– Third
Quarter GAAP EPS of $0.16 –
– Declares
$0.13 Per Share Quarterly Dividend –
Ruth’s Hospitality Group, Inc. (the “Company”) (NASDAQ: RUTH)
today reported unaudited financial results for its third quarter
ended September 29, 2019.
Highlights for the third quarter of 2019 were as
follows:
- Total revenues in the third quarter of 2019 increased 4.0% to
$103.0 million compared to $99.0 million in the third quarter of
2018.
- Net income in the third quarter of 2019 increased 25.7% to $4.5
million, or $0.16 per diluted share, compared to net income of $3.6
million, or $0.12 per diluted share, in the third quarter of
2018.
- Net income in the third quarter of 2019
included $0.3 million in acquisition-related expenses associated
with the acquisition of the three restaurants from our Philadelphia
and Long Island franchisee, and a $0.3 million income tax benefit
related to the impact of discrete income tax items. Net income in
the third quarter of 2018 included $0.4 million in
acquisition-related expenses associated with the acquisition of the
six restaurants of our Hawaiian franchisee, as well as a $0.1
million 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 $0.15 in the third quarter of 2019, compared to
$0.13 in the third 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 third quarter of 2019, the Company completed 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.
- The Company returned $17.3 million through dividends and share
repurchases during the third quarter of 2019.
Cheryl Henry, President and Chief Executive Officer of Ruth's
Hospitality Group, Inc., stated, “I’m pleased with the strength of
our third quarter results including a comp sales increase of 0.6%
and pro-forma earnings per share of $0.15. I’m particularly proud
of the commitment to excellence from our team and our franchise
partners, who through their execution delivered these achievements
in spite of weather-related headwinds and a 19% increase in beef
costs during the quarter.”
Henry added, “During the quarter, we continued to strengthen our
development pipeline with new leases for Company-owned restaurants
in Long Beach, CA and another in Suffolk County on Long Island, NY.
In addition to these investments, we announced a new $60 million
share repurchase authorization, which reflects our commitment to
delivering on our total return strategy for our shareholders.”
Review of Third Quarter 2019 Operating Results
Restaurant sales in the third quarter of 2019 increased 4.0% to
$97.2 million compared to $93.5 million in the third quarter of
2018. Average unit weekly sales were $93.4 thousand in the third
quarter of 2019, an increase of 0.5% compared to $92.9 thousand in
the third quarter of 2018.
Company-owned Sales
- Comparable restaurant sales at Company-owned restaurants
increased 0.6% compared to the third quarter of 2018, which
consisted of a 1.7% decrease in traffic, as measured by entrees,
and an average check increase of 2.3%. Comparable restaurant sales
and traffic were negatively impacted by 30 to 40 basis points due
to the effects of Hurricane Dorian, and to a lesser degree Tropical
Storm Barry, which resulted in eleven lost operating days combined
during the third quarter.
- 81 Company-owned Ruth’s Chris Steak House restaurants were open
at the end of the third quarter of 2019, compared to 78 Ruth’s
Chris Steak House restaurants at the end of the third quarter of
2018. Total operating weeks for the third quarter of 2019 increased
to 1,041 from 1,006 in the third quarter of 2018.
Franchise Income
- Franchise income in the third quarter of 2019 was $3.9 million,
a decrease of 2.5% compared to $4.0 million in the third quarter of
2018. The decrease in franchise income was driven primarily by the
recent franchise acquisition, which decreased franchise income by
$125 thousand.
- 73 franchisee-owned restaurants were open at the end of the
third quarter of 2019 compared to 75 at the end of the third
quarter of 2018.
Operating Expenses
- Food and beverage costs, as a percentage of restaurant sales,
increased 140 basis points to 29.6% as compared to the third
quarter of 2018, primarily driven by a 19% increase in total beef
costs.
- Restaurant operating expenses, as a percentage of restaurant
sales, decreased 40 basis points to 52.7% as compared to the third
quarter of 2018, primarily due to lower incentive-based
compensation.
- Marketing and advertising costs, as a percentage of total
revenues, decreased 80 basis points to 3.1% as compared to the
third quarter of 2018. The decrease as a percentage of total
revenues, was primarily driven by the planned shift in marketing
tactics across the periods.
- General and administrative expenses, as a percentage of total
revenues, decreased 80 basis points to 8.1% as compared to the
third quarter of 2018. The decrease as a percentage of total
revenues, was primarily driven by lower performance-based
compensation, cost management initiatives and lower acquisition
deal costs.
- Income tax expense was $0.4 million in the third quarter of
2019 compared to $0.7 million in the third quarter of 2018, a 42%
decrease. The decrease was driven primarily by a larger benefit
from discrete income tax items in the third quarter of 2019.
Development Update
Subsequent to the end of the third quarter, the Company opened a
new restaurant in Columbus, OH and is expected to open an
additional restaurant in Somerville, MA later in the fourth
quarter.
The Company also recently signed leases for two new restaurants;
one in Long Beach, CA, and another restaurant in Suffolk County on
Long Island, NY.
We expect to open restaurants in Washington DC, Short Hills, NJ,
Worcester, MA, Long Island, NY and Long Beach, CA in 2020. For
2021, the Company currently expects to open a new restaurant in
Oklahoma City, OK.
Our franchise partners are currently expected to open a new
restaurant in St. George, UT now expected to open in 2021.
Share Repurchase and Debt
During the third quarter, the Company repurchased approximately
664 thousand shares for $13.5 million, at an average price of
$20.26 per share. Year to date, the Company has repurchased 941
thousand shares for $20.6 million, at an average price of $21.90
per share.
Subsequent to the end of the third quarter, the Company’s Board
of Directors approved a new share repurchase program under which it
authorized the repurchase of up to $60 million of the Company’s
common shares outstanding. The share repurchase authorization is
effective immediately and does not expire. Share repurchases may be
made from time to time in the open market or in negotiated
transactions depending on share price, market conditions and other
factors. The Company had approximately $11.5 million remaining
under its previous share repurchase authorization, which is being
retired.
During the third quarter the Company increased the amount of its
revolving credit facility to $120 million from the previously
authorized $90 million. At the end of the third quarter, the
Company had $83 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
December 5, 2019 to shareholders of record as of the close of
business on November 21, 2019 and represents an 18% increase from
the quarterly cash dividend paid in November 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 28.5% to 29.0% of restaurant
sales,
- Restaurant operating expenses of 48.5% to 49.0% of restaurant
sales,
- Marketing and advertising costs of 3.3% to 3.5% of total
revenue,
- General and administrative expenses of $34.5 million to $35.5
million, inclusive of integration costs related to the acquired
franchise restaurants in Philadelphia and Long Island,
- Pre-opening costs of $2.0 million to $2.2 million,
- Effective tax rate of 17% to 19%,
- Capital expenditures of $54 million to $56 million, which
contributes to depreciation expense of $21.0 million to $22.0
million,
- Fully diluted shares outstanding of 29.4 million to 29.6
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 third 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 201-689-8470. A replay will be available one hour after the
call and can be accessed by dialing 412-317-6671; the password is
13695691. The replay will be available until Friday, November 8,
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 39 Weeks Ended
September 29, September 30, September 29,
September 30,
2019
2018
2019
2018
Revenues: Restaurant sales
$
97,226
$
93,488
$
314,229
$
307,390
Franchise income
3,928
4,030
12,907
12,905
Other operating income
1,855
1,497
5,857
4,880
Total revenues
103,009
99,015
332,993
325,175
Costs and expenses: Food and beverage costs
28,817
26,440
89,688
86,894
Restaurant operating expenses
51,216
49,626
155,974
151,328
Marketing and advertising
3,174
3,813
10,925
11,930
General and administrative costs
8,335
8,809
26,016
27,056
Depreciation and amortization expenses
5,361
4,628
15,453
13,762
Pre-opening costs
535
845
876
1,258
Total costs and expenses
97,438
94,161
298,932
292,228
Operating income
5,571
4,854
34,061
32,947
Other income (expense): Interest expense, net
(638
)
(470
)
(1,460
)
(1,253
)
Other
18
(65
)
33
(31
)
Income from continuing operations before income tax expense
4,951
4,319
32,634
31,663
Income tax expense
423
727
4,886
4,873
Income from continuing operations
4,528
3,592
27,748
26,790
Income from discontinued operations, net of income taxes
-
9
-
30
Net income
$
4,528
$
3,601
$
27,748
$
26,820
Basic earnings per common share: Continuing operations
$
0.16
$
0.12
$
0.95
$
0.90
Discontinued operations
-
-
-
-
Basic earnings per share
$
0.16
$
0.12
$
0.95
$
0.90
Diluted earnings per common share: Continuing operations
$
0.16
$
0.12
$
0.94
$
0.88
Discontinued operations
-
-
-
-
Diluted earnings per share
$
0.16
$
0.12
$
0.94
$
0.88
Shares used in computing net income per common share: Basic
28,951,612
29,720,472
29,159,922
29,708,055
Diluted
29,191,076
30,358,284
29,563,396
30,370,193
Dividends declared per common share
$
0.13
$
0.11
$
0.39
$
0.33
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 39 Weeks Ended September 29,
September 30, September 29, September 30,
2019
2018
2019
2018
GAAP Net income
$
4,528
$
3,601
$
27,748
$
26,820
GAAP Income tax expense
423
727
4,886
4,873
GAAP Income from discontinued operations
-
(9)
-
(30)
GAAP Income from continuing operations before income tax expense
4,951
4,319
32,634
31,663
Adjustments: Franchisee acquisition costs
302
415
412
1,275
Adjusted net income from continuing operations before income taxes
5,253
4,734
33,046
32,938
Adjusted income tax expense (1)
(496)
(829)
(4,985)
(5,185)
Impact of excluding certain discrete income tax items
(280)
(80)
(885)
(711)
Non-GAAP net income
$
4,477
$
3,825
$
27,176
$
27,042
GAAP diluted earnings per common share
$
0.16
$
0.12
$
0.94
$
0.88
Non-GAAP diluted earnings per common share
$
0.15
$
0.13
$
0.92
$
0.89
Weighted-average number of common shares outstanding -
diluted
29,191,076
30,358,284
29,563,396
30,370,193
(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: https://www.businesswire.com/news/home/20191101005084/en/
Investor Relations Fitzhugh
Taylor (203) 682-8261 ftaylor@icrinc.com
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