay down debt and reinvest in the business.
The Company will host a conference call today to discuss fourth quarter and fiscal year 2016 financial results at 5:00 PM Eastern Time. The conference call can be accessed live by dialing 888-466-4462 or for international callers by dialing 719-325-2463. A replay will be available after the call and can be accessed by dialing 877-870-5176 or for international callers by dialing 858-384-5517; the passcode is 8485790. The replay will be available through Sunday, September 11, 2016.
The conference call will also be webcast live and later archived on the Investor Relations page of Ruby Tuesday’s corporate website at www.rubytuesday.com under the ‘Events & Presentations’ section.
Ruby Tuesday, Inc. owns and franchises Ruby Tuesday brand restaurants. As of May 31, 2016, there were 724 Ruby Tuesday restaurants in 44 states, 14 foreign countries, and Guam. Of those restaurants, we owned and operated 646 Ruby Tuesday restaurants and franchised 78 Ruby Tuesday restaurants, comprised of 27 domestic and 51 international restaurants. We also owned and operated two Lime Fresh Mexican Grill restaurants as of May 31, 2016. Our corporate-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. For more information about Ruby Tuesday, please visit www.rubytuesday.com. Ruby Tuesday, Inc. is traded on the New York Stock Exchange (Symbol: RT).
This press release contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements represent our expectations or beliefs concerning future events, including one or more of the following: future financial performance (including our estimates of changes in same-restaurant sales, average unit volumes, operating margins, expenses, and other items), future capital expenditures, the effect of strategic initiatives (including statements relating to cost savings initiatives and the benefits of our marketing), the opening or closing of restaurants by us or our franchisees, sales of our real estate or purchases of new real estate, future borrowings and repayments of debt, availability of financing on terms attractive to the Company, compliance with financial covenants in our debt instruments, payment of dividends, stock and bond repurchases, restaurant acquisitions and dispositions, 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, including, without limitation, the risks and uncertainties described in the Risk Factors included in Part I, Item A of our Annual Report on Form 10-K for the year ended June 2, 2015.
The Company believes excluding certain items from its financial results provides investors with a clearer understanding of the Company’s operating performance and comparison to prior-period results. In addition, management uses these non-GAAP financial measures and ratios to assess the results of the Company’s operations.
We have included Restaurant Level Margin, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share to provide investors with supplemental measures of our operating performance. We believe these are important supplemental measures of operating performance because they eliminate items that have less bearing on our Company-wide operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on financial measures in accordance with GAAP. We also believe that securities analysts, investors and other interested parties frequently use Restaurant Level Margin, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share in evaluating issuers. Because other companies in some cases calculate Restaurant Level Margin, EBITDA, Adjusted EBITDA, Adjusted Net Income, or Adjusted Net Income per share differently from the way we calculate such measures, these metrics may not be comparable to similarly titled measures reported by other companies. Additionally, supplemental non-GAAP financial measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
The use of these measures permits a comparative assessment of the Company's operating performance relative to its performance based on GAAP results, while isolating the effects of certain items that vary from period to period without correlation to core operating performance and certain items that vary widely among similar companies. However, the inclusion of these adjusted measures should not be construed as an indication that future results will be unaffected by unusual or infrequent items or that the items for which the adjustments have been made are necessarily unusual or infrequent.
Available in this release is the reconciliation of Net (Loss)/Income, the most directly comparable GAAP measure, to EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share, all of which are non-GAAP financial measures. A reconciliation of Restaurant Level Margin, which is also a non-GAAP measure, to Net (Loss)/Income is presented in the Condensed Consolidated Statements of Operations. The Company defines Restaurant Level Margin as Restaurant Sales and Operating Revenue less Cost of Goods Sold, Payroll and Related Costs, and Other Restaurant Operating Costs. EBITDA is defined as Net (Loss)/Income before interest, taxes, and depreciation and amortization and Adjusted EBITDA as EBITDA, excluding certain non-cash and/or non-recurring expenses/ (income) including, but not limited to, Closures and Impairments, Net, Trademark Impairment, Executive Transition, and the Gain on the Sales of the Lime Fresh Mexican Grill assets. Adjusted Net Income is defined as Net (Loss)/Income, excluding certain non-cash and/or non-recurring expenses/(income) as detailed in Adjusted EBITDA as well as adjustments related to Debt Prepayment Penalties, Deferred Financing Fees, Income Tax Benefit from Adjustments, and Income Tax Provision (Benefit) Adjusted to the Statutory Rate. Adjusted Net Income per share is defined as Adjusted Net Income divided by diluted shares outstanding.
*On August 11, 2016, we announced a plan to close approximately 95 Company-Owned restaurants by September 2016.
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*On August 11, 2016, we announced a plan to close approximately 95 Company-Owned restaurants by September 2016.
SOURCE Ruby Tuesday
Melissa Calandruccio
Investor Relations
ICR
646-277-1273
RubyTuesdayIR@icrinc.com
Christine Beggan
Media Relations
ICR
203-682-8329
RubyTuesday@icrinc.com
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.