– Fourth Quarter GAAP EPS of $0.49 –
– Full Year GAAP EPS of $1.38 –
– Company Announces 18% Increase in Quarterly
Dividend to $0.13 per Share –
Ruth’s Hospitality Group, Inc. (the “Company”) (NASDAQ:RUTH)
today reported unaudited financial results for its 13-week fourth
quarter and 52-week full year ended December 30, 2018.
Highlights for the 13-week fourth quarter of 2018 compared to
the 14-week fourth quarter of 2017 were as follows:
- Restaurant sales in the 13-week fourth
quarter of 2018 increased 2.3% to $120.0 million compared to $117.4
million in the 14-week fourth quarter of 2017. Average unit weekly
sales were $117.8 thousand in the fourth quarter of 2018, an
increase of 0.4% compared to $117.4 thousand in the fourth quarter
of 2017.
- Net income in the fourth quarter of
2018 was $14.9 million, or $0.49 per diluted share, compared to net
income of $9.6 million, or $0.31 per diluted share, in the fourth
quarter of 2017.
- Net income in the fourth quarter of
2018 included $0.3 million in acquisition-related expenses
associated with the acquisition of the six restaurants from our
Hawaiian franchisee. Net income in the fourth quarter of 2017
included a $3.9 million non-cash charge related to the impairment
of assets at one restaurant location, $0.6 million in
acquisition-related expenses associated with the acquisition of our
Hawaiian franchisee, and a discrete income tax charge of $1.2
million primarily related to the reduction of deferred tax assets
from the Tax Cuts and Jobs Act.
- Excluding these adjustments, non-GAAP
diluted earnings per common share were $0.50 in the 13-week fourth
quarter of 2018, compared to $0.44 in the 14-week fourth quarter of
2017. 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 fourth quarter of 2018, the
Company returned $28.9 million through its dividend program, debt
repayment and the repurchase of 464 thousand shares of common stock
for $12.6 million.
- One Company-owned Ruth’s Chris Steak
House restaurant, one new franchised restaurant and one restaurant
operating under a contractual agreement opened in the fourth
quarter.
Cheryl Henry, President and Chief Executive Officer of Ruth's
Hospitality Group, Inc., stated, “I’m proud of all that our team
accomplished in both the fourth quarter and the full year. For the
full year, we grew revenue by 9%, expanded restaurant level margins
to the highest levels in over 10 years, successfully integrated our
six Hawaiian franchise locations, and opened 3 new Company-operated
and 2 new franchise restaurants.”
Henry added, “In addition, 2018 marked the 9th consecutive year
of comparable restaurant sales and earnings growth. This success
has been driven by our intense focus on operational excellence, and
I’d like to thank all of our team members and franchisees for their
incredible work each and every day.”
Review of Fourth Quarter 2018 Operating Results
Total revenues in the 13-week fourth quarter of 2018 were $127.2
million, an increase of 2.5% compared to $124.1 million in the
14-week fourth quarter of 2017.
Company-owned Sales
- Comparable restaurant sales at
Company-owned restaurants decreased 0.1% compared to the fourth
quarter of 2017, which consisted of a traffic decrease of 2.5%, as
measured by entrees, and an average check increase of 2.5%.
Comparable restaurant sales and traffic were negatively affected by
approximately 150 basis points due to the shift of the New Year’s
Eve holiday into 2019.
- 78 Company-owned Ruth’s Chris Steak
House restaurants were open at the end of the fourth quarter of
2018, compared to 77 Ruth’s Chris Steak House restaurants at the
end of the fourth quarter of 2017. Total operating weeks for the
fourth quarter of 2018 increased to 1,019 from 1,000 in the fourth
quarter of 2017.
Franchise Income
- Franchise income in the fourth quarter
of 2018 was $5.0 million, an increase of 7.1% compared to $4.7
million in the fourth quarter of 2017. The increase in franchise
income was driven by a 1.1% increase in comparable franchise
restaurant sales, the impact of the changes related to the
implementation of the revenue recognition standard of $0.3 million,
partially offset by the loss of $0.3 million of franchise income
related to the acquisition of our Hawaiian franchise
restaurants.
- 75 franchisee-owned restaurants were
open at the end of the fourth quarter of 2018 compared to 76 at the
end of the fourth quarter of 2017.
Operating Expenses
- Food and beverage costs, as a
percentage of restaurant sales, decreased 160 basis points to
27.7%, primarily driven by a 6.4% decrease in total beef costs, as
well as an increase in average check of 2.5%.
- Restaurant operating expenses, as a
percentage of restaurant sales, increased 110 basis points to
45.8%. The increase in restaurant operating expenses as a
percentage of restaurant sales was primarily due to the loss of
sales leverage from the extra week in the fourth quarter of 2017 as
well an increase in occupancy related expenses.
- Marketing and advertising costs, as a
percentage of total revenues, increased 80 basis points to 3.7%.
The increase in marketing and advertising costs was primarily due
to the partial re-investment of tax savings back into the
business.
- General and administrative expenses, as
a percentage of total revenues, increased 40 basis points to 8.0%.
The increase as a percentage of total revenues was primarily driven
by the loss of sales leverage from the extra week in the fourth
quarter of 2017 as well as an increase in performance-based
compensation and costs related to the integration of the Hawaiian
restaurants.
- Pre-opening costs were $0.6 million
compared to $0.5 million in the fourth quarter of 2017.
- Income tax expense declined from $6.0
million in the fourth quarter of 2017 to $3.4 million largely as a
result of the enactment of the Tax Cuts and Jobs Act.
Highlights for the 52-week Fiscal Year 2018 Compared to the
53-week Fiscal Year 2017 were as follows:
- Restaurant sales in the 52-week fiscal
year 2018 increased 9.5% to $427.4 million compared to $390.4
million in the 53-week fiscal year 2017. Average unit weekly sales
were $106.1 thousand in 2018, an increase of 1.0% compared to
$105.1 thousand in 2017.
- Net income in 2018 was $41.7 million,
or $1.38 per diluted share, compared to net income of $30.1
million, or $0.97 per diluted share in 2017.
- Income from continuing operations in
2018 was $41.6 million, or $1.37 per diluted share, compared to
income from continuing operations of $30.2 million, or $0.98 per
diluted share, in 2017.
- Net income in 2018 included $1.5
million in acquisition-related expenses associated with the
acquisition of our Hawaiian franchisee and a $0.7 million benefit
related to other discrete income tax items. Net income in 2017
included a $3.9 million non-cash charge related to the impairment
of assets at one restaurant location, $0.6 million in
acquisition-related expenses associated with the acquisition of our
Hawaiian franchisee, and a discrete income tax charge of $1.2
million primarily related to the reduction of deferred tax assets
from the Tax Cuts and Jobs Act.
- Excluding these adjustments, as well as
the results from discontinued operations, non-GAAP diluted earnings
per common share were $1.39 in 2018, compared to $1.10 in 2017. 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 year, the Company returned
$41.1 million through its dividend program, debt repayment and the
repurchase of 689 thousand shares of common stock for $18.5
million.
Review of Fiscal Year 2018 Operating Results
Total revenues in the 52-week fiscal year 2018 were $452.3
million, an increase of 9.0% to compared to $414.8 million in the
53-week year 2017.
Company-owned Sales
- For 2018, Company-owned comparable
restaurant sales increased 1.4% on a comparable 52-week basis,
which consisted of an average check increase of 1.7%, and 0.3%
decrease in traffic counts. Comparable restaurant sales and traffic
were negatively affected by approximately 50 basis points due to
the shift of the New Year’s Eve holiday into 2019.
- Total operating weeks for 2018
increased to 4,027 from 3,715 in 2017. Total operating weeks
exclude discontinued operations.
Franchise Income
- Franchise income in 2018 was up 2.1% to
$17.9 million compared to $17.5 million in 2017. The increase in
franchise income was driven by a 1.0% increase in comparable
restaurant sales, as well as an increase of $1.5 million related to
the new revenue recognition standard, partially offset by the loss
of $1.6 million of franchise income related to the acquisition of
our Hawaiian franchise restaurants.
Operating Expenses
- Food and beverage costs, as a
percentage of restaurant sales, decreased 170 basis points to
28.1%, primarily due to a decrease in total beef costs of 8.4% and
an increase in average check of 1.7%.
- Restaurant operating expenses, as a
percentage of restaurant sales, increased 80 basis points to 48.3%.
The increase in restaurant operating expenses as a percentage of
restaurant sales was primarily due to the partial re-investment of
tax savings back into the business as well an increase in occupancy
related expenses.
- Marketing and advertising costs, as a
percentage of total revenues, increased 60 basis points to 3.7%.
The increase in marketing and advertising costs was primarily due
to the partial re-investment of tax savings back into the business,
as well as the impact of the changes related to the implementation
of the new revenue recognition standard.
- General and administrative expenses, as
a percentage of total revenues, increased 35 basis points to 8.2%.
The increase, as a percentage of total revenues, was primarily
driven by increased performance-based compensation of $3.5 million
and $0.9 million of additional costs related to the integration of
the Hawaiian restaurants.
- Pre-opening costs were $1.9 million in
2018, compared to $2.0 million for full year 2017.
Development Update
The Company opened two new restaurants in the fourth quarter,
one in Paramus, NJ and one in Reno, NV that operates under a
management agreement.
The Company has signed a lease for a new Company-owned
restaurant location in Somerville, MA which will open in late 2019.
With that, there are now four leases signed for new Company-owned
restaurants; one in Columbus, OH, one in Washington DC, one in
Somerville, MA and one in Oklahoma City, OK. The Columbus,
Washington DC and Somerville restaurants are expected to open in
the second half of 2019, while Oklahoma City is expected to open in
2020.
Franchise partners opened a new restaurant in Markham, Ontario
in the fourth quarter. For 2019, our franchise partners are
currently scheduled to open two new restaurants. The first is
expected to open in Chongqing, China in the first half of 2019 and
another is expected to open in St. George, UT during the second
half of the year.
Lastly, the Company closed one restaurant in Washington DC late
in the fourth quarter of 2018 which was at the end of its lease
term.
Share Repurchase and Debt
During the fourth quarter, the Company repurchased approximately
464 thousand shares for $12.6 million, at a $27.12 average
price.
For the full year, the Company repurchased approximately 689
thousand shares for $18.5 million, at an average price of $26.91.
The Company ended the year with approximately $32.1 million
remaining under its share repurchase authorization. Since the
beginning of 2014, the Company has repurchased an aggregate of 7.4
million shares for approximately $126.7 million under the current
and previous share repurchase programs.
At the end of 2018, the Company had $41.0 million in debt
outstanding under its senior credit facility, with an additional
$44.8 million of availability.
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 March
21, 2019 to shareholders of record as of the close of business on
March 7, 2019, and represents a 18% increase from the quarterly
cash dividend paid in March of 2018.
Financial Outlook
Based on current information, Ruth's Hospitality Group, Inc. is
providing 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
30.0% 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
- Effective tax rate of 17% to 19%,
excluding discrete income tax items
- Capital expenditures of $30 million to
$32 million resulting in depreciation expense of $19.5 million to
$21.5 million.
- Fully diluted shares outstanding of
30.0 million to 30.5 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 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 fourth
quarter 2018 and full year 2018 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 323-794-2588. A replay will be available one hour after the
call and can be accessed by dialing 412-317-6671; the password is
3782165. The replay will be available until Friday, March 1, 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, 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; 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 31, 2017, 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 WeeksEnded
14 WeeksEnded
52 WeeksEnded
53 WeeksEnded
December 30, December 31, December 30,
December 31, 2018 2017
2018 2017
Revenues: Restaurant sales $ 120,043 $ 117,392 $ 427,433 $ 390,434
Franchise income 5,014 4,680 17,919 17,545 Other operating income
2,102 2,031 6,982
6,844 Total revenues 127,159 124,103 452,334 414,823
Costs and expenses: Food and beverage costs 33,219 34,349 120,112
116,361 Restaurant operating expenses 54,930 52,398 206,258 185,444
Marketing and advertising 4,709 3,668 16,639 12,724 General and
administrative costs 10,195 9,433 37,253 32,700 Depreciation and
amortization expenses 4,776 3,906 18,538 14,995 Pre-opening costs
617 539 1,875 2,013 Loss on impairment — 3,904
— 3,904 Total costs and
expenses 108,446 108,197 400,675 368,141 Operating income 18,713
15,906 51,659 46,682 Other income (expense): Interest expense, net
(486 ) (300 ) (1,739 ) (821 ) Other (42 ) 19
(73 ) 53 Income from continuing
operations before income tax expense 18,185 15,625 49,847 45,914
Income tax expense 3,375 6,036
8,247 15,669 Income from continuing
operations 14,810 9,589 41,600 30,245 Income (loss) from
discontinued operations, net of income taxes 50
(8 ) 80 (108 ) Net income $
14,860 $ 9,581 $ 41,680 $ 30,137
Basic earnings per common share: Continuing operations $ 0.50 $
0.32 $ 1.40 $ 1.00 Discontinued operations — —
0.01 (0.01 ) Basic earnings per
share $ 0.50 $ 0.32 $ 1.41 $ 0.99
Diluted earnings per common share: Continuing operations $
0.49 $ 0.31 $ 1.37 $ 0.98 Discontinued operations —
— 0.01 (0.01 ) Diluted
earnings per share $ 0.49 $ 0.31 $ 1.38
$ 0.97 Shares used in computing net income per common share:
Basic 29,513,678 29,947,096 29,659,461 30,346,999 Diluted
30,071,992 30,571,801 30,273,841 30,916,364 Dividends declared per
common share $ 0.11 $ 0.09 $ 0.44 $ 0.36
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 loss on impairment, 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 WeeksEnded
14 WeeksEnded
52 WeeksEnded
53 WeeksEnded
December 30, December 31, December 30,
December 31, 2018 2017
2018 2017 GAAP
Net income $ 14,860 $ 9,581 $ 41,680 $ 30,137 GAAP Income tax
expense 3,375 6,036 8,247 15,669 GAAP (Income) loss from
discontinued operations (50 ) 8 (80 )
108 GAAP Income from continuing operations before
income tax expense 18,185 15,625 49,847 45,914 Adjustments: Loss on
impairment — 3,904 — 3,904 Hawaii acquisition costs 250
619 1,525 619
Adjusted net income from continuing operations before income taxes
18,435 20,148 51,372 50,437 Adjusted income tax expense (1) (3,436
) (7,755 ) (8,621 ) (17,388 ) Impact of excluding certain discrete
income tax items — 1,160 (711 )
913
Non-GAAP net income $ 14,999
$ 13,553 $ 42,040
$ 33,962 GAAP
diluted earnings per common share $ 0.49
$ 0.31 $ 1.38 $
0.97 Non-GAAP diluted
earnings per common share $ 0.50 $
0.44 $ 1.39 $ 1.10
Weighted-average number of common shares outstanding
- diluted 30,071,992 30,571,801 30,273,841 30,916,364 (1)
Adjusted income tax expense 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: https://www.businesswire.com/news/home/20190222005039/en/
Investor RelationsFitzhugh
Taylor (203) 682-8261ftaylor@icrinc.com
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