Ruby Tuesday, Inc. Reports Fourth Quarter and Annual Fiscal 2008 Results; Review of Strategies and Outlook for Fiscal 2009

MARYVILLE, Tenn. (BUSINESS WIRE) -- Ruby Tuesday, Inc. (NYSE: RT) today reported diluted earnings per share of $0.27 on net income of $13.9 million for the Company's fourth quarter of fiscal 2008, which ended on June 3, 2008. This compares to diluted earnings per share of $0.46 on net income of $24.7 million for the fourth quarter of the prior year. The diluted earnings per share impact of costs associated with the Company's remodel initiative in the fourth quarter of fiscal 2008 was $0.02 compared with $0.01 in the year earlier quarter.

For the fiscal year ended June 3, 2008, the Company reported diluted earnings per share of $0.51 on net income of $26.4 million as compared to $1.59 on net income of $91.7 million for fiscal 2007. For all of 2008, the diluted per share impact of costs associated with the Company's remodel initiative was $0.19 per share.

Quarterly Highlights



Same-restaurant sales for the fourth quarter decreased 10.3% and 7.2% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively, compared to a decline of 3.9% and 2.1%, respectively, in the fourth quarter of the prior year.

Sandy Beall, Founder and CEO, commented on the fiscal year results, saying, "While we are clearly disappointed in our financial results for the year, we are encouraged by our operating trends. Our average guest check and restaurant operating margins in the fourth quarter showed steady improvement and indicate that we are managing our food and labor costs and other aspects of our business more effectively in this difficult operating environment. We just completed our repositioning and remodeling program early in the fourth quarter, and in less than 12 months completely transformed more than 650 Company-owned Ruby Tuesday's to a look that is more relevant to today's guests and clearly differentiates Ruby Tuesday from other bar-grill competitors.

"Our four key strategies of uncompromising freshness and quality, gracious hospitality, a fresh new look for our restaurants, and compelling value are all in place. We believe these brand strategies are clearly working as our guests tell us that they like what we have done and we are executing in the restaurant at a higher level than ever before. This is evidenced by our Guest Satisfaction Scores, which are at record levels in virtually every category. In addition we are seeing some sales and traffic momentum with May improving to approximately down 9% with no price increase.

"Our team talent is stronger and more stable than it has ever been in the history of our Company at both the hourly and management levels, and turnover is at a near record low. Our teams believe in our quality positioning and are proud to be a part of it. Our focus for the coming year is to continue to run great restaurants, get more sales from our existing restaurants, increase profitability at the restaurant level, decrease expenses outside the restaurants, and maximize free cash flow to pay down debt, which should strengthen our balance sheet. Once these goals are achieved, we will turn our focus to prudent growth and returning excess capital to our shareholders.


Fourth quarter fiscal 2008 same-restaurant sales:

Fourth
March April May Quarter
------ ------ ------ -------
Company-Owned -10.2% -11.6% -9.2% -10.3%
Domestic Franchise - 8.0% - 7.8% - 5.5% - 7.2%


Other highlights for the 13-week fourth quarter:

  • Total revenue decreased 4.3% from the same period of the prior year.

  • The average check for the quarter was up $0.02 versus prior year, exceeding our goal of a flat average check by year-end.

  • The Company opened three new Ruby Tuesday restaurants while three were closed during the quarter.

  • Domestic and international franchisees opened five new Ruby Tuesday restaurants during the quarter and two were closed.

  • Sales at domestic and international franchise Ruby Tuesday restaurants (which is the basis for determining royalty fees included in franchise income on the Company's income statement) totaled $100,167,000 and $117,971,000 for the fourth quarter of fiscal 2008 and 2007, respectively. Fiscal 2008 sales at franchise restaurants were reduced due to the acquisitions of our West Palm Beach and Michigan franchisees earlier in fiscal 2008 and the lower same-restaurant sales.

  • Total capital expenditures, excluding those related to our remodel initiative, were $7.2 million for the quarter.

  • Capital expenditures related to the Company's remodel initiative were $5.8 million for the quarter.

  • The Company had 52.8 million shares of common stock outstanding at the end of the quarter.

  • As noted in our May 22, 2008 Form 8-K filing with the SEC, we obtained amendments to our credit facilities which modified our debt covenants and leverage ratios going forward.


Fiscal Year 2008 Highlights

  • Total revenue decreased 3.5% from the prior year.

  • The average check was up $0.02 for the year.

  • Same-restaurant sales for the fiscal year decreased 9.8% and 7.6% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively.

  • The Company opened eighteen new Ruby Tuesday restaurants, acquired thirty-six restaurants from franchisees and closed thirteen restaurants.

  • Domestic and international franchisees opened fourteen new Ruby Tuesday restaurants while seven were closed.

  • Sales at domestic and international franchise Ruby Tuesday restaurants (which is the basis for determining royalty fees included in franchise income on the Company's income statement) totaled $411,968,000 and $471,642,000 for fiscal 2008 and 2007, respectively. Fiscal 2008 sales at franchise restaurants decreased due to the acquisition of our West Palm Beach and Michigan franchisees and the lower same-restaurant sales.

  • Total capital expenditures, excluding those related to the remodel initiative, were $59.9 million for fiscal year 2008.

  • Capital expenditures related to the Company's remodel initiative were $57.0 million for the fiscal year.

  • The tax rate represented a benefit of 11.3%, versus a prior year expense of 30.8%, primarily due to the impact of credits applied to a lower level of pretax income.


Fiscal Year 2009 Guidance

  • New restaurant development. We plan on opening four Company-owned restaurants, two of which were originally scheduled to open in fiscal 2008. We also expect to close approximately 15 Company-owned restaurants due primarily to lease expirations. Our domestic and international franchisees plan on opening approximately 20 restaurants.

  • Same-restaurant sales are expected to decline at a rate in the low to mid-single digits for the year, improving sequentially throughout the year. We expect first quarter same-restaurant sales to be down 8-9%.

  • Restaurant operating margins are anticipated to be down marginally, reflecting higher labor and other operating costs that are partially offset by lower food costs. We expect purchasing agreements currently in place and cost savings initiatives to result in the lower year-to-year food costs, although they are projected to be higher as a percentage of sales than in the fourth quarter of fiscal 2008.

  • Other expenses. Depreciation is projected in the $79-$83 million range and selling, general, and administrative expenses are targeted to be down 10-15% from a year earlier. The advertising component of SG&A is budgeted to be down nearly $18 million. Interest expense is projected to be $36-$38 million and the tax rate is estimated to be 10-20%. Fully diluted shares outstanding are estimated to be approximately 53 million for the year.

  • Earnings per share for the year are projected to be in the $0.50-0.70 range.


In closing, Mr. Beall said, "We feel good about how the Ruby Tuesday brand is positioned and how we are executing at the restaurant level. Our guests clearly like what we are doing. Quality is up, value is up, and sales are trending slightly better. We believe that we are in position to increase sales, profits, cash flow, and long-term shareholder value. We invite you to visit the new Ruby Tuesday, fresher, better."

A FRESH NEW RUBY TUESDAY

Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby Tuesday brand restaurants in 45 states, the District of Columbia, Puerto Rico, Guam, and 13 foreign countries. As of June 3, 2008, the Company-owned and operated 721 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 170 and 54 restaurants, respectively. 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.fulldisclosure.com

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 federally mandated minimum wage; 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 either Ruby Tuesday or other restaurant concepts; effects of actual or threatened future terrorist attacks in the United States; significant fluctuations in energy prices; and general economic conditions.


RUBY TUESDAY, INC.

Financial Results For the Fourth Quarter of Fiscal Year 2008
(Amounts in thousands except per share amounts)


13 Weeks 13 Weeks
Ended Percent Ended Percent
June 3, of June 5, of Percent
2008 Revenue 2007 Revenue Change
----------------- ----------------- -------

Revenue:
Restaurant sales and
operating revenue $338,309 99.1 $352,893 98.9
Franchise revenue 3,042 0.9 3,916 1.1
--------- ---------
Total revenue 341,351 100.0 356,809 100.0 (4.3)

Operating Costs and
Expenses:
(as a percent of
Restaurant sales and
operating revenue)
Cost of merchandise 91,722 27.1 94,198 26.7
Payroll and related
costs 112,274 33.2 111,183 31.5
Other restaurant
operating costs 68,583 20.3 65,154 18.5
Depreciation and
amortization 20,824 6.2 20,576 5.8
(as a percent of Total
revenue)
Loss from Specialty
Restaurant Group,
LLC bankruptcy 37 0.0 (210) (0.1)
Selling, general and
administrative, net 26,784 7.8 25,104 7.1
Equity in (earnings)
losses of
unconsolidated
franchises (41) 0.0 702 0.2
--------- ---------
Total operating costs and
expenses 320,183 316,707
--------- ---------

Earnings before Interest
and Taxes 21,168 6.2 40,102 11.3 (47.2)

Interest expense, net 7,524 2.2 6,306 1.8
--------- ---------

Pre-tax Profit 13,644 4.0 33,796 9.5 (59.6)

(Benefit)/Provision for
income taxes (286) (0.1) 9,062 2.5
--------- ---------

Net Income $ 13,930 4.1 $ 24,734 6.9 (43.7)
========= =========


Earnings Per Share:
Basic $ 0.27 $ 0.46 (41.3)
========= =========
Diluted $ 0.27 $ 0.46 (41.3)
========= =========

Shares:
Basic 51,381 53,757
========= =========
Diluted 51,420 54,150
========= =========

52 weeks 52 weeks
Ended Percent Ended Percent
June 3, of June 5, of Percent
2008 Revenue 2007 Revenue Change
------------------- ------------------ -------

Revenue:
Restaurant sales and
operating revenue $1,346,721 99.0 $1,395,212 98.9
Franchise revenue 13,583 1.0 15,015 1.1
----------- ----------
Total revenue 1,360,304 100.0 1,410,227 100.0 (3.5)

Operating Costs and
Expenses:
(as a percent of
Restaurant sales
and operating
revenue)
Cost of
merchandise 370,693 27.5 375,836 26.9
Payroll and
related costs 446,910 33.2 431,456 30.9
Other restaurant
operating costs 275,579 20.5 253,462 18.2
Depreciation and
amortization 93,845 7.0 77,351 5.5
(as a percent of
Total revenue)
Loss from
Specialty
Restaurant
Group, LLC
bankruptcy 288 0.0 5,812 0.4
Selling, general
and
administrative,
net 114,403 8.4 112,619 8.0
Equity in
(earnings)
losses of
unconsolidated
franchises 3,535 0.3 1,328 0.1
----------- ----------
Total operating costs
and expenses 1,305,253 1,257,864
----------- ----------

Earnings before
Interest and Taxes 55,051 4.0 152,363 10.8 (63.9)

Interest expense,
net 31,352 2.3 19,965 1.4
----------- ----------

Pre-tax Profit 23,699 1.7 132,398 9.4 (82.1)

(Benefit)/Provision
for income taxes (2,678) (0.2) 40,730 2.9
----------- ----------

Net Income $ 26,377 1.9 $ 91,668 6.5 (71.2)
=========== ==========


Earnings Per Share:
Basic $ 0.51 $ 1.60 (68.1)
=========== ==========
Diluted $ 0.51 $ 1.59 (67.9)
=========== ==========

Shares:
Basic 51,572 57,204
=========== ==========
Diluted 51,688 57,633
=========== ==========


----------------------------------------------------------------------

RUBY TUESDAY, INC.

Financial Results For the Fourth Quarter of Fiscal Year 2008
(Amounts in thousands)


June 3, June 5,
CONDENSED BALANCE SHEETS 2008 2007
----------------------------------------------- ---------- ----------
Assets
Cash and Short-Term Investments $ 16,032 $ 25,892
Accounts and Notes Receivable 10,515 14,773
Inventories 21,323 20,032
Income Tax Receivable 7,708 -
Deferred Income Taxes 4,525 5,239
Assets Held for Disposal 24,268 20,368
Prepaid Rent and Other Expenses 20,538 15,551
---------- ----------

Total Current Assets 104,909 101,855

Property and Equipment, Net 1,088,356 1,033,336
Goodwill, Net 18,927 16,935
Notes Receivable, Net 1,884 9,212
Other Assets 57,140 68,918
---------- ----------

Total Assets $1,271,216 $1,230,256
========== ==========

Liabilities
Current Portion of Long Term Debt, including
Capital Leases $ 17,301 $ 1,779
Income Tax Payable - 5,730
Other Current Liabilities 97,852 117,258
Long-Term Debt, including Capital Leases 588,142 512,559
Deferred Income Taxes 27,422 37,507
Deferred Escalating Minimum Rents 42,450 39,824
Other Deferred Liabilities 66,531 76,273
---------- ----------

Total Liabilities 839,698 790,930

Shareholders' Equity 431,518 439,326
---------- ----------

Total Liabilities and
Shareholders' Equity $1,271,216 $1,230,256
========== ==========


SOURCE: Ruby Tuesday, Inc.

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