Ruth’s Hospitality Group, Inc. (the “Company”) (NASDAQ: RUTH)
today provided a business update on the impact of the COVID-19
pandemic and reported unaudited financial results for its third
quarter ended September 27, 2020.
Business and Liquidity Update:
- By the end of the third quarter, the Company was able to
re-open 94% (72 of 77) of its Company-owned and managed
restaurants, which included 71 restaurants offering limited
capacity dining service and one restaurant offering to-go and
delivery service only.
- 99% (71 of 72) of the Company’s franchisee-owned restaurants
were open with capacity restricted dining rooms as of the end of
the third quarter.
- Third quarter comparable restaurant sales at Company-owned
restaurants decreased 36.7% compared to the third quarter of 2019.
As a result of the increased number of open restaurants, sales
trends improved throughout the third quarter. Year over year
monthly comparable sales at Company-owned restaurants improved to
down 28% in September from down 38% in August and down 43% in
July.
- Third quarter comparable sales for Company-owned and managed
restaurants with open dining rooms decreased 21.6% compared to the
third quarter of 2019.
- During August and September 2020, the Company’s cash balance
increased by a total of $8.8 million primarily due to improved
sales and operating margins. As of September 27, 2020, the
Company’s cash balance was approximately $103.1 million, with
$135.2 million of debt outstanding under its senior credit facility
and outstanding letters of credit of $4.8 million.
- Subsequent to the end of the third quarter, the Company repaid
$20.2 million in debt, and secured a term extension to February
2023 on its senior credit facility.
- During the quarter, the Company permanently closed four
Company-owned restaurants, which brings the total number of
Company-owned locations closed during the year to nine.
Highlights for the third quarter of 2020 were as
follows:
- Total revenue in the third quarter of 2020 was $63.4 million,
compared to $103.0 million in the third quarter of 2019.
- Net loss in the third quarter of 2020 was $5.3 million, or
($0.15) per diluted share, compared to net income of $4.5 million,
or $0.16 per diluted share, in the third quarter of 2019.
- Net loss in the third quarter of 2020 included $1.2 million in
severance costs and accelerated stock expense; $0.3 million in
losses related to lease modifications; a $3.3 million impairment
loss related to restaurant closures, long-lived assets and
inventory; and a $0.2 million income tax expense related to the
impact of discrete income tax items. 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.
- Excluding these items, non-GAAP diluted loss per common share
was ($0.04) in the third quarter of 2020, compared to a non-GAAP
diluted earnings per common share of $0.15 in the third quarter of
2019. 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.
Cheryl Henry, President and Chief Executive Officer of Ruth's
Hospitality Group, Inc., stated, “Our operations team has worked
tirelessly to adapt to an ever changing regulatory environment and
I’m thrilled with the continued sales trend improvement since the
end of the second quarter that was the driver of our positive cash
flow during the quarter. In addition to the sales improvement, we
were also able to produce higher restaurant-level margin on lower
sales compared to last year once our dining rooms have been
reopened with capacity restrictions. As we look forward to the end
of the year, we are cautiously optimistic about the health of our
business and feel prepared with proven business models to operate
in a variety of regulatory scenarios. All of these accomplishments
would not have been possible without the tireless efforts from all
of our Ruth’s Chris team members and our franchise partners.”
Review of third quarter 2020 operating results
Restaurant sales in the third quarter of 2020 were $58.6 million
compared to $97.2 million in the third quarter of 2019. Average
unit weekly sales for restaurants with open dining rooms were $74.5
thousand in the third quarter of 2020, compared to $98.7 thousand
in the third quarter of 2019.
Company-owned Sales
- Comparable restaurant sales at Company-owned restaurants
decreased 36.7% compared to the third quarter of 2019, which
consisted of a 29.7% decrease in traffic, as measured by entrees,
and a 9.9% decrease in average check, which was largely due to
lower alcohol sales and our current streamlined menu
offerings.
- At the end of the third quarter of 2020, 72 Company-owned and
managed Ruth’s Chris Steak House restaurants were in operation,
which included 71 restaurants offering limited capacity dining
service and one restaurant offering to-go and delivery service
only. Five Company-owned restaurants remained temporarily closed as
of September 27, 2020. At the end of the third quarter of 2019, 81
Ruth’s Chris Steak House restaurants were in operation.
Franchise Income
- Franchise income in the third quarter of 2020 was $3.5 million
compared to $3.9 million in the third quarter of 2019. The
reduction in franchise income was due to a decrease in sales from
franchise operations.
- At the end of the third quarter, 71 franchisee-owned Ruth’s
Chris Steak House restaurants were in operation offering limited
capacity dining room service. One franchise restaurant remains
temporarily closed and a franchisee has permanently closed one
location in Charleston, SC. At the end of the third quarter of
2019, 73 franchisee-owned restaurants were open.
Operating Expenses
- Food and beverage costs decreased $12.9 million (44.8%) from
the third quarter of 2019. As a percentage of restaurant sales,
food and beverage costs were 27.1% compared to 29.6% in the third
quarter of 2019. Total beef costs decreased 12% from the third
quarter of 2019.
- Restaurant operating expenses decreased $16.3 million (31.9%)
from the third quarter of 2019.
- Marketing and advertising costs decreased $2.3 million (72.0%)
from the third quarter of 2019.
- General and administrative expenses decreased $763 thousand
(9.2%) from the third quarter of 2019.
- Pre-opening costs were $403 thousand in the third quarter of
2020, compared to $535 thousand in the third quarter of 2019. The
pre-opening costs in 2020 were related to rent accruals for
unopened locations where the Company has taken possession of the
property.
Financial Outlook
As a reminder, due to the ongoing uncertainty around the
duration and severity of the COVID-19 pandemic, the Company
previously withdrew its financial guidance for fiscal year
2020.
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
2020 financial results today at 8:30 AM Eastern Time. Hosting the
call will be Cheryl J. 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
13711704. The replay will be available until Friday, November 6th,
2020. 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 140 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 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 restaurant openings and acquisitions or closures,
capital expenditures, strategy, financial outlook, cash flows, our
effective tax rate and the impact of recent accounting
pronouncements, 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: the
negative impact the COVID-19 pandemic has had and will continue to
have on our business, financial condition and results of
operations; 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;
political conditions, civil unrest or other developments and risks
in the markets where the Company’s restaurants are located; harmful
actions taken by the Company’s franchisees; the inability to
successfully integrate franchisee acquisitions into the Company’s
business operations; economic, regulatory and other limitations on
the Company’s ability to pursue new restaurant openings and other
organic growth opportunities; 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; gains or losses on
lease modifications; the impact of litigation; the restrictions
imposed by the Company’s credit agreement; changes in, or the
suspension or discontinuation of, the Company’s quarterly cash
dividend payments or share repurchase program; and the inability to
secure additional financing on terms acceptable to the Company. 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 29,
2019, “Risk Factors” in the Company’s Quarterly Report on Form 10-Q
for the quarter ended June 28, 2020, and the Company’s other
filings with the Securities and Exchange Commission (“SEC”). Such
filings are 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 Operations - Preliminary and
Unaudited (Amounts in thousands, except share and per share
data)
13 Weeks Ended
39 Weeks Ended
September 27,
September 29,
September 27,
September 29,
2020
2019
2020
2019
Revenues: Restaurant sales
$
58,594
$
97,226
$
188,611
$
314,229
Franchise income
3,511
3,928
8,094
12,907
Other operating income
1,318
1,855
3,671
5,857
Total revenues
63,423
103,009
200,376
332,993
Costs and expenses: Food and beverage costs
15,908
28,817
54,563
89,688
Restaurant operating expenses
34,868
51,216
117,224
155,974
Marketing and advertising
889
3,174
5,285
10,925
General and administrative costs
7,572
8,335
22,668
26,016
Depreciation and amortization expenses
5,316
5,361
16,660
15,453
Pre-opening costs
403
535
1,185
876
Loss (gain) on lease modifications
310
—
(178
)
—
Loss on impairment
3,272
—
16,253
—
Total costs and expenses
68,538
97,438
233,660
298,932
Operating income (loss)
(5,115
)
5,571
(33,284
)
34,061
Other income (expense): Interest expense, net
(1,422
)
(638
)
(3,341
)
(1,460
)
Other
(48
)
18
(12
)
33
Income (loss) before income taxes
(6,585
)
4,951
(36,637
)
32,634
Income tax expense (benefit)
(1,284
)
423
(9,920
)
4,886
Net income (loss)
$
(5,301
)
$
4,528
$
(26,717
)
$
27,748
Basic earnings (loss) per share
$
(0.15
)
$
0.16
$
(0.87
)
$
0.95
Diluted earnings (loss) per share
$
(0.15
)
$
0.16
$
(0.87
)
$
0.94
Shares used in computing net income per common share: Basic
34,240,318
28,951,612
30,826,304
29,159,922
Diluted
34,240,318
29,191,076
30,826,304
29,563,396
Dividends declared per common share
$
—
$
0.13
$
0.15
$
0.39
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 acquisition costs, accelerated stock
compensation and severance payments, loss (gain) on lease
modifications, loss on impairment and certain discrete income tax
items. We exclude the impact of the acquisition related costs,
accelerated stock compensation and severance payments, loss (gain)
on lease modifications, loss on impairment 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 and per share data)
13 Weeks Ended
39 Weeks Ended
September 27,
September 29,
September 27,
September 29,
2020
2019
2020
2019
GAAP Net income (loss)
$
(5,301
)
$
4,528
$
(26,717
)
$
27,748
GAAP Income tax expense (benefit)
(1,284
)
423
(9,920
)
4,886
GAAP Income (Loss) from continuing operations before income taxes
(6,585
)
4,951
(36,637
)
32,634
Adjustments: Franchisee acquisition costs
—
302
—
412
Accelerated stock compensation and severance payments
1,172
—
1,502
—
Loss (gain) on lease modifications
310
—
(178
)
—
Loss on impairment
3,272
—
16,253
—
Adjusted net income before income taxes
(1,831
)
5,253
(19,060
)
33,046
Adjusted income tax expense (1)
89
(496
)
5,502
(4,985
)
Impact of excluding certain discrete income tax items
217
(280
)
313
(885
)
Non-GAAP net income
$
(1,525
)
$
4,477
$
(13,245
)
$
27,176
GAAP diluted earnings (loss) per common share
$
(0.15
)
$
0.16
$
(0.87
)
$
0.94
Non-GAAP diluted earnings (loss) per common share
$
(0.04
)
$
0.15
$
(0.43
)
$
0.92
Weighted-average number of common shares outstanding -
diluted
34,240,318
29,191,076
30,826,304
29,563,396
(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: https://www.businesswire.com/news/home/20201030005075/en/
Investor Relations Fitzhugh
Taylor (203) 682-8261 ftaylor@icrinc.com
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