– Total Revenues Grew 8% –
– Earnings Per Share Increased 19% to $0.25
–
Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) today reported
unaudited financial results for its second quarter ended June 25,
2017 and announced a quarterly cash dividend of $0.09 per share to
be paid in the third quarter.
Highlights for the second quarter of 2017 compared to the
second quarter of 2016 were as follows:
- The Company reported net income of $7.8
million, or $0.25 per diluted share, in the second quarter of 2017
compared to net income of $6.9 million, or $0.21 per diluted share,
in the second quarter of 2016.
- Income from continuing operations in
the second quarter of 2017 was $7.8 million, or $0.25 per diluted
share, compared to income from continuing operations of $7.0
million, or $0.21 per diluted share, in the second quarter of
2016.
- Net income in the second quarter of
2016 included a $465 thousand expense related to disputed rent
charges from 2006 through 2015 for a leased Company restaurant, as
well as a $99 thousand gain related to the sale of our closed
Columbus, OH restaurant.
- Excluding the disputed rent charges,
gain on sale and results from discontinued operations, non-GAAP
diluted earnings per share increased 13.6% to $0.25 in the second
quarter of 2017 compared to $0.22 in the second quarter of 2016.
The Company believes that non-GAAP diluted earnings per 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.
- During the quarter the Company
repurchased 400,000 shares of common stock under its current share
repurchase program.
Michael P. O'Donnell, Chairman and Chief Executive Officer of
Ruth's Hospitality Group, Inc., noted, “Our sales momentum
accelerated in the second quarter and was driven by a traffic
increase of 2.1%. These positive traffic trends in the quarter also
positively impacted our year-to date traffic, which now sits in
positive territory. I am pleased with the continued superior
execution from our team members and franchise partners which drove
a 7.9% increase in total revenues and a 2.9% increase in
Company-owned comparable sales. This topline performance, combined
with operating margin expansion and continued execution against our
total return strategy, allowed us to generate a 13.6% increase in
Non-GAAP earnings per share.”
Review of Second Quarter 2017 Operating Results
Total revenues in the second quarter of 2017 were $100.0
million, an increase of 7.9% compared to $92.7 million in the
second quarter of 2016.
Company-owned Sales
- For the second quarter of 2017,
Company-owned comparable restaurant sales increased 2.9%, which
consisted of an average check increase of 0.8% and a traffic
increase of 2.1%, as measured by entrees. The calendar shift of
Easter from the first quarter of 2016 into the second quarter of
2017 positively impacted second quarter comparable restaurant sales
by approximately 70 basis points.
- Average unit weekly sales were $103.5
thousand in the second quarter of 2017, compared to $101.1 thousand
in the second quarter of 2016.
- 70 Company-owned Ruth’s Chris Steak
House restaurants were open at the end of the second quarter of
2017, compared to 67 Ruth’s Chris Steak House restaurants at the
end of the second quarter of 2016. Total operating weeks for the
second quarter of 2017 increased to 910 from 863 in the second
quarter of 2016.
Franchise Income
- Franchise income in the second quarter
of 2017 was $4.3 million, an increase of 5.5% compared to $4.0
million in the second quarter of 2016.
- 81 franchisee-owned restaurants were
open at the end of the second quarter of 2017 compared to 80 at the
end of the second quarter of 2016.
Operating income in the second quarter of 2017 increased 10.4%
to $11.5 million, compared to $10.5 million in the second quarter
of 2016. As a percentage of total revenues, operating margin
increased 25 basis points year-over-year to 11.5%.
- Food and beverage costs, as a
percentage of restaurant sales, increased 20 basis points in the
second quarter of 2017 to 29.9%, primarily due to a 3.8% increase
in total beef costs.
- Restaurant operating expenses, as a
percentage of restaurant sales, decreased 100 basis points in the
second quarter of 2017 to 47.8%, primarily due to a $465 thousand
expense in the second quarter of 2016 related to disputed rent
charges.
- General and administrative expenses, as
a percentage of total revenues, increased 40 basis points in the
second quarter of 2017 to 8.0% driven primarily by an increase in
performance-based compensation.
- Marketing and advertising costs, as a
percentage of total revenues, increased 60 basis points in the
second quarter of 2017, primarily due to the shift of marketing
spend across the quarters.
- Pre-opening costs, as a percentage of
total revenues, decreased 60 basis points in the second quarter of
2017 to 0.2% driven by the timing of new restaurant openings.
Development Update
The Company expects to open its third new Company-owned
restaurant of the year in suburban Denver, CO during the fourth
quarter of 2017. Additionally, the Company signed a lease for a new
restaurant to open in the second half of 2018 in Jersey City,
NJ.
Franchise partners are currently expected to open their second
restaurant in China, a restaurant in Kauai, HI and relocate the
restaurant in Mississauga, Canada during the second half of 2017.
In addition, a new franchised restaurant is expected to open in
Fort Wayne, IN in 2018.
Quarterly Cash Dividend
Subsequent to the end of the second quarter of 2017, 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 August 24, 2017 to shareholders of record as of the
close of business on August 10, 2017, and represents a 29% increase
from the quarterly cash dividend paid in August of 2016.
Share Repurchase Program and Debt
During the second quarter of 2017, the Company repurchased
400,000 shares of common stock under its current share repurchase
program, for approximately $8.4 million or an average price of
$21.08 per share.
At the end of the second quarter of 2017, the Company had $21
million in debt outstanding under its senior credit facility.
Financial Outlook
Based on current information, Ruth's Hospitality Group, Inc. is
updating 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 $23 million to
$25 million
- Fully diluted shares outstanding of
31.2 million to 31.5 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 second
quarter 2017 financial results today at 8:30 AM Eastern Time.
Hosting the call will be Michael P. O’Donnell, Chairman and Chief
Executive Officer, Arne G. Haak, Executive Vice President and Chief
Financial Officer and Cheryl Henry, President and Chief Operating
Officer.
The conference call can be accessed live over the phone by
dialing 719-325-4865. A replay will be available one hour after the
call and can be accessed by dialing 412-317-6671; the password is
7483430. The replay will be available until August 4, 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, strategy, financial outlook and
capital expenditures 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 25, 2016, 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
26 Weeks Ended June 25, June 26, June
25, June 26, 2017
2016 2017 2016
Revenues: Restaurant sales $ 94,145 $ 87,244 $
193,600 $ 183,181 Franchise income 4,257 4,034 8,647 8,535 Other
operating income 1,613 1,376
3,306 2,828 Total revenues 100,015
92,654 205,553 194,544 Costs and expenses: Food and beverage
costs 28,114 25,853 56,693 54,299 Restaurant operating expenses
45,005 42,556 90,452 86,477 Marketing and advertising 3,412 2,618
5,859 4,587 General and administrative costs 8,035 7,058 16,171
14,721 Depreciation and amortization expenses 3,731 3,371 7,236
6,472 Pre-opening costs 173 737
1,352 1,092 Total costs and expenses
88,470 82,193 177,763 167,648 Operating income 11,545 10,461
27,790 26,896 Other income (expense): Interest expense, net
(144 ) (253 ) (324 ) (466 ) Other 14 144
39 151 Income from
continuing operations before income tax expense 11,415 10,352
27,505 26,581 Income tax expense 3,611 3,396
8,616 8,742 Income from
continuing operations 7,804 6,956 18,889 17,839 Income (loss) from
discontinued operations, net of income taxes 7 (48 ) (30 ) (169 )
Net income $ 7,811 $ 6,908
$ 18,859 $ 17,670 Basic earnings per
common share: Continuing operations $ 0.26 $ 0.22 $ 0.62 $ 0.55
Discontinued operations $ - - $ -
- Basic earnings per share $ 0.26 $ 0.22
$ 0.62 $ 0.55 Diluted earnings per
common share: Continuing operations $ 0.25 $ 0.21 $ 0.60 $ 0.54
Discontinued operations $ - - $ -
- Diluted earnings per share $ 0.25 $ 0.21
$ 0.60 $ 0.54 Shares used in computing
net income per common share: Basic 30,548,258 32,138,846 30,561,741
32,382,746 Diluted 31,264,266 32,540,633 31,255,441 32,796,134
Dividends declared per common share $ 0.09 $ 0.07 $ 0.18 $
0.14
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 results from discontinued operations and certain
discrete income tax items. We exclude the impact of the results
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 we do not expect
to take similar accruals 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
26 Weeks Ended June 25, June 26, June
25, June 26, 2017
2016 2017 2016
GAAP net income $ 7,811 $ 6,908 $ 18,859 $ 17,670
GAAP Income tax expense 3,611 3,396 8,616 8,742 GAAP Income (loss)
from discontinued operations (7 ) 48 30
169 GAAP Income from continuing operations
before income tax expense 11,415 10,352 27,505 26,581
Adjustments: Restaurant closing costs - (99 ) - 148 Accrual of
prior years' rent dispute costs - 465
- 465 Adjusted net income from
continuing operations before income taxes 11,415 10,718 27,505
27,194 Adjusted income tax expense (1) (3,611 ) (3,539 )
(8,616 ) (8,982 ) Impact of excluding certain discrete income tax
items - - (247 ) -
Non-GAAP net
income $ 7,804 $ 7,179
$ 18,642 $ 18,212
GAAP diluted earnings per common
share $ 0.25 $ 0.21
$ 0.60 $ 0.54
Non-GAAP diluted earnings per common
share $ 0.25 $ 0.22
$ 0.60 $ 0.56
Weighted-average number of common shares outstanding - diluted
31,264,266 32,540,633 31,255,441 32,796,134
(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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170728005040/en/
Investor RelationsFitzhugh
Taylor, 203-682-8261ftaylor@icrinc.com
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