– First Quarter GAAP EPS of $0.47 –
– Announces Acquisition of Three Franchised
Restaurants and Territory Development Rights –
– Declares $0.13 Per Share Quarterly Dividend
–
Ruth’s Hospitality Group, Inc. (the “Company”) (NASDAQ:RUTH)
today reported unaudited financial results for its first quarter
ended March 31, 2019.
Highlights for the first quarter of 2019 were as
follows:
- Restaurant sales in the first quarter
of 2019 increased 2.4% to $113.0 million compared to $110.4 million
in the first quarter of 2018. Average unit weekly sales were $111.4
thousand in the first quarter of 2019, an increase of 1.1% compared
to $110.3 thousand in the first quarter of 2018.
- Net income in the first quarter of 2019
was $13.9 million, or $0.47 per diluted share, compared to net
income of $13.6 million, or $0.45 per diluted share, in the first
quarter of 2018.
- Net income in the first quarter of 2019
included $39 thousand in acquisition-related expenses associated
with the acquisition of the three restaurants from our Philadelphia
and Long Island franchisee, and a $0.5 million income tax benefit
related to the impact of discrete income tax items. Net income in
the first quarter of 2018 included $0.5 million in
acquisition-related expenses associated with the acquisition of our
Hawaiian franchisee, and a $0.4 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 $0.45 in the first quarter of 2019, compared to
$0.45 in the first 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 first quarter of 2019, the
Company returned $6.5 million through dividends, share repurchases
and debt repayments.
- One new franchised Ruth’s Chris Steak
House restaurant opened in the first quarter in China.
Cheryl Henry, President and Chief Executive Officer of Ruth's
Hospitality Group, Inc., stated, “I’m pleased with our first
quarter results, which included comparable restaurant sales growth,
consistent margins year-over-year, and GAAP EPS of $0.47 despite
weather challenges.”
Henry added, “I’m excited to announce the acquisition of three
franchised restaurants and development territory from longtime
franchise partner Marsha Brown. This acquisition includes two
restaurants in the Philadelphia, PA area and one on Long Island,
NY. Additionally, we purchased the development rights to these
areas which will contribute to our long-term growth strategy by
unlocking valuable territory. I am thrilled to welcome these
restaurants and our new team members to the Ruth’s Chris corporate
family.”
Review of First Quarter 2019 Operating Results
Total revenues in the first quarter of 2019 were $119.7 million,
an increase of 2.8% compared to $116.5 million in the first quarter
of 2018.
Company-owned Sales
- Comparable restaurant sales at
Company-owned restaurants increased 1.8% compared to the first
quarter of 2018, which consisted of flat traffic, as measured by
entrees, and an average check increase of 1.8%. Comparable
restaurant sales and traffic were positively affected by
approximately 200 basis points due to the shift of the New Year’s
Eve holiday into the first quarter of 2019 from the fourth quarter
of 2017, and negatively impacted by approximately 90 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 first quarter of
2019, compared to 77 Ruth’s Chris Steak House restaurants at the
end of the first quarter of 2018. Total operating weeks for the
first quarter of 2019 increased to 1,014 from 1,001 in the first
quarter of 2018.
Franchise Income
- Franchise income in the first quarter
of 2019 was $4.6 million, an increase of 3.2% compared to $4.4
million in the first quarter of 2018. The increase in franchise
income was driven primarily by a 3.1% increase in comparable
franchise restaurant sales.
- 76 franchisee-owned restaurants were
open at the end of the first quarter of 2019 compared to 74 at the
end of the first quarter of 2018.
Operating Expenses
- Food and beverage costs, as a
percentage of restaurant sales, decreased 30 basis points to 28.2%
as compared to the first quarter of 2018, primarily driven by a
3.7% decrease in total beef costs, as well as an increase in
average check of 1.8%.
- Restaurant operating expenses, as a
percentage of restaurant sales, increased 60 basis points to 47.4%
as compared to the first quarter of 2018. The increase in
restaurant operating expenses as a percentage of restaurant sales
was primarily due to higher labor costs.
- Marketing and advertising costs, as a
percentage of total revenues, remained steady at 3.0% as compared
to the first quarter of 2018.
- General and administrative expenses, as
a percentage of total revenues, decreased 40 basis points to 7.3%
as compared to the first quarter of 2018. The decrease as a
percentage of total revenues, was primarily driven by $0.5 million
in acquisition related expenses included in the first quarter of
2018.
- Income tax expense was $2.5 million in
the first quarter of 2019 compared to $2.4 million in the first
quarter of 2018.
Development Update
The Company currently has four signed leases 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 the Oklahoma City restaurant
is expected to open in 2020.
Franchise partners opened a new restaurant in Chongqing, China
in the first quarter. 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 first quarter, the Company repurchased approximately
26 thousand shares for $0.6 million, at a $22.03 average price per
share. The Company has approximately $31.5 million remaining under
its share repurchase authorization.
The Company repaid $2 million in debt under its senior credit
facility during the quarter. At the end of the first quarter, the
Company had $39.0 million in debt outstanding under its senior
credit facility, with an additional $46.8 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 June
6, 2019 to shareholders of record as of the close of business on
May 23, 2019 and represents an 18% increase from the quarterly cash
dividend paid in June of 2018.
Franchisee Acquisition
On May 1, 2019, the Company entered into an asset purchase
agreement to acquire the two franchised Ruth’s Chris Steak House
restaurants in the Philadelphia area, one restaurant in Garden
City, NY as well as development rights for these territories for
approximately $19 million in cash. The purchase price for the
restaurants is subject to adjustments for certain deposits,
credits, inventory and prepaid amounts. The Company expects the
transaction to close in the third quarter.
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
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, exclusive of integration costs related
to the franchise acquisition
- Effective tax rate of 17% to 19%,
excluding discrete income tax items
- 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
29.9 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 first 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 323-794-2423. A replay will be available one hour after the
call and can be accessed by dialing 412-317-6671; the password is
3508625. The replay will be available until Friday, May 10, 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; 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 March 31, April 1, 2019 2018
Revenues: Restaurant sales $ 112,986 $ 110,364 Franchise
income 4,558 4,417 Other operating income 2,197 1,745 Total
revenues 119,741 116,526 Costs and expenses: Food and beverage
costs 31,848 31,405 Restaurant operating expenses 53,603 51,679
Marketing and advertising 3,629 3,477 General and administrative
costs 8,751 8,976 Depreciation and amortization expenses 4,969
4,461 Pre-opening costs 98 140 Total costs and expenses 102,898
100,138 Operating income 16,843 16,388 Other income (expense):
Interest expense, net (405) (380) Other 2 12 Income from continuing
operations before income tax expense 16,440 16,020 Income tax
expense 2,529 2,384 Income from continuing operations 13,911 13,636
Income (loss) from discontinued operations, net of income taxes -
10 Net income $ 13,911 $ 13,646 Basic earnings per common share:
Continuing operations $ 0.48 $ 0.46 Discontinued operations - -
Basic earnings per share $ 0.48 $ 0.46 Diluted earnings per common
share: Continuing operations $ 0.47 $ 0.45 Discontinued operations
- - Diluted earnings per share $ 0.47 $ 0.45 Shares used in
computing net income per common share: Basic 29,275,501 29,689,870
Diluted 29,903,511 30,384,180 Dividends declared per common share $
0.13 $ 0.11
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, wemake reference to non-GAAP
diluted earnings per common share. This non-GAAP measurement was
calculated by excluding certain items andresults from discontinued
operations and certain discrete income tax items. We exclude the
impact of the results from discontinuedoperations, the impact of
acquisition related costs and the impact of certain discrete income
tax items because these items are not reflectiveof the ongoing
operations of our business. This non-GAAP measurement has been
included as supplemental information. We believe that thismeasure
represents a useful internal measure of performance. Accordingly,
where this non-GAAP measure is provided, it is done so
thatinvestors have the same financial data that management uses in
evaluating performance with the belief that it will assist the
investmentcommunity in assessing our underlying performance on a
quarter-over-quarter basis. However, because this measure is not
determined inaccordance 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 othercompanies. This non-GAAP financial
measure is presented as supplemental information and not as an
alternative to diluted earnings per shareas calculated in
accordance with GAAP.
Reconciliation of Non-GAAP Financial
Measure - Unaudited (Amounts in thousands, except share
data) 13 Weeks Ended March
31, April 1, 2019 2018 GAAP Net
income $ 13,911 $ 13,646 GAAP Income tax expense 2,529 2,384
GAAP (Income) loss from discontinued operations 0 (10) GAAP Income
from continuing operations before income tax expense 16,440 16,020
Adjustments: Franchisee acquisition costs 39 452 Adjusted net
income from continuing operations before income taxes 16,479 16,472
Adjusted income tax expense (1) (2,538) (2,492) Impact of excluding
certain discrete income tax items (483) (358)
Non-GAAP net
income $ 13,458 $ 13,622 GAAP
diluted earnings per common share $ 0.47 $ 0.45
Non-GAAP diluted earnings per common share
$ 0.45 $ 0.45 Weighted-average number of
common shares outstanding - diluted 29,903,511 30,384,180
(1) Adjusted income tax is calculated by
multiplying the Non-GAAP adjustments by our marginal federal and
state income tax rates and addingor subtracting the result to/from
our GAAP income tax expense.
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version on businesswire.com: https://www.businesswire.com/news/home/20190503005023/en/
Investor RelationsFitzhugh
Taylor (203) 682-8261ftaylor@icrinc.com
Ruths Hospitality (NASDAQ:RUTH)
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