Ruby Tuesday Reports Second Quarter Results - Costs Reduced and Property Portfolio Restructured to Strengthen the Company
MARYVILLE, Tenn.--(BUSINESS WIRE)--Jan. 7, 2009--Ruby Tuesday (NYSE: RT) reported revenue of $289.8 million for its second fiscal quarter ended December 2, 2008, versus $320.9 million for the same period a year ago, with the decrease reflecting a 10.8% decline in same-restaurant sales. The Company also reported a diluted loss per share of $0.73 on a net loss of $37.4 million including pre-tax charges of $56.2 million or $0.71 per diluted share for restructuring its property portfolio and the write-off of its goodwill. This compares to a diluted loss per share of $0.20 for the second quarter of the prior year on a net loss of $10.4 million.
Management took decisive action during the quarter to lower the Company's costs and improve the productivity and profitability of its assets in response to continuing soft sales and the deterioration in the overall economic climate by:
-- Reducing costs by an estimated $40-45 million annually, including
lowering general and administrative and other expenses, and the benefit
from our restructuring;
-- Restructuring the Company's property portfolio including plans to close
approximately 40 restaurants in the third quarter and an additional 30
over the next several years, and the write-down of properties held for
sale to facilitate their disposal.
Sandy Beall, founder and CEO commented, "We are highly focused on four key aspects of our business: improving same-restaurant sales; maintaining and growing cash flow; improving the productivity and quality of our restaurant locations; and strengthening our balance sheet and reducing debt by an estimated $80-90 million in fiscal 2009. We paid down approximately $40 million of debt in the first half of the fiscal year.
"While the actions we took in the second quarter are important, we understand that the best and most sustainable way to increase cash flow, reduce our debt, and address our financial position is through increasing same-restaurant sales. Our advertising dollars are focused on promoting value aggressively to generate traffic. We are also testing targeted marketing programs in the South, an area that has been especially soft for us.
Mr. Beall continued, "In the last several years we invested heavily to reimage all our restaurants through upgraded menu offerings, service standards, and remodels. With our system freshly updated and new restaurant development on hold, we have minimal capital needs. Therefore, nearly all our cash flow will be used for debt pay-down.
"In addition, proceeds from the sales of the properties held for sale, the carrying value of which we wrote down in the second quarter, will be used to retire our debt.
"We are generating substantial free cash flow, have the liquidity to repay debt, and are in compliance with our debt covenants. We believe the actions we are taking, including our cost reduction efforts, will help us to remain in compliance with our debt covenants going forward.
"The bar grill segment is highly competitive and the supply of restaurants far exceeds the level of demand. Many observers believe the entire segment will need to invest to improve quality, overall value, and find ways to differentiate themselves. We have already accomplished this through our quality improvement initiatives and remodeling program that we commenced three years ago and completed towards the end of fiscal 2008. Consequently, we believe we are well-positioned to gain market share when consumer spending recovers," Mr. Beall concluded.
Second Quarter Highlights
-- Same-restaurant sales at Company-owned Ruby Tuesday restaurants
decreased 10.8%, while same-restaurant sales at domestic franchise Ruby
Tuesday restaurants decreased 6.2%, as compared to a decrease of 10.8%
and a decrease of 8.7% at Company-owned and domestic franchise Ruby
Tuesday restaurants, respectively, in the second quarter of the prior
Second quarter fiscal 2009 same-restaurant sales:
September October November December
Company-Owned -9.4% -10.4% -12.7% -10.8% -9.1%
Domestic Franchise -5.1% -6.9% -6.9% -6.2% -9.9%
-- Total revenues were down 9.7% primarily reflecting the decline in
same-restaurant sales. A net of one restaurant closed during the
quarter, and there was a net decrease of 7 restaurants from the same
quarter of the prior year.
-- Sales at domestic and international franchise Ruby Tuesday restaurants
(which are the basis for determining royalty fees included in franchise
income on the Company's operating statement) totaled $90,698,000 and
$98,173,000 for the second quarter of fiscal 2009 and 2008,
respectively. Fiscal 2009 sales at franchise restaurants were reduced
due to the acquisition of the Michigan franchisees in October 2007 and
the lower same-restaurant sales.
-- The Company's effective tax rate was impacted by our goodwill charges
and tax credits.
-- Capital expenditures were $5.0 million, compared with $40.8 million a
year earlier reflecting the Company's decision to use cash flow to
retire debt and the completion of its remodeling program in the fourth
quarter of fiscal 2008.
-- The Company was in compliance with its debt covenants as of the end of
the second quarter: the leverage ratio was 4.22, versus a maximum
requirement of 4.50; the fixed charge coverage ratio was 2.48, compared
with a minimum threshold of 2.25; and net worth exceeded the minimum
requirement by $13.6 million.
-- The Company had 52.8 million shares outstanding at the end of the
Impairments and Goodwill Charges
The Company's pre-tax $37.2 million Closures and Impairments expenses in the quarter included impairments for approximately 40 restaurants that are to be closed in the third quarter of this fiscal year ($16 million), 30 restaurants that are expected to close over the next several years as their leases expire or sooner if possible ($9.9 million), the write down of properties held for sale ($8.7 million), dead site costs ($2.0 million), and ($0.6 million) of closed restaurant lease reserves and other adjustments. As of January 7, 2009, the Company had closed 28 of the approximately 40 restaurants that are expected to close in the fiscal third quarter.
The Company also incurred a $19.0 million pre-tax charge for the write-off of its goodwill balances. This followed the Company's on-going review process and was due to the overall poor economic conditions, declines in fair value, same-restaurant sales trends at Company-owned restaurants, and the current poor industry conditions.
Fiscal 2009 Guidance
Restaurant locations - we plan to open one Company-owned restaurant in the third quarter and close approximately 40. Our franchisees expect to open 12-15 restaurants during the second half of the year, including six to eight domestic and six to seven international.
Same-restaurant sales are expected to decline 9% to 10% for the year.
Other expenses - depreciation is projected to be in the $74-76 million range and selling, general, and administrative expenses are targeted to be down 20-25% from a year earlier.
Lease reserve - we anticipate incurring a pre-tax lease-related charge of $10-15 million in the third quarter when our restaurant closings take place.
After giving effect to the second quarter pre-tax restructuring and goodwill charges of $56.2 million and anticipated lease-related costs of $10-15 million in the third quarter, the diluted loss per share for the year is projected to be in the range of $0.45-$0.55. These charges are estimated to reduce annual EPS by approximately $0.85.
Capital expenditures for the year are expected to be in the $19-21 million range.
Debt pay-down is expected to total $80-90 million for the year.
Mr. Beall commented, "Fiscal 2009 is the most difficult year since our founding nearly 37 years ago. We are highly focused on improving cash flow and expect to be profitable in the second half of the year. Our entire team is committed to taking the appropriate steps to restore shareholder value."
About 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 14 foreign countries. As of December 2, 2008, the Company-owned and operated 713 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 171 and 56 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:
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 state and federally mandated minimum wages; 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 Second Quarter of Fiscal Year 2009
(Amounts in thousands except per share amounts)
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
December 2, Percent December 4, Percent Percent December 2, Percent December 4, Percent Percent
2008 of 2007 of Change 2008 of 2007 of Change
Revenue Revenue Revenue Revenue
sales and $ 287,697 99.3 $ 317,393 98.9 $ 608,913 99.2 $ 660,387 98.9
Franchise 2,081 0.7 3,530 1.1 4,866 0.8 7,333 1.1
Total revenue 289,778 100.0 320,923 100.0 (9.7 ) 613,779 100.0 667,720 100.0 (8.1 )
(as a percent
Cost of 78,847 27.4 89,018 28.0 166,478 27.3 181,711 27.5
Payroll and 105,239 36.6 109,525 34.5 215,037 35.3 219,466 33.2
restaurant 64,785 22.5 68,157 21.5 133,301 21.9 134,194 20.3
and 19,326 6.7 25,140 7.9 39,455 6.5 48,733 7.4
(as a percent
Restaurant 28 0.0 (7 ) 0.0 54 0.0 157 0.0
general and 24,815 8.6 32,734 10.2 51,075 8.3 62,487 9.4
Closures and 37,207 12.8 1,629 0.5 39,185 6.4 2,479 0.4
Goodwill 18,957 6.5 0 0.0 18,957 3.1 0 0.0
losses of 577 0.2 1,612 0.5 78 0.0 2,458 0.4
costs and 349,781 327,808 663,620 651,685
before Interest (60,003 ) (20.7 ) (6,885 ) (2.1 ) (771.5 ) (49,841 ) (8.1 ) 16,035 2.4 (410.8 )
Interest 9,888 3.4 8,281 2.6 19,688 3.2 15,380 2.3
Pre-tax Profit/ (69,891 ) (24.1 ) (15,166 ) (4.7 ) (360.8 ) (69,529 ) (11.3 ) 655 0.1 (10,715.1 )
Provision for (32,472 ) (11.2 ) (4,815 ) (1.5 ) (32,395 ) (5.2 ) (84 ) 0.0
Net Income/ $ (37,419 ) (12.9 ) $ (10,351 ) (3.2 ) (261.5 ) $ (37,134 ) (6.1 ) $ 739 0.1 (5,124.9 )
Basic $ (0.73 ) $ (0.20 ) (265.0 ) $ (0.72 ) $ 0.01 (7,300.0 )
Diluted $ (0.73 ) $ (0.20 ) (265.0 ) $ (0.72 ) $ 0.01 (7,300.0 )
Basic 51,395 51,380 51,388 51,763
Diluted 51,395 51,380 51,388 51,964
RUBY TUESDAY, INC.
Financial Results For the Second Quarter
of Fiscal Year 2009
(Amounts in thousands)
December 2, June 3,
CONDENSED BALANCE SHEETS 2008 2008
Cash and Short-Term Investments $ 6,926 $ 16,032
Accounts and Notes Receivable 8,378 10,515
Inventories 22,325 21,323
Income Tax Receivable 12,186 7,708
Deferred Income Taxes 8,763 4,525
Assets Held for Disposal 27,940 24,268
Prepaid Rent and Other Expenses 18,385 20,538
Total Current Assets 104,903 104,909
Property and Equipment, Net 1,015,718 1,088,356
Goodwill, Net 0 18,927
Notes Receivable, Net 2,001 1,884
Other Assets 50,927 57,861
Total Assets $ 1,173,549 $ 1,271,937
Current Portion of Long Term Debt, including $ 18,228 $ 17,301
Other Current Liabilities 99,210 97,852
Long-Term Debt, including Capital Leases 546,701 588,142
Deferred Income Taxes 7,840 27,422
Deferred Escalating Minimum Rents 43,781 42,450
Other Deferred Liabilities 59,773 67,252
Total Liabilities 775,533 840,419
Shareholders' Equity 398,016 431,518
Total Liabilities and Shareholders' Equity $ 1,173,549 $ 1,271,937
Source: Ruby Tuesday, Inc.