Ruby Tuesday, Inc. Reports Fiscal Third Quarter 2016 Financial Results

Updates Guidance for Fiscal Year 2016

MARYVILLE, TN - (BUSINESS WIRE) - Apr. 7, 2016 - Ruby Tuesday, Inc. (NYSE:RT) today announced fiscal third quarter 2016 financial results for the period ended March 1, 2016 and updated its guidance for fiscal year 2016.

Fiscal Third Quarter 2016 Highlights (13 weeks ended March 1, 2016, compared to the 13 weeks ended March 3, 2015):

  • Same-restaurant sales decreased 3.1%, which included a 140 basis point negative impact due to temporary store closures resulting from severe winter weather, compared to a 0.3% decline in the third quarter of the prior fiscal year.
  • Total revenue declined 5.1% to $271.5 million, which included a net reduction of 20 corporate-owned restaurants.
  • Restaurant level margin contracted 10 basis points to 17.1%.
  • Net loss was $3.1 million, or ($0.05) per diluted share, compared to a net loss of $800,000, or ($0.01) per diluted share.
  • Adjusted Net Income* was $1.6 million, or $0.03 per diluted share, compared to Adjusted Net Income of $1.9 million, or $0.03 per diluted share.
  • Adjusted EBITDA* was $20.3 million compared to $21.5 million in the prior year quarter.
  • The Company invested $10.0 million to repurchase 1.9 million shares of its common stock and $2.5 million to repurchase bonds below par.
  • As of March 1, 2016, the Company had cash on hand of $52.5 million.

* Adjusted EBITDA, Adjusted Net (Loss)/ Income and Adjusted Net (Loss)/ Income per share are non-GAAP measures.Reconciliations of Adjusted EBITDA, Adjusted Net (Loss)/ Income and Adjusted Net (Loss)/ Income per share to the most directly comparable financial measures presented in accordance with GAAP are set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

JJ Buettgen, Chairman of the Board, President, and Chief Executive Officer, commented, “Our third quarter was a volatile period affected by weather, softness in the casual dining industry, and increased promotional activity by our peers. Despite this challenging environment, we continue to believe that our key brand initiatives will drive an improvement in guest counts.”

Buettgen continued, “We are encouraged by our early results in attracting and delighting women and young families with our Garden Bar initiative and by the lift we are seeing so far at our remodeled locations. We remain focused on better in-restaurant execution, refining our media and targeting plans, and incorporating what we’ve learned from our Garden Bar and remodel tests into our go forward strategy. This gives us confidence that we can return to same-restaurant sales growth and higher operating profitability. While not yet visible in our results, we believe that we have the right framework in place to attract more women and families and increase visits from our current Ruby Tuesdayguest.”

Fiscal Third Quarter 2016 Financial Results

Total revenue was $271.5 million, a decrease from last year of $14.4 million, or 5.1%, primarily due to a net reduction of 20 corporate-owned restaurants compared to the third quarter last year and a same-restaurant sales decline of 3.1% at corporate-owned Ruby Tuesday restaurants.

  • Third quarter same-restaurant sales decrease of 3.1% was driven mainly by traffic declines resulting from temporary store closures due to inclement weather and increased discounting by competitors. Year-over-year guest counts were down 5.9% for the quarter while average check rose 2.8%.

Restaurant level margin, excluding franchise revenue, decreased to $46.1 million from $48.9 million in the prior fiscal year’s third quarter. As a percentage of corporate-owned restaurant sales, restaurant level margin declined approximately 10 basis points to 17.1% from 17.2%. The decrease was primarily driven by an increase in cost of goods sold and payroll and related costs, partially offset by a reduction in other restaurant operating costs.

Selling, general & administrative expenses (SG&A) decreased to $27.4 million from $28.9 million in the prior fiscal year’s third quarter. The decrease in SG&A was primarily due to lower G&A expenses, partially offset by increased marketing spend to support new initiatives.

GAAP net loss was $3.1 million, or ($0.05) per diluted share, compared to a net loss of $0.8 million, or ($0.01) per diluted share in the prior fiscal year’s third quarter.

Adjusted Net Income was $1.6 million, or $0.03 per diluted share, a decline of $300,000 compared to Adjusted Net Income of $1.9 million, or $0.03 per diluted share, in the prior fiscal year’s third quarter. Adjusted Net Income for the period excluded after-tax adjustments of $4.7 million, primarily related to closure and impairment charges, compared to after-tax adjustments of $2.6 million in the prior fiscal year’s third quarter. A reconciliation between GAAP net loss and Adjusted Net Income is included in the accompanying financial data.

Balance Sheet

The Company ended the fiscal 2016 third quarter with cash and cash equivalents totaling $52.5 million and book debt of $229.1 million. This compares to cash and cash equivalents totaling $45.3 million and book debt of $231.9 millionas of December 1, 2015.

Restaurant Activity

As of March 1, 2016, there were 729 Ruby Tuesday restaurants system-wide, of which 649 were corporate-owned, and 16 Lime Fresh Mexican Grills, eight of which were corporate-owned and are in the process of being sold. During the third quarter, six corporate-owned Ruby Tuesday restaurants were closed and two international franchised Ruby Tuesday restaurants were opened.

Fiscal Year 2016 Financial Outlook

The Company is updating its full-year Adjusted Net Income per share guidance to $0.05 to $0.08 (vs. $0.12 to $0.17previously) based on the following updated assumptions:

  • Same-Restaurant Sales – Fiscal 2016 same-restaurant sales down approximately 1% (vs. flat to up 1% previously).
  • Unit Development – A net reduction of 11-14 corporate-owned Ruby Tuesday restaurants.
  • Restaurant Level Margin – Fiscal 2016 restaurant level margin of 16.7% to 17.0% (vs. 17.3% to 17.6% previously).
  • Selling, General, and Administrative Expense – Fiscal 2016 SG&A ranging from $110 million to $112 million (vs. $114 million to $117 million previously).
  • Tax Rate – Adjusted Net Income is calculated using the statutory tax rate of 39.69%. This provides a more consistent tax rate to facilitate review and analysis of the Company’s financial performance. The Company is limited in the amount of tax credits that can be utilized each year based upon taxable income for that year and cannot recognize a full benefit of any year’s currently generated tax credits or tax credit carry-forwards due to the Company’s tax valuation allowance.
  • Capital Expenditures – Fiscal 2016 capital expenditures ranging from $34 million to $36 million (vs. $36 million to $38 million previously).

Conference Call & Webcast

JJ Buettgen, Chairman of the Board, President, and Chief Executive Officer, Sue Briley, Vice President of Finance, as well as Dave Skena, Chief Marketing Officer will host a conference call today to discuss fiscal third quarter 2016 financial results at 5:00 PM Eastern Time. The conference call can be accessed live by dialing 888-359-3624 or for international callers by dialing 719-325-2315. 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 9148349. The replay will be available through Saturday, May 7, 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.

About Ruby Tuesday, Inc.

Ruby Tuesday, Inc. owns and franchises Ruby Tuesday and Lime Fresh brand restaurants. As of March 1, 2016, there were 729 Ruby Tuesday restaurants in 44 states, 13 foreign countries, and Guam, and there were 16 Lime Fresh restaurants in two states. Of those restaurants, we owned and operated 649 Ruby Tuesday restaurants and franchised 80 Ruby Tuesday restaurants, comprised of 28 domestic and 52 international restaurants. We also owned and operated eight Lime Fresh restaurants and franchised eight Lime Fresh domestic restaurants. 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 visitwww.rubytuesday.com. Ruby Tuesday, Inc. is traded on the New York Stock Exchange (Symbol: RT).

Forward-looking Information

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.

Non-GAAP Financial Measures

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 EBITDA, Adjusted EBITDA, Adjusted Net (Loss)/ Income and Adjusted Net (Loss)/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 United States Generally Accepted Accounting Principles (GAAP). We also believe that securities analysts, investors and other interested parties frequently use EBITDA, Adjusted EBITDA, Adjusted Net (Loss)/ Income and Adjusted Net (Loss)/ Income per share in evaluating issuers. Because other companies in some cases calculate EBITDA, Adjusted EBITDA, Adjusted Net (Loss)/ Income, or Adjusted Net (Loss)/ 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 (Loss)/ Income and Adjusted Net (Loss)/ Income per share, all of which are non-GAAP financial measures. The Company defines EBITDA as 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, Trademark Impairment and Executive Transition. Adjusted Net (Loss)/ Income is defined as Net (Loss)/ Income, excluding certain non-cash and/or non-recurring expenses/(income) as detailed in Adjusted EBITDA, net of tax as well as adjustments related to Debt Prepayment Penalties, Deferred Financing Fees, and Income Tax (Benefit)/Provision Adjusted to the Statutory Rate. Adjusted Net (Loss)/ Income per share is defined as Adjusted Net (Loss)/ Income divided by diluted shares outstanding.

Financial Tables

 
Financial Results For the Third Quarter and First 39 Weeks of Fiscal Year 2016
(Amounts in thousands except per share amounts)
(Unaudited)
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
    13 Weeks       13 Weeks       39 Weeks       39 Weeks    
    Ended       Ended       Ended       Ended    
    March 1,   Percent   March 3,   Percent   March 1,   Percent   March 3,   Percent
    2016  

of Revenue

  2015  

of Revenue

  2016  

of Revenue

  2015  

of Revenue

                                 
Revenue:                                
Restaurant sales and operating revenue   $ 269,868     99.4     $ 284,392     99.5     $ 807,105     99.4     $ 825,055     99.4  
Franchise revenue     1,602     0.6       1,521     0.5       4,801     0.6       4,699     0.6  
Total Revenue     271,470     100.0       285,913     100.0       811,906     100.0       829,754     100.0  
                                 
Operating Costs and Expenses:                                
(as a percent of Restaurant sales and operating revenue)                                
Cost of goods sold (excluding depreciation and amortization shown below)     75,143     27.8       77,796     27.4       221,689     27.5       224,589     27.2  
Payroll and related costs     93,357     34.6       96,680     34.0       280,976     34.8       286,486     34.7  
Other restaurant operating costs (1)     55,311     20.5       60,972     21.4       173,903     21.5       179,706     21.8  
                                 

Restaurant Level Margin (excludes franchise revenue)(1)

    46,057     17.1       48,944     17.2       130,537     16.2       134,274     16.3  
 
Depreciation and amortization (1)     12,732     4.7       12,961     4.6       38,474     4.8       39,319     4.8  
(as a percent of Total revenue)                                
Selling, general and administrative, net     27,378     10.1       28,948     10.1       84,622     10.4       87,141     10.5  
Closures and impairments, net     6,123     2.3       3,991     1.4       18,908     2.3       6,548     0.8  
Trademark impairment     -     -       -     -       1,999     0.2       -     -  
Total operating costs and expenses     270,044           281,348           820,571           823,789      
                                 
Earnings/(Loss) From Operations     1,426     0.5       4,565     1.6       (8,665 )   (1.1 )     5,965     0.7  
                                 
Interest expense, net     5,005     1.8       5,446     1.9       16,110     2.0       16,783     2.0  
Gain on extinguishment of debt     (10 )   -       -     -       (10 )   -       -     -  
                                 
Loss before income taxes     (3,569 )   (1.3 )     (881 )   (0.3 )     (24,765 )   (3.1 )     (10,818 )   (1.3 )
Benefit for income taxes     (483 )   (0.2 )     (112 )   -       (1,686 )   (0.2 )     (3,341 )   (0.4 )
                                 
Net Loss   $ (3,086 )   (1.1 )   $ (769 )   (0.3 )   $ (23,079 )   (2.8 )   $ (7,477 )   (0.9 )
                                 
                                 
Net Loss Per Share:                                
Basic   $ (0.05 )       $ (0.01 )       $ (0.38 )       $ (0.12 )    
Diluted   $ (0.05 )       $ (0.01 )       $ (0.38 )       $ (0.12 )    
                                 
Shares:                                
Basic     60,918           60,643           61,239           60,532      
Diluted     60,918           60,643           61,239           60,532      
                                 

(1) Beginning in the first quarter of 2016, the Company reclassified its Amortization of intangible assets from “Other restaurant operating costs” to “Depreciation and amortization.” The Company believes this reclassification better aligns the Company with its peers and increased both current and prior period restaurant level margin by approximately 20 basis points. The schedule accompanying the condensed unaudited consolidated financial statements has been revised to reflect the reclassification of Amortization of intangible assets.

 

 

 
Financial Results For the Third Quarter of Fiscal Year 2016
(Amounts in thousands)
(Unaudited)
      March 1,   June 2,
CONDENSED BALANCE SHEETS     2016   2015
Assets          
           
Cash and Cash Equivalents     $ 52,458   $ 75,331
Accounts Receivable       5,866     5,287
Inventories       22,587     20,411
Income Tax Receivable       2,958     -
Prepaid Rent and Other Expenses       11,520     12,398
Assets Held for Sale       3,402     5,453
           
Total Current Assets       98,791     118,880
           
Property and Equipment, Net       722,570     752,174
Deferred Income Taxes, Net       1,995     -
Other Assets       47,108     54,398
           
Total Assets     $ 870,464   $ 925,452
           
Liabilities          
Current Portion of Long-Term Debt, including          
Capital Leases     $ 10,964   $ 10,078
Income Tax Payable       -     1,069
Deferred Income Taxes, Net       2,612     7
Other Current Liabilities       85,308

 

  99,227
           
Total Current Liabilities       98,884     110,381
           
Long-Term Debt and Capital Leases       218,117     231,017
Deferred Income Taxes, Net       -     1,442
Deferred Escalating Minimum Rents       51,793     50,768
Other Deferred Liabilities       66,116     66,261
           
Total Liabilities       434,910     459,869
           
Shareholders' Equity       435,554     465,583
           
Total Liabilities and          
Shareholders' Equity     $ 870,464   $ 925,452
               

 

 
Non-GAAP Reconciliation Table
Reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net (Loss)/Income, and Adjusted Net (Loss)/Income Per Share
(Amounts in thousands except per share amounts)
(Unaudited)
 
    13 Weeks   13 Weeks   39 Weeks   39 Weeks
    Ended   Ended   Ended   Ended
    March 1,   March 3,   March 1,   March 3,
    2016   2015   2016   2015
                 
Net Loss   $ (3,086 )   $ (769 )   $ (23,079 )   $ (7,477 )
                 
Depreciation and Amortization     12,732       12,961       38,474       39,319  

Interest Expense and Gain on Extinguishment of Debt

    4,995       5,446       16,100       16,783  
Benefit for Income Taxes     (483 )     (112 )     (1,686 )     (3,341 )
EBITDA   $ 14,158     $ 17,526     $ 29,809     $ 45,284  
Closures and Impairments, Net (1)     6,123       3,991       18,908       6,548  
Trademark Impairment (2)     -       -       1,999       -  
Executive Transition (3)    

-

      -       (1,274 )     -  
Adjusted EBITDA   $ 20,281     $ 21,517     $ 49,442     $ 51,832  
                 
Net Loss   $ (3,086 )   $ (769 )   $ (23,079 )   $ (7,477 )
                 
Closures and Impairments, Net (net of tax) (1)(5)     3,692       2,407       11,403       3,949  
Trademark Impairment (net of tax) (2)(5)     -       -       1,205       -  
Executive Transition (net of tax) (3)(5)     -       -       (768 )     -  
Debt Prepayment Penalties & Deferred Financing Fees (net of tax) (4)(5)     36       -       690       293  
Income Tax (Benefit)/Provision Adjusted to Statutory Rate (6)     933       238       8,143       953  
Adjusted Net (Loss)/Income   $ 1,575     $ 1,876     $ (2,406 )   $ (2,282 )
                 
                 
Net Loss Per Share   $ (0.05 )   $ (0.01 )   $ (0.38 )   $ (0.12 )
                 
Adjusted Net (Loss)/Income Per Share   $ 0.03     $ 0.03     $ (0.04 )   $ (0.04 )
                 
Basic Shares Outstanding     60,918       60,643       61,239       60,532  
                 
Diluted Shares Outstanding (7)     61,232       61,506       61,239       60,532  
                 
                 
(1) Includes property impairments, restaurant lease reserves, closing cost adjustments, and gain on the sale of surplus properties.
 
(2) In connection with the planned sale and closures of our Company-owned Lime Fresh restaurants, we recorded a $2.0 million trademark impairment charge representing a partial impairment of the Lime Fresh trademark during the second quarter of fiscal year 2016. The Lime Fresh trademark has a net book value of $0.9 million remaining at March 1, 2016.
 
(3) On July 25, 2015, our then President Ruby Tuesday Concept and Chief Operations Officer left the Company. Accordingly, included within our share-based compensation expense for the first quarter is a forfeiture credit of $1.3 million in connection with the forfeiture of 333,000 unvested stock options and 137,000 unvested shares of restricted stock.
 
(4) Debt prepayment penalties and the write-off of deferred financing fees are classified within Interest Expense and Gain on Extinguishment of Debt, which are already included in EBITDA calculation and therefore not a separate add-back for Adjusted EBITDA.
 
(5) Adjusted for income taxes based on a statutory tax rate of 39.69%.
 
(6) Represents the difference between the benefit for Taxes at the quarterly effective tax rate versus the statutory tax rate of 39.69%. Adjusted Net (Loss)/Income per share applies the statutory rate to pre-tax loss and adjustments to loss.
 
(7) Adjusted Net Income per share figures are calculated based on diluted shares outstanding whereas Net Loss and Adjusted Net Loss per share figures are calculated based on basic shares outstanding.
 

 

 
Ruby Tuesday, Inc.
Number of Restaurants at End of Period
 
    March 1,   March 3,
    2016   2015
Ruby Tuesday:        
Company-Owned   649   658
Domestic Franchised   28   30
International Franchised   52   49
Total   729   737
         
Lime Fresh:        
Company-Owned   8   19
Domestic Franchised   8   7
Total   16   26
         
Total Restaurants:        
Company-Owned   657   677
Domestic Franchised   36   37
International Franchised   52   49
System-wide total   745   763
         

SOURCE Ruby Tuesday, Inc.

Contacts:

Melissa Calandruccio
ICR
Investor Relations
646-277-1273
RubyTuesdayIR@icrinc.com

Christine Beggan
Media Relations
203-682-8200
RubyTuesday@icrinc.com

###

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