– Second
Quarter GAAP EPS of $0.31 –
– Declares
$0.13 Per Share Quarterly Dividend –
Ruth’s Hospitality Group, Inc. (the “Company”) (NASDAQ: RUTH)
today reported unaudited financial results for its second quarter
ended June 30, 2019.
Highlights for the second quarter of 2019 were as
follows:
- Restaurant sales in the second quarter of 2019 increased 0.5%
to $104.0 million compared to $103.5 million in the second quarter
of 2018. Average unit weekly sales were $102.6 thousand in the
second quarter of 2019, a decrease of 0.8% compared to $103.4
thousand in the second quarter of 2018.
- Net income in the second quarter of 2019 was $9.3 million, or
$0.31 per diluted share, compared to net income of $9.6 million, or
$0.32 per diluted share, in the second quarter of 2018.
- Net income in the second quarter of 2019
included $71 thousand in acquisition-related expenses associated
with the acquisition of the three restaurants from our Philadelphia
and Long Island franchisee, and a $122 thousand income tax benefit
related to the impact of discrete income tax items. Net income in
the second quarter of 2018 included $409 thousand in
acquisition-related expenses associated with the acquisition of our
Hawaiian franchisee, and a $273 thousand income tax benefit related
to the impact of discrete income tax items.
- Excluding these adjustments, as well as the
results from discontinued operations, non-GAAP diluted earnings per
common share were $0.31 in the second quarter of 2019, compared to
$0.32 in the second quarter of 2018. The Company believes that
non-GAAP diluted earnings per common share provides a useful
alternative measure of financial performance to improve
comparability of diluted earnings per common share between periods.
Investors are advised to see the attached Reconciliation of
non-GAAP Financial Measure table for additional information.During
the second quarter of 2019, the Company announced the acquisition
of three franchised restaurants with two in the Philadelphia, PA
area and one on Long Island, NY as well as development rights for
this territory.
- On July 29th, subsequent to the end of the quarter, the Company
closed on this acquisition.
- The Company returned $10.5 million through dividends and share
repurchases during the second quarter of 2019.
Cheryl Henry, President and Chief Executive Officer of Ruth's
Hospitality Group, Inc., stated, “I’m pleased with the work of our
team. After seeing slower sales in April, our comparable restaurant
sales saw sequential improvement throughout the quarter including
positive comparable sales during our June period.”
Henry added, “We continue to lay the foundation for long-term
growth within the framework of our total return strategy. Earlier
this week, we closed on the previously announced acquisition of
development territory and three restaurants in Philadelphia, PA and
Long Island, NY from a long-time franchise partner. Additionally,
we have recently signed two new leases for Company-owned
restaurants in Short Hills, NJ and Worcester, MA. We remain excited
about our opportunities to grow and evolve the iconic Ruth’s Chris
Steak House brand.”
Review of Second Quarter 2019 Operating Results
Total revenues in the second quarter of 2019 were $110.2
million, an increase of 0.6% compared to $109.6 million in the
second quarter of 2018.
Company-owned Sales
- Comparable restaurant sales at Company-owned restaurants
decreased 0.5% compared to the second quarter of 2018, which
consisted of a 1.3% decrease in traffic, as measured by entrees,
and an average check increase of 0.9%. Comparable restaurant sales
and traffic were positively affected by approximately 50 to 70
basis points due to the shift of Easter into the second quarter of
2019 from the first quarter of 2018.
- 78 Company-owned Ruth’s Chris Steak House restaurants were open
at the end of the second quarter of 2019, compared to 77 Ruth’s
Chris Steak House restaurants at the end of the second quarter of
2018. Total operating weeks for the second quarter of 2019
increased to 1,014 from 1,001 in the second quarter of 2018.
Franchise Income
- Franchise income in the second quarter of 2019 was $4.4
million, a decrease of 0.8% compared to $4.5 million in the second
quarter of 2018. The decrease in franchise income was driven
primarily by lower franchise development fees, offset by a 1.1%
increase in comparable franchise restaurant sales.
- 76 franchisee-owned restaurants were open at the end of the
second quarter of 2019 compared to 75 at the end of the second
quarter of 2018.
Operating Expenses
- Food and beverage costs, as a percentage of restaurant sales,
decreased 20 basis points to 27.9% as compared to the second
quarter of 2018, primarily driven by an increase in average check
of 0.9%, and slightly offset by a 0.8% increase in total beef
costs.
- Restaurant operating expenses, as a percentage of restaurant
sales, increased 90 basis points to 49.2% as compared to the second
quarter of 2018. The increase in restaurant operating expenses as a
percentage of restaurant sales was primarily due to higher labor
and occupancy costs.
- Marketing and advertising costs, as a percentage of total
revenues, decreased 50 basis points to 3.7% as compared to the
second quarter of 2018. The decrease as a percentage of total
revenues, was primarily driven by the shift of marketing tactics
across the periods.
- General and administrative expenses, as a percentage of total
revenues, decreased 40 basis points to 8.1% as compared to the
second quarter of 2018. The decrease as a percentage of total
revenues, was primarily driven by $0.4 million in acquisition
related expenses included in the second quarter of 2018.
- Income tax expense was $1.9million in the second quarter of
2019 compared to $1.8 million in the second quarter of 2018.
Development Update
As previously reported, the Company has signed leases for new
Company-owned restaurants in Columbus, OH, Washington DC,
Somerville, MA and Oklahoma City, OK. The Columbus, Washington DC
and Somerville restaurants are on track to open in the second half
of 2019, while the Oklahoma City restaurant is expected to open in
2020.
In addition, the Company recently signed two new leases to open
restaurants in Short Hills, NJ, and Worcester, MA which we expect
to open in the second half of 2020.
Our franchise partners are currently expected to open a new
restaurant in St. George, UT, now in the first half of 2020.
Share Repurchase and Debt
During the second quarter, the Company repurchased approximately
251 thousand shares for $6.6 million, at an average price of $26.23
per share. Year to date, the Company has repurchased 276 thousand
shares for $7.1 million, at an average price of $25.84 per share.
The Company has approximately $25.0 million remaining under its
share repurchase authorization.
At the end of the second quarter, the Company had $45.0 million
in debt outstanding under its senior credit facility.
Quarterly Cash Dividend
Subsequent to the end of the quarter, the Company’s Board of
Directors approved the payment of a quarterly cash dividend to
shareholders of $0.13 per share. The dividend will be paid on
September 5, 2019 to shareholders of record as of the close of
business on August 22, 2019 and represents an 18% increase from the
quarterly cash dividend paid in September of 2018.
Financial Outlook
Based on current information and the aforementioned franchise
acquisition, Ruth's Hospitality Group, Inc. is revising its full
year 2019 outlook based on a 52-week year ending December 29, 2019,
as follows:
- Food and beverage costs of 28.0% to 29.5% of restaurant
sales,
- Restaurant operating expenses of 48.0% to 50.0% of restaurant
sales,
- Marketing and advertising costs of 3.4% to 3.6% of total
revenue,
- General and administrative expenses of $35 million to $36
million, inclusive of integration costs related to the acquired
franchise restaurants in Philadelphia and Long Island,
- Effective tax rate of 17% to 19%,
- Capital expenditures of $54 million to $56 million, inclusive
of the $19 million related to the franchise acquisition, resulting
in depreciation expense of $20.0 million to $22.0 million,
- Fully diluted shares outstanding of 29.8 million to 30.3
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 the “Cautionary Note Regarding
Forward-Looking Statements” section in this earnings press release
and 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 2019 financial results today at 8:30 AM Eastern Time.
Hosting the call will be Cheryl Henry, President 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 323-794-2590. A replay will be available one hour after the
call and can be accessed by dialing 412-317-6671; the password is
4017610. The replay will be available until Friday, August 9, 2019.
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 and acquisitions, capital
expenditures, strategy, financial outlook, our effective tax rate
and the impact of healthcare inflation, recent accounting
pronouncements and tax reform 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 income taxes, unclaimed
property, 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; the inability
to successfully integrate franchisee acquisitions into the
Company’s business operations; a material failure, interruption or
security breach of the Company’s information technology network;
the Company’s indemnification obligations in connection with its
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 30,
2018, 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 presentation to reflect events or
circumstances after the date hereof. You should not assume that
material events subsequent to the date of this presentation 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 30,
July 1,
June 30,
July 1,
2019
2018
2019
2018
Revenues: Restaurant sales
$
104,017
$
103,538
$
217,003
$
213,902
Franchise income
4,421
4,457
8,979
8,874
Other operating income
1,805
1,640
4,002
3,384
Total revenues
110,243
109,635
229,984
226,160
Costs and expenses: Food and beverage costs
29,023
29,049
60,871
60,454
Restaurant operating expenses
51,156
50,022
104,759
101,702
Marketing and advertising
4,121
4,640
7,751
8,117
General and administrative costs
8,929
9,274
17,681
18,248
Depreciation and amortization expenses
5,124
4,673
10,092
9,134
Pre-opening costs
244
272
341
412
Total costs and expenses
98,597
97,930
201,495
198,067
Operating income
11,646
11,705
28,489
28,093
Other income (expense): Interest expense, net
(417
)
(403
)
(822
)
(783
)
Other
13
22
15
34
Income from continuing operations before income tax expense
11,242
11,324
27,682
27,344
Income tax expense
1,933
1,763
4,462
4,147
Income from continuing operations
9,309
9,561
23,220
23,197
Income (loss) from discontinued operations,net of income taxes
-
12
-
22
Net income
$
9,309
$
9,573
$
23,220
$
23,219
Basic earnings per common share: Continuing operations
$
0.32
$
0.32
$
0.79
$
0.78
Discontinued operations
-
-
-
-
Basic earnings per share
$
0.32
$
0.32
$
0.79
$
0.78
Diluted earnings per common share: Continuing operations
$
0.31
$
0.32
$
0.78
$
0.76
Discontinued operations
-
-
-
-
Diluted earnings per share
$
0.31
$
0.32
$
0.78
$
0.76
Shares used in computing net income per common share: Basic
29,252,651
29,713,825
29,264,076
29,701,847
Diluted
29,726,102
30,375,306
29,768,702
30,377,194
Dividends declared per common share
$
0.13
$
0.11
$
0.26
$
0.22
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, the impact of acquisition related
costs and the impact of certain discrete income tax items because
these items are not reflective of the ongoing operations of our
business. 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
30, July 1, June 30, July 1,
2019
2018
2019
2018
GAAP Net income
$
9,309
$
9,573
$
23,220
$
23,219
GAAP Income tax expense
1,933
1,763
4,462
4,147
GAAP (Income) loss from discontinued operations
-
(12
)
-
(22
)
GAAP Income from continuing operations before income tax expense
11,242
11,324
27,682
27,344
Adjustments: Franchisee acquisition costs
71
409
110
861
Adjusted net income from continuing operations before income taxes
11,313
11,733
27,792
28,205
Adjusted income tax expense (1)
(1,950
)
(1,863
)
(4,488
)
(4,355
)
Impact of excluding certain discrete income tax items
(122
)
(273
)
(605
)
(631
)
Non-GAAP net income
$
9,241
$
9,597
$
22,699
$
23,219
GAAP diluted earnings per common share
$
0.31
$
0.32
$
0.78
$
0.76
Non-GAAP diluted earnings per common share
$
0.31
$
0.32
$
0.76
$
0.76
Weighted-average number of common shares outstanding -
diluted
29,726,102
30,375,306
29,768,702
30,377,194
(1) Adjusted income tax is calculated by multiplying the
Non-GAAP adjustments by our marginal federal and stateincome tax
rates and adding or subtracting the result to/from our GAAP income
tax expense.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190802005063/en/
Investor Relations Fitzhugh
Taylor (203) 682-8261 ftaylor@icrinc.com
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