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 second
quarter ended June 28, 2020.
COVID-19 Business Update:
- During the second quarter of 2020, the COVID-19 pandemic
continued to impact overall sales and traffic. As previously
reported, Company-operated Ruth’s Chris dining rooms were closed in
all domestic U.S. locations during April, and the Company
transitioned its services to take-out and delivery operations in
69% of its restaurants (56 of 81 locations). By the end of June,
the Company was able to re-open 88% (71 of 81) of its restaurants,
which included opening dining rooms in 59 capacity restricted
locations. The re-opening of the Company’s dining rooms was the
primary contributor to the rapid sales acceleration in June.
- The 24 Company restaurants that operated with open dining rooms
for the full month of June experienced sales at 81% of 2019 levels.
Additionally, all 24 restaurants had positive cash flows, as well
as strong restaurant operating margins consistent with the margin
levels in June 2019 due to operating and labor initiatives that the
Company has implemented.
($ in thousands) April May June
Q2 Comparable Sales for All Restaurants (Open and Closed)
(87%)
(80%)
(54%)
(74%)
Average Weekly Sales per Open Restaurant (All Formats)
$19,200
$30,500
$60,000
$36,300
Average Number of Restaurants with Open Dining Rooms
0
12
44
17
Average Weekly Sales for
Restaurants with Open Dining Rooms
$0
$70,750
$84,000
$81,900
Comparable Sales for Restaurants with Open Dining Rooms
0%
(23%)
(19%)
(19%)
Over the past several weeks, while some states have begun to
re-tighten their dining room restrictions, the Company’s sales
performance has continued to improve. Through July 28th,
month-to-date comparable sales at Company-owned restaurants (open
and closed) are down 47% year over year, with average weekly sales
of $53,700 per open restaurant.
As of July 28th, the Company’s restaurants are operating in
several different modes. Currently, 88% (71 of 81) of Company-owned
and managed restaurants are open and 10 remain closed. Of the 71
Company-owned restaurants that are open, 52 are operating with open
dining rooms that have capacity restrictions, 15 are operating with
outdoor seating only, and four are operating with only take-out and
delivery.
Currently, 93% (68 of 72) of the Company’s franchisee-owned
restaurants are open and four remain closed. Of the 68
franchisee-owned restaurants that are open, 66 have open dining
rooms with capacity restrictions, one restaurant is operating with
outdoor seating only, and one restaurant is operating with only
take-out and delivery.
Cheryl Henry, President and Chief Executive Officer of Ruth's
Hospitality Group, Inc., stated, “While the past several months
have been a test of resiliency, the tireless efforts of our Ruth’s
Chris team have transformed our business. Demonstrated by
significant improvements in our sales trends, I’m pleased to say
that we have been encouraged by the strong consumer demand, despite
capacity restrictions. Our team continues to provide the renowned
service Ruth’s Chris is known for, all while keeping the health and
safety of our guests paramount.”
Henry concluded, “While there is continued uncertainty
surrounding COVID-19, it is clear to me that there is solid
consumer demand for eating in our dining rooms when we are able to
re-open. We believe that our cash position, expense reductions and
operational changes provide the financial resources to withstand
continued market volatility. I’m incredibly grateful for the
privilege of serving with both our Ruth Chris’ team members and
franchise partners.”
Highlights for the second quarter of 2020 were as
follows:
- Total revenue in the second quarter of 2020 was $28.4 million,
compared to $110.2 million in the second quarter of 2019.
- Net loss in the second quarter of 2020 was $17.6 million, or
($0.59) per diluted share, compared to net income of $9.3 million,
or $0.31 per diluted share, in the second quarter of 2019.
- Net loss in the second quarter of 2020
included $330 thousand in one-time severance payments, $488
thousand in gains related to lease modifications, a $4.3 million
impairment loss related to long-lived assets and inventory, and a
$175 thousand income tax expense related to the impact of discrete
income tax items. Net income in the second quarter of 2019 included
$71 thousand in expenses associated with the acquisition of the
three restaurants from the Company’s Philadelphia and Long Island
franchisee, as well as a $122 thousand income tax benefit related
to the impact of discrete income tax items.
- Excluding these items, non-GAAP diluted
loss per common share was ($0.48) in the second quarter of 2020,
compared to a non-GAAP diluted earnings per common share of $0.31
in the second 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.
Due to the fluid nature of the COVID-19 pandemic, the Company
has taken actions to enhance its financial flexibility and increase
available liquidity. Highlights include the following:
- During the second quarter, the Company completed its previously
announced common stock offering, which resulted in approximately
$49.6 million in proceeds, net of underwriting discounts,
commissions and issuance expenses. The Company used $9.8 million of
these proceeds to pay down debt.
- The Company’s cash balance as of June 28, 2020 was
approximately $96.1 million; at the end of the second quarter, the
Company had $135.2 million in debt outstanding under its senior
credit facility.
- As previously announced, the Company has suspended all new
restaurant construction and non-essential capital expenditures,
which is expected to lower 2020 capital expenditures by over $35
million. The Company also has suspended its quarterly cash dividend
and share repurchases, made significant reductions in ongoing
operating expenses, permanently closed five Company-owned
restaurants, and terminated leases at two of the seven locations
that were under construction.
- As a result of these actions, the Company’s average weekly
cash-burn rate during the second quarter was approximately $1.2
million per week, which includes approximately $3.0 million in rent
payments during the quarter.
Review of second quarter 2020 operating results
Restaurant sales in the second quarter of 2020 were $27.0
million compared to $104.0 million in the second quarter of
2019.
Company-owned Sales
- Comparable restaurant sales at Company-owned restaurants
decreased 74.1% compared to the second quarter of 2019, which
consisted of a 68.6% decrease in traffic, as measured by entrees,
and a 17.4% decrease in average check which was largely due to less
alcohol sales on take-out and delivery orders in April.
- At the end of the second quarter, 71 Company-owned Ruth’s Chris
Steak House restaurants were in operation, which included 59
restaurants offering limited capacity dining room service and 12
restaurants offering to-go and delivery service only. This compares
to 78 Ruth’s Chris Steak House restaurants in operation at the end
of the second quarter of 2019.
Franchise Income
- Franchise income in the second quarter of 2020 was $1.0 million
compared to $4.4 million in the second quarter of 2019. The
reduction in franchise income was due to decreased franchise
operations and the forgiveness of franchise royalties as a result
of dining room closures caused by COVID-19.
- At the end of the second quarter, 66 franchisee-owned Ruth’s
Chris Steak House restaurants were in operation including 64
restaurants offering limited capacity dining room service and 2
restaurants offering to-go and delivery service only. Six
franchised restaurants remain temporarily closed and a franchisee
has permanently closed one location in Charleston, SC. 76
franchised restaurants were open at the end of the second quarter
of 2019.
Operating Expenses
- Food and beverage costs decreased $21.0 million (72.3%) from
the second quarter of 2019. As a percentage of restaurant sales,
food and beverage costs were 29.8% as compared to 27.9% in the
second quarter of 2019. Total beef costs increased 5.5% from the
second quarter of 2019.
- Restaurant operating expenses decreased $24.9 million (48.6%)
from the second quarter of 2019.
- Marketing and advertising costs decreased $2.6 million (63.9%)
from the second quarter of 2019.
- General and administrative expenses decreased $1.9 million
(20.9%) from the second quarter of 2019.
- Pre-opening costs were $304 thousand in the second quarter of
2020, compared to $244 thousand in the second 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
Due to the ongoing uncertainty around the duration and severity
of the COVID-19 pandemic, the Company has withdrawn its financial
guidance for fiscal year 2020. As of July 28th, the Company’s cash
balance was $94.0 million. While the Company’s cash burn has
improved as restaurants have re-opened, the Company currently
expects weekly cash burn for the third quarter to be approximately
$1.0 million per week, which excludes out of period rent payments
and closure costs.
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 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
13707106. The replay will be available until Friday, August 7th,
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 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 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, cash burn rate, our
effective tax rate and the impact of healthcare inflation and
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 March 29, 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 26 Weeks Ended
June 28, June 30, June 28, June 30,
2020
2019
2020
2019
Revenues: Restaurant sales
$
26,978
$
104,017
$
130,018
$
217,003
Franchise income
956
4,421
4,582
8,979
Other operating income
483
1,805
2,353
4,002
Total revenues
28,417
110,243
136,953
229,984
Costs and expenses: Food and beverage costs
8,030
29,023
38,657
60,871
Restaurant operating expenses
26,273
51,156
81,827
104,759
Marketing and advertising
1,487
4,121
4,925
7,751
General and administrative costs
7,066
8,929
15,095
17,681
Depreciation and amortization expenses
5,522
5,124
11,345
10,092
Pre-opening costs
304
244
781
341
Gain on lease modifications
(488
)
—
(488
)
—
Loss on impairment
4,283
—
12,980
—
Total costs and expenses
52,477
98,597
165,122
201,495
Operating income (loss)
(24,060
)
11,646
(28,169
)
28,489
Other income (expense): Interest expense, net
(1,291
)
(417
)
(1,919
)
(822
)
Other
3
13
36
15
Income (loss) before income taxes
(25,348
)
11,242
(30,052
)
27,682
Income tax expense (benefit)
(7,750
)
1,933
(8,636
)
4,462
Net income (loss)
$
(17,598
)
$
9,309
$
(21,416
)
$
23,220
Basic earnings (loss) per share
$
(0.59
)
$
0.32
$
(0.74
)
$
0.79
Diluted earnings (loss) per share
$
(0.59
)
$
0.31
$
(0.74
)
$
0.78
Shares used in computing net income per common share: Basic
29,951,332
29,252,651
29,119,296
29,264,076
Diluted
29,951,332
29,726,102
29,119,296
29,768,702
Dividends declared per common share
$
-
$
0.13
$
0.15
$
0.26
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 loss on
impairments, acquisition costs, severance payments, gain on lease
modifications and certain discrete income tax items. We exclude the
impact of loss on impairments, acquisition costs, severance
payments, gain on lease modifications and 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 26
Weeks Ended June 28, June 30, June 28,
June 30,
2020
2019
2020
2019
GAAP Net income (loss)
$
(17,598
)
$
9,309
$
(21,416
)
$
23,220
GAAP Income tax expense (benefit)
(7,750
)
1,933
(8,636
)
4,462
GAAP Income from continuing operations before income taxes
(25,348
)
11,242
(30,052
)
27,682
Adjustments: Franchisee acquisition costs
—
71
—
110
Severance payments
330
—
330
—
Gain on lease modifications
(488
)
—
(488
)
—
Loss on impairment
4,283
—
12,980
—
Adjusted net income before income taxes
(21,223
)
11,313
(17,230
)
27,792
Adjusted income tax expense (1)
6,712
(1,950
)
5,412
(4,488
)
Impact of excluding certain discrete income tax items
175
(122
)
96
(605
)
Non-GAAP net income
$
(14,336
)
$
9,241
$
(11,722
)
$
22,699
GAAP diluted earnings (loss) per common share
$
(0.59
)
$
0.31
$
(0.74
)
$
0.78
Non-GAAP diluted earnings per common share
$
(0.48
)
$
0.31
$
(0.40
)
$
0.76
Weighted-average number of common shares outstanding -
diluted
29,951,332
29,726,102
29,119,296
29,768,702
(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/20200731005096/en/
Investor Relations Fitzhugh
Taylor (203) 682-8261 ftaylor@icrinc.com
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