– Fourth Quarter GAAP Earnings Per Share Up
7.1% to $0.30 –
– Full Year 2016 GAAP Earnings Per Share Up
8.9% to $0.95 –
– Company Announces 29% Increase in Quarterly
Dividend to $0.09 per Share –
Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) today reported
unaudited financial results for its fourth quarter and full year
ended December 25, 2016 and announced a quarterly cash dividend of
$0.09 per share to be paid in the first quarter.
Highlights for the fourth quarter of 2016 compared to the
fourth quarter of 2015 were as follows:
- The Company reported net income of $9.2
million, or $0.30 per diluted share, in the fourth quarter of 2016
compared to net income of $9.5 million, or $0.28 per diluted share,
in the fourth quarter of 2015.
- Income from continuing operations in
the fourth quarter of 2016 was $9.4 million, or $0.31 per diluted
share, compared to income from continuing operations of $9.1
million, or $0.27 per diluted share, in the fourth quarter of
2015.
- Net income in the fourth quarter of
2016 included a $0.2 million income tax charge and net income in
the fourth quarter of 2015 included a $0.3 million income tax
benefit, each related to the impact of certain discrete income tax
items.
- Excluding these discrete income tax
items, as well as the loss from discontinued operations, non-GAAP
diluted earnings per common share were $0.31 in the fourth quarter
of 2016 compared to $0.26 in the fourth quarter of 2015. The
Company believes that non-GAAP diluted earnings per common share
provides a useful alternative measure of financial performance.
Investors are advised to see the attached Reconciliation of
Non-GAAP Financial Measure table for additional information.
- Two franchisee-owned Ruth’s Chris Steak
House restaurants were opened during the quarter.
Michael P. O'Donnell, Chairman and Chief Executive Officer of
Ruth's Hospitality Group, Inc., noted, “Our fourth quarter results
capped off our 5th consecutive year of earnings growth. These
results would not be possible without the dedication to operational
excellence from our franchisees and team members.”
O’Donnell added, “Looking ahead to 2017, we are excited about
our development plans. So far this year, we have opened two new
Company-owned Ruth’s Chris Steak House restaurants, one in Waltham,
MA and one in Tulsa, OK, and we have one more expected to open in
the first quarter in Cleveland, OH. Additionally, we will open a
fourth Company-operated restaurant in Denver, CO later this year,
the most Company restaurants that we have opened in a single year
since 2008.”
Review of Fourth Quarter 2016 Operating Results
Total revenues in the fourth quarter of 2016 were $107.6
million, an increase of 2.8% compared to $104.7 million in the
fourth quarter of 2015.
Company-owned Sales
- For the fourth quarter of 2016,
Company-owned comparable restaurant sales were flat year-over-year,
which consisted of an average check increase of 2.3%, offset by a
traffic decrease of 2.2%.
- Average unit weekly sales were $114.5
thousand in the fourth quarter of 2016, compared to $114.2 thousand
in the fourth quarter of 2015.
- 68 Company-owned Ruth’s Chris Steak
House restaurants were open at the end of the fourth quarter of
2016, compared to 67 Ruth’s Chris Steak House restaurants at the
end of the fourth quarter of 2015. Total operating weeks for the
fourth quarter of 2016 increased to 884 from 865 in the fourth
quarter of 2015.
Franchise Income
- Franchise income in the fourth quarter
of 2016 was $4.8 million, an increase of 6.1% compared to $4.6
million in the fourth quarter of 2015. The increase in franchise
income was due to a 2.4% increase in comparable franchise
restaurant sales and development fees from new franchise
restaurants opened during the quarter.
- 81 franchisee-owned restaurants were
open at the end of the fourth quarter of 2016 compared to 80 at the
end of the fourth quarter of 2015.
Operating income in the fourth quarter of 2016 increased 15.9%
to $15.1 million, compared to $13.0 million in the fourth quarter
of 2015. As a percentage of total revenues, operating margin
increased 160 basis points year-over-year to 14.0%.
- Food and beverage costs, as a
percentage of restaurant sales, decreased 180 basis points in the
fourth quarter of 2016 to 28.7%, primarily driven by a 2.3%
increase in average check and a 6.4% decline in total beef
costs.
- Restaurant operating expenses, as a
percentage of restaurant sales, increased 30 basis points in the
fourth quarter of 2016 to 45.4%, primarily due to an increase in
labor expenses.
- General and administrative expenses, as
a percentage of total revenues, increased 25 basis points in the
fourth quarter of 2016 to 8.8% driven primarily by an increase in
stock based compensation.
Share Repurchase Program and Debt
During the fourth quarter of 2016, the Company repurchased 347
thousand shares of common stock under its current share repurchase
program for approximately $5.1 million, or an average price of
$14.69 per share.
At the end of the fourth quarter of 2016, the Company had $25
million in debt outstanding under its senior credit facility.
On February 2, 2017, the Company entered into a new credit
agreement that replaced the existing credit facility. The new
credit agreement provides a $90.0 million revolving line of credit
and, subject to the satisfaction of certain conditions and lender
consent, may be increased up to a maximum of $150.0 million. The
new credit facility bears interest between 1.50% to 2.25% over
LIBOR, depending upon the Company's consolidated leverage ratio.
The new credit facility also provides additional flexibility on
capital distributions and contains generally less restrictive
financial covenants. At the closing of the credit agreement,
approximately $15.0 million in revolving loans were drawn
thereunder.
Quarterly Cash Dividend
Subsequent to the end of the fourth quarter of 2016, the
Company’s Board of Directors approved the payment of a quarterly
cash dividend to shareholders of $0.09 per share. This dividend
will be paid on March 9, 2017 to shareholders of record as of the
close of business on February 23, 2017, and represents a 29%
increase from the quarterly cash dividend paid in March of
2016.
Review of Full Year 2016 Operating Results
Net income was $30.5 million, or $0.95 per diluted share, for
the full year of 2016 compared to net income of $30.0 million, or
$0.87 per diluted share for the full year of 2015.
- Income from continuing operations was
$30.8 million, or $0.96 per diluted share, for the full year of
2016 compared to income from continuing operations of $30.2
million, or $0.87 per diluted share, for the full year of
2015.
- Net income in 2016 included a $0.2
million income tax charge related to certain discrete income tax
items as well as an adjustment of $0.3 million related to
restaurant closing costs and accrual of prior year’s rent dispute
costs. Net income in 2015 included a $0.4 million income tax
benefit related to discrete income tax benefits.
- Excluding these adjustments as well as
earnings from discontinued operations, non-GAAP diluted earnings
per common share increased 11.8% to $0.97 for the full year of
2016, compared to $0.87 in the full year of 2015. The Company
believes that non-GAAP diluted earnings per common share provides a
useful alternative measure of financial performance. Investors are
advised to see the attached Reconciliation of Non-GAAP Financial
Measure table for additional information.
Total revenues in 2016 increased 3.4% to $385.9 million compared
to $373.4 million in the prior year. The increase in revenues was
due to new Company and franchise restaurants opened within the last
twelve months as well as an increase in comparable restaurant
sales.
Company-owned Sales
- For the full year 2016, Company-owned
comparable restaurant sales increased 1.6%, which consisted of an
average check increase of 2.5%, partially offset by a traffic
decrease of 0.8%.
- Average unit weekly sales were $104.1
thousand for the full year 2016, an increase of 1.5% compared to
$102.5 thousand in the full year 2015.
- Total operating weeks for the full year
2016 increased to 3,489 from 3,433 in the full year of 2015. Total
operating weeks exclude discontinued operations.
Franchise Income
- Franchise income in the full year of
2016 was up 3.8% to $17.3 million compared to $16.7 million in the
full year of 2015. The increase in franchise income was due to new
franchise restaurant openings during the last 12 months and a 1.0%
increase in comparable franchise restaurant sales.
Operating income in 2016 increased 6.2% to $47.6 million,
compared to $44.8 million in 2015. As a percentage of total
revenues, operating margin increased 30 basis points year-over-year
to 12.3%.
- Food and beverage costs, as a
percentage of restaurant sales, decreased 120 basis points in 2016
to 29.5%, primarily due to a 2.5% increase in average check and a
decrease in total beef costs of 5.5%.
- Restaurant operating expenses, as a
percentage of restaurant sales, increased 50 basis points to 47.6%
primarily due to increased labor costs.
- Marketing and advertising costs, as a
percentage of total revenues, were relatively flat year-over-year
at 3.0%.
- General and administrative expenses, as
a percentage of total revenues, were relatively flat year-over-year
at 8.2%.
- Pre-opening costs in 2016 increased
$1.0 million to $2.0 million compared to $1.0 million in 2015
driven by the timing of new restaurant openings.
Share Repurchase Program
During 2016, the Company repurchased 2.8 million shares of
common stock for approximately $45.1 million or an average price of
$15.96 per share. As of the end of 2016, the Company had $26.6
million remaining under its current authorization. Since the
beginning of 2014, the Company has repurchased an aggregate of 5.6
million shares for approximately $84.2 million under the current
and prior share repurchase programs.
Development Update
Subsequent to the end of the fourth quarter of 2016, the Company
opened two new Ruth’s Chris Steak House restaurants, one in
Waltham, MA and one in Tulsa, OK in January 2017. Additionally,
during the first quarter of 2017, the Company expects to open a new
Ruth’s Chris Steak House restaurant in Cleveland, OH. The Company
plans to open our fourth new Company-owned restaurant in 2017 in
the Denver, CO Tech Center during the fourth quarter.
During the fourth quarter, Ruth’s Chris Steak House franchisees
opened two new restaurants, one in Odenton, MD and one in
Greenville, SC. As previously announced, due to the opening of the
new Odenton, MD restaurant, one of the franchised locations in
downtown Baltimore, MD was closed in the fourth quarter of 2016.
Franchisees also completed the relocation of a restaurant in
Huntsville, AL during the fourth quarter of 2016. Franchise
partners are slated to open their second restaurant in China and
relocate the restaurant in Mississauga, Canada during the second
half of 2017, as well as open a new restaurant in Fort Wayne, IN in
2018.
Financial Outlook
Based on current information, Ruth's Hospitality Group, Inc. is
providing its full year 2017 outlook based on a 53 week year ending
December 31, 2017, as follows:
- Food and beverage costs of 29.0% to
31.0% of restaurant sales
- Restaurant operating expenses of 47.0%
to 49.0% of restaurant sales
- Marketing and advertising costs of 2.9%
to 3.1% of total revenues
- General and administrative expenses of
$32.0 million to $34.0 million
- Effective tax rate of 31% to 34%
- Capital expenditures of $24 million to
$26 million
- Fully diluted shares outstanding of
31.3 million to 32.0 million (exclusive of any future share
repurchases under the Company's share repurchase program)
The foregoing statements are not guarantees of future
performance, and therefore, undue reliance should not be placed
upon them. We refer you to our recent filings with the Securities
and Exchange Commission for more detailed discussions of the risks
that could impact our financial outlook and our future operating
results and financial condition.
Conference Call
The Company will host a conference call to discuss fourth
quarter 2016 financial results today at 8:00 AM Eastern Time.
Hosting the call will be Michael P. O’Donnell, Chairman and Chief
Executive Officer, and Arne G. Haak, Executive Vice President and
Chief Financial Officer.
The conference call can be accessed live over the phone by
dialing 719-325-2344. A replay will be available one hour after the
call and can be accessed by dialing 412-317-6671; the password is
2577862. The replay will be available until February 24, 2017. The
call will also be webcast live from the Company's website at
www.rhgi.com under the investor relations section.
About Ruth’s Hospitality Group, Inc.
Ruth's Hospitality Group, Inc., headquartered in Winter Park,
Florida, is the largest fine dining steakhouse company in the U.S.
as measured by the total number of Company-owned and
franchisee-owned restaurants, with over 150 Ruth’s Chris Steak
House locations worldwide specializing in USDA Prime grade steaks
served in Ruth’s Chris’ signature fashion – “sizzling.”
For information about our restaurants, to make reservations, or
to purchase gift cards, please visit www.RuthsChris.com. For more
information about Ruth’s Hospitality Group, Inc., please visit
www.rhgi.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains “forward-looking statements” that
reflect, when made, the Company’s expectations or beliefs
concerning future events that involve risks and uncertainties.
Forward-looking statements frequently are identified by the words
“believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,”
“targeting,” “will be,” “will continue,” “will likely result,” or
other similar words and phrases. Similarly, statements herein that
describe the Company’s objectives, plans or goals, including with
respect to new restaurant openings, capital expenditures and the
impact of healthcare inflation and minimum wage legislation, also
are forward-looking statements. Actual results could differ
materially from those projected, implied or anticipated by the
Company’s forward-looking statements. Some of the factors that
could cause actual results to differ include: reductions in the
availability of, or increases in the cost of, USDA Prime grade
beef, fish and other food items; changes in economic conditions and
general trends; the loss of key management personnel; the effect of
market volatility on the Company’s stock price; health concerns
about beef or other food products; the effect of competition in the
restaurant industry; changes in consumer preferences or
discretionary spending; labor shortages or increases in labor
costs; the impact of federal, state or local government regulations
relating to Company employees, the sale or preparation of food, the
sale of alcoholic beverages and the opening of new restaurants;
harmful actions taken by the Company’s franchisees; a material
failure, interruption or security breach of the Company’s
information technology network; repeal or reduction of the federal
FICA tip credit; unexpected expenses incurred as a result of the
sale of the Mitchell’s Restaurants; the Company’s ability to
protect its name and logo and other proprietary information; an
impairment in the financial statement carrying value of our
goodwill, other intangible assets or property; the impact of
litigation; the restrictions imposed by the Company’s Credit
Agreement; and changes in, or the discontinuation of, the Company’s
quarterly cash dividend payments or share repurchase program. For a
discussion of these and other risks and uncertainties that could
cause actual results to differ from those contained in the
forward-looking statements, see “Risk Factors” in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 27,
2015, which is available on the SEC’s website at www.sec.gov. All
forward-looking statements are qualified in their entirety by this
cautionary statement, and the Company undertakes no obligation to
revise or update this press release to reflect events or
circumstances after the date hereof. You should not assume that
material events subsequent to the date of this press release have
not occurred.
Unless the context otherwise indicates, all references in this
report to the “Company,” “Ruth’s,” “we,” “us”, “our” or similar
words are to Ruth’s Hospitality Group, Inc. and its subsidiaries.
Ruth’s Hospitality Group, Inc. is a Delaware corporation formerly
known as Ruth’s Chris Steak House, Inc., and was founded in
1965.
RUTH'S HOSPITALITY GROUP, INC. AND
SUBSIDIARIES Condensed Consolidated Statements of Income -
Preliminary and Unaudited (Amounts in thousands, except
share and per share data)
13 Weeks Ended 52 Weeks Ended December
25, December 27, December 25, December 27,
2016 2015 2016 2015 Revenues:
Restaurant sales $ 101,206 $ 98,790 $ 363,147 $ 351,875 Franchise
income 4,838 4,558 17,301 16,661 Other operating income
1,585 1,399 5,499 4,897
Total revenues 107,629 104,747 385,947 373,433
Costs and expenses: Food and beverage costs 29,054 30,130 107,075
108,101 Restaurant operating expenses 45,973 44,561 172,999 165,847
Marketing and advertising 4,272 4,573 11,406 10,925 General and
administrative costs 9,420 8,908 31,488 30,242 Depreciation and
amortization expenses 3,527 3,173 13,434 12,520 Pre-opening costs
320 405 1,986
1,032 Total costs and expenses 92,566 91,750 338,388
328,667 Operating income 15,063 12,997 47,559 44,766
Other income (expense): Interest expense, net (355 ) (202 ) (1,154
) (790 ) Other (50 ) 319 10
358 Income from continuing operations before
income tax expense 14,658 13,114 46,415 44,334 Income tax expense
5,250 4,024 15,660
14,168 Income from continuing operations 9,408 9,090
30,755 30,166 Income (loss) from discontinued operations, net of
income taxes (197 ) 421 (290 ) (162 )
Net income $ 9,211 $ 9,511 $ 30,465 $ 30,004
Basic earnings (loss) per common share: Continuing
operations $ 0.31 $ 0.27 $ 0.97 $ 0.88 Discontinued operations
(0.01 ) 0.01 (0.01 ) 0.00
Basic earnings per share $ 0.30 $ 0.28 $ 0.96
$ 0.88 Diluted earnings (loss) per common share:
Continuing operations $ 0.31 $ 0.27 $ 0.96 $ 0.87 Discontinued
operations (0.01 ) 0.01 (0.01 )
0.00 Diluted earnings per share $ 0.30 $ 0.28
$ 0.95 $ 0.87 Shares used in computing net
income (loss) per common share: Basic 30,609,313 33,524,916
31,670,189 34,018,582 Diluted 31,163,202 33,901,787 32,108,965
34,434,407 Dividends declared per common share $ 0.07 $ 0.06
$ 0.28 $ 0.24
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE We prepare our financial statements in accordance with
U.S. generally accepted accounting principles (GAAP). Within our
press release, we make reference to non-GAAP diluted earnings per
common share. This non-GAAP measurement was calculated by excluding
certain items and losses from discontinued operations and certain
discrete income tax items. We exclude the impact of the loss from
discontinued operations and restaurant closing costs and the impact
of certain discrete income tax items because these items are not
reflective of the ongoing operations of our business, and we
exclude the impact of rent dispute costs because the accrual and
the benefit from the favorable settlement was taken as a result of
a dispute with a landlord related to rent costs in prior years and
we do not expect to take similar accruals or benefits in the
future. This non-GAAP measurement has been included as supplemental
information. We believe that this measure represents a useful
internal measure of performance. Accordingly, where this non-GAAP
measure is provided, it is done so that investors have the same
financial data that management uses in evaluating performance with
the belief that it will assist the investment community in
assessing our underlying performance on a quarter-over-quarter
basis. However, because this measure is not determined in
accordance with GAAP, such a measure is susceptible to varying
calculations and not all companies calculate the measure in the
same manner. As a result, the aforementioned measure as presented
may not be directly comparable to a similarly titled measure
presented by other companies. This non-GAAP financial measure is
presented as supplemental information and not as an alternative to
diluted earnings per share as calculated in accordance with GAAP.
Reconciliation of
Non-GAAP Financial Measure - Unaudited (Amounts in
thousands, except share data) 13 Weeks Ended
52 Weeks Ended December 25, December 27,
December 25, December 27, 2016 2015
2016 2015 GAAP net income $ 9,211 $ 9,511 $
30,465 $ 30,004 GAAP Income tax expense 5,250 4,024 15,660 14,168
GAAP Income (loss) from discontinued operations 197
(421 ) 290 162 GAAP Income from
continuing operations before income tax expense 14,658 13,114
46,415 44,334 Adjustments: Restaurant closing costs - - 148
- Accrual of prior years' rent dispute costs -
- 130 - Adjusted net
income from continuing operations before income taxes 14,658 13,114
46,693 44,334 Adjusted income tax expense (1) (5,250 )
(4,024 ) (15,769 ) (14,168 ) Impact of excluding certain discrete
income tax items 239 (322 ) 165 (355 )
Non-GAAP net income $ 9,647 $
8,768 $ 31,089 $
29,811 GAAP diluted
earnings per common share $ 0.30 $
0.28 $ 0.95 $ 0.87
Non-GAAP diluted earnings per
common share $ 0.31 $ 0.26
$ 0.97 $ 0.87
Weighted-average number of common shares outstanding -
diluted 31,163,202 33,901,787 32,108,965 34,434,407 (1)
Adjusted income tax is calculated by multiplying the Non-GAAP
adjustments by our marginal federal and state income tax rates and
adding or subtracting the result to/from our GAAP income tax
expense.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170217005080/en/
Investor RelationsFitzhugh
Taylor, 203-682-8261ftaylor@icrinc.com
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