Ruby Tuesday, Inc. (NYSE: RT) today reported financial results
for the fiscal fourth quarter ended May 31, 2011.
Results for the fourth quarter of 2011 compared to the fourth
quarter of 2010 include:
- Same-restaurant sales decreased 0.1% at
Company-owned Ruby Tuesday restaurants
- Generated $31.4 million in free cash
flow
- Net income of $13.9 million compared to
prior-year net income of $21.0 million
- Diluted earnings per share of $0.21
compared to diluted earnings per share of $0.33 for the prior
year
- Included in the fourth quarter results
are gains and losses from franchise partnership acquisitions,
higher than prior year impairment costs, and income tax charges
related to state net operating losses which represent ($0.04) per
share. We have included a reconciliation of these items on the
Investor Relations page of the Ruby Tuesday website:
www.rubytuesday.com
Sandy Beall, Founder, Chairman, and CEO, commented on the fiscal
year results, saying, “While we are pleased to report positive
same-restaurant sales of 0.9% for the year, our first positive
same-restaurant sales results in five years, we did experience
sales and profitability pressure in the third and fourth quarters.
The fourth quarter was especially challenging given the aggressive
competitive promotional environment and very heavy advertising
levels. We began the first month of the quarter with negative sales
but showed sequential monthly improvement, including positive
same-restaurant sales in May, resulting in nearly flat sales for
the quarter.”
Beall added, “While the investments we have made this year in
both food and service initiatives will benefit our brand
longer-term, we are disappointed with our financial results for the
year. We believe the competitive pressures that hampered our
results the last two quarters of the year will remain for the near
term. As a result, our efforts in FY12 will be sharply focused on
four primary goals: increasing our same-restaurant sales,
lowering our costs, enhancing our margins, and
maximizing our strong free cash flow. Executing on these
goals is key in getting our sales and earnings back to stronger
levels and building shareholder value.”
Other highlights from our fourth quarter results
include:
- Same-restaurant sales for domestic
franchised restaurants increased by 1.8%
- Total revenue increased 12.6% from the
prior-year period primarily due to the franchise partnership
acquisitions
- Sales at domestic and international
franchise Ruby Tuesday restaurants (which is the basis for
determining royalty fees included in franchise revenue on the
Company’s statement of operations) totaled $47.6 million and $93.7
million for the fourth quarter of fiscal 2011 and 2010,
respectively, with the decline primarily driven by the franchise
partnership acquisitions
- Acquired remaining two franchise
partnership businesses, representing a total of 13 restaurants
- The Company did not open any new
restaurants and closed seven restaurants (two of which experienced
significant tornado and hail damage)
- Domestic and international franchisees
opened one new Ruby Tuesday restaurant and closed five Ruby Tuesday
restaurants
- Total capital expenditures were $8.4
million
- Book debt to EBITDA ratio of 2.66,
which excludes the pro forma EBITDA impact from the franchise
partnership acquisitions, represents an increase over the
prior-year ratio of 2.1, due to the assumption of $147.0 million in
debt from the franchise partnership acquisitions and payment of
$6.7 million in debt guarantees during this fiscal year
Mr. Beall added, “In addition to our FY12 primary goals outlined
earlier, we continue to focus on the following three-year
strategies to further strengthen and grow our business in a
low-risk, high-return manner:
- Enhance Sales and Margins of Our
Core Brand – Our most recent Summer Mixed Grill Favorites which
launched on June 15th and are being promoted through print, cinema,
and select television markets, include a choice of six separate
entrees from $11.99 which we believe will be good sales builders.
New compelling lunch and dinner value offerings such as these,
together with our continued focus on improving the overall guest
experience, will help us increase traffic and sales.
- Increase Shareholder Returns Through
New Concept Conversions – We opened our second Marlin &
Ray’s conversion in Manassas, VA on June 1st and consumer response
to this concept, both in sales volume and sentiment, has been
positive. We also opened a new Wok Hay restaurant in Knoxville on
June 15th in a location whose lease we acquired in the fourth
quarter. In Fiscal 2012, we will continue testing the Marlin &
Ray’s, Truffles Grill, and Wok Hay concepts in order to determine
which concepts could provide the best conversion growth vehicle to
generate solid returns for our shareholders in the future.
- Focus on Low-Risk, Low
Capital-Intensive, High-Return Inline Growth – We continue to
make progress on the development phase with Lime Fresh Mexican
Grill and our growth plans include test rollouts to the Washington,
D.C. area and the core Southeast including Alabama, Georgia, and
Tennessee, beginning in Fiscal 2012. Our site selection process is
focused on securing good test locations, and we now have six
locations on our development schedule with other locations in
negotiation.
- Allocate Capital to Enhance
Shareholder Value – Our balance sheet is in good shape, and the
incremental revolving credit facility capacity of $60 million we
raised subsequent to year end will provide us with added
flexibility going forward. Our capital expenditure needs over the
next several years are very manageable and this should position us
to return excess cash to our shareholders through an opportunistic
share repurchase program or to utilize the excess cash to repay
some of our higher interest rate third-party debt.”
Fiscal Year 2011 Highlights
- Total revenue increased 5.9% from the
prior year, our first annual revenue growth in four years,
primarily driven by increased same-restaurant sales and the
franchise partnership acquisitions, partially offset by 12
restaurant closures (excluding conversions)
- Same-restaurant sales increased 0.9% at
both Company-owned and domestic franchise Ruby Tuesday
restaurants
- Net income of $46.9 million compared to
prior-year net income of $45.3 million
- Diluted earnings per share of $0.72
compared to diluted earnings per share of $0.73 for the prior
year
- The Company did not open any new
restaurants, permanently closed 12 restaurants (two of which
experienced significant tornado and hail damage), and converted
three Ruby Tuesday restaurants into other high quality casual
dining concepts
- Domestic and international franchisees
opened seven new Ruby Tuesday restaurants and closed 25
restaurants, 11 of which were underperforming franchise partnership
restaurants not sold to the Company
- Sales at domestic and international
franchise Ruby Tuesday restaurants (which is the basis for
determining royalty fees included in franchise revenue on the
Company’s statement of operations) totaled $289.4 million and
$368.9 million for fiscal 2011 and 2010, respectively, with the
decline primarily driven by the franchise partnership
acquisitions
- Total capital expenditures were $26.7
million
- Generated $89.6 million in free cash
flow
- Debt increased by $55.0 million on a
net basis, with debt reduction and fair value amortization of $98.7
million offset primarily by the assumption of $147.0 million in
debt from the franchise partnership acquisitions and payment of
$6.7 million in debt guarantees during the year
Fiscal Year 2012 Guidance
- Same-Restaurant Sales – We
estimate same-restaurant sales for Company-owned restaurants will
be in the range of flat to 1.0% for the year, with the first
two quarters providing more headwinds due to the current
competitive environment coupled with more difficult comps to lap
from the prior year. Our first quarter same-restaurant sales are
estimated to be in the range of down 1.5%-2.5%.
- Company-Owned and Licensed
Restaurant Development – We expect to close four to six
Company-owned restaurants (excluding conversions), convert six to
eight Company-owned restaurants to other high quality casual dining
concepts, open one new restaurant, and open seven to nine Lime
Fresh Mexican restaurants
- Franchise Restaurant Development
– We estimate our franchisees will open six to eight restaurants,
up to six of which will be international
- Restaurant Operating Margins –
Margins are anticipated to improve slightly primarily due to
fixed cost leverage from the 53rd week in addition to cost savings
initiatives. We have some food cost exposure in the back half of
the year but plan on partially offsetting this exposure with
freight savings.
- Depreciation – Estimated to be
in the $66-$68 million range
- Selling, General, and Administrative
Expenses – Estimated to be up approximately 15%-20% from a year
earlier, primarily reflecting a shift in spending of approximately
$10 million from promotional initiatives to advertising expenses
and the loss of fee income from acquired franchise partnerships
which historically offset selling, general, and administrative
expenses. Excluding these expense shifts, selling, general, and
administrative expenses are expected to be flat on a year-over-year
basis, reflecting our focused efforts on cost containment.
- Other Expenses – Interest
expense is estimated to be $15-$17 million and the effective tax
rate is estimated to be 20%-24%, which is double our FY11 effective
tax rate due to higher levels of pre-tax income
- Diluted Earnings Per Share for
the year are estimated to be in the $0.75-$0.85 range. Our
first quarter earnings per share are estimated to be in the $0.03 -
$0.06 range due to lower same-restaurant sales and year-over-year
increases in bread costs, advertising expense, and interest
expense. Fully-diluted weighted average shares outstanding are
estimated to be approximately 63-64 million for the year.
- Capital Expenditures for the
year are estimated to be $43-$47 million
- Free Cash Flow for the year is
estimated to be $90-$100 million
In closing, Mr. Beall said, “We have made good progress over the
last year in terms of food quality and dining experience
enhancements, two key components of building longer-term loyalty
among our guests. While we anticipate Fiscal 2012 will be
characterized by a continued slow economic recovery, we believe our
strong balance sheet and focus on increasing our same-restaurant
sales, lowering our costs, enhancing our margins,
and maximizing our strong free cash flow will enable us to
grow our sales and earnings, and create long-term value for our
shareholders.”
A FRESH NEW RUBY TUESDAY
Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby
Tuesday brand restaurants in 46 states, the District of
Columbia, 14 foreign countries, and Guam. As of May 31, 2011,
the Company owned and operated 750 Ruby Tuesday restaurants, while
domestic and international franchisees (including Hawaii and
Guam) operated 43 and 53 Ruby Tuesday restaurants,
respectively. Ruby Tuesday, Inc. is traded on the New York Stock
Exchange (Symbol: RT).
The Company will host a conference call, which will be a live
web-cast, this afternoon at 5:00 p.m. Eastern Time. The call will
be available live at the following websites:
http://www.rubytuesday.com
http://www.earnings.com
Special Note Regarding Forward-Looking Information
This press release contains various forward-looking statements,
which represent our expectations or beliefs concerning future
events, including one or more of the following: future financial
performance and restaurant growth (both Company-owned and
franchised), future capital expenditures, future borrowings and
repayments of debt, availability of debt financing on terms
attractive to the Company, payment of dividends, stock repurchases,
restaurant acquisitions, and conversions of Company-owned
restaurants to other dining concepts. We caution the reader that a
number of important factors and uncertainties could, individually
or in the aggregate, cause our actual results to differ materially
from those included in the forward-looking statements (such
statements include, but are not limited to, statements relating to
cost savings that we estimate may result from any programs we
implement, our estimates of future capital spending and free cash
flow, and our targets for annual growth in same-restaurant sales
and average annual sales per restaurant), including, without
limitation, the following: general economic conditions; changes in
promotional, couponing and advertising strategies; changes in our
guests’ disposable income; consumer spending trends and habits;
increased competition in the restaurant market; laws and
regulations affecting labor and employee benefit costs, including
further potential increases in state and federally mandated minimum
wages, and healthcare reform; guests’ acceptance of changes in menu
items; guests’ acceptance of our development prototypes, remodeled
restaurants, and conversion strategy; mall-traffic trends; changes
in the availability and cost of capital; weather conditions in the
regions in which Company-owned and franchised restaurants are
operated; costs and availability of food and beverage inventory;
our ability to attract and retain qualified managers, franchisees
and team members; impact of adoption of new accounting standards;
impact of food-borne illnesses resulting from an outbreak at either
Ruby Tuesday or other restaurant concepts; effects of actual or
threatened future terrorist attacks in the United States; and
significant fluctuations in energy prices.
RUBY TUESDAY, INC. Financial Results For
the Fourth Quarter of Fiscal Year 2011 (Amounts in thousands
except per share amounts) (Unaudited) 13 Weeks 13 Weeks
52 Weeks 52 Weeks Ended Ended Ended Ended May 31, Percent June 1,
Percent Percent May 31, Percent June 1, Percent Percent 2011
of Revenue 2010 of Revenue Change 2011
of Revenue 2010 of Revenue Change
Revenue: Restaurant sales and operating revenue $ 351,270
99.5 $ 311,219 99.3 $ 1,258,015 99.4 $ 1,188,043 99.4 Franchise
revenue 1,692 0.5 2,236 0.7
7,147 0.6 6,753 0.6 Total revenue
352,962 100.0
313,455 100.0 12.6
1,265,162 100.0
1,194,796
100.0 5.9 Operating Costs and Expenses: (as a percent of
Restaurant sales and operating revenue) Cost of merchandise 103,243
29.4 88,464 28.4 365,653 29.1 344,462 29.0 Payroll and related
costs 116,060 33.0 100,801 32.4 422,230 33.6 396,877 33.4 Other
restaurant operating costs 70,120 20.0 60,580 19.5 256,632 20.4
240,947 20.3
Depreciation
16,540 4.7 15,300 4.9 62,878 5.0 63,767 5.4 (as a percent of Total
revenue) Selling, general and administrative, net 23,742 6.7 17,432
5.6 85,971 6.8 70,526 5.9 Closures and impairments 3,380 1.0 928
0.3 6,249 0.5 3,776 0.3 Equity in losses/(earnings) of
unconsolidated franchises (75 ) 0.0 (62 ) 0.0
574 0.0 328 0.0 Total operating costs and expenses
333,010 283,443 1,200,187
1,120,683
Earnings before Interest and Taxes
19,952 5.7
30,012 9.6 (33.5 )
64,975 5.1
74,113 6.2 (12.3 ) Interest expense, net 4,220
1.2 2,788 0.9 12,353 1.0 16,355
1.4 Pre-tax Profit 15,732 4.5 27,224 8.7 (42.2 ) 52,622 4.2
57,758 4.8 (8.9 ) Provision for income taxes 1,816
0.5 6,254 2.0 5,744 0.5 12,414
1.0
Net Income $ 13,916 3.9
$ 20,970 6.7 (33.6 )
$ 46,878
3.7
$ 45,344 3.8 3.4
Earnings
Per Share: Basic
$ 0.22 $
0.33 (33.3 )
$ 0.73 $
0.74 (1.4 ) Diluted
$ 0.21 $
0.33 (36.4 )
$ 0.72 $
0.73 (1.4 )
Shares: Basic
64,246
63,342 64,029
61,533 Diluted
65,244
64,198 64,948 61,870
RUBY TUESDAY, INC. Financial Results
For the Fourth Quarter of Fiscal Year 2011 (Amounts
in thousands) (Unaudited)
May 31, June 1, CONDENSED
BALANCE SHEETS 2011 2010 Assets Cash and Short-Term Investments
$9,722 $9,569 Accounts and Notes Receivable 7,531 9,746 Inventories
34,470 28,813 Income Tax Receivable 3,077 Deferred Income Taxes
14,429 13,794 Assets Held for Sale 1,340 3,234 Prepaid Rent and
Other Expenses 12,797 11,154 Total Current Assets 83,366
76,310 Property and Equipment, Net 1,031,151 943,486
Unamortized Goodwill, Net 15,571 Notes Receivable, Net 269 Other
Assets 56,938 43,964 Total Assets $1,187,026 $1,064,029
Liabilities
Current Portion of Long Term Debt,
including Capital Leases
$15,090 $12,776 Income Tax Payable 1,049 Other Current Liabilities
104,234 100,956 Long-Term Debt, including Capital Leases 329,184
276,490 Deferred Income Taxes 42,923 40,010 Deferred Escalating
Minimum Rents 44,291 42,305 Other Deferred Liabilities 59,591
52,343 Total Liabilities 595,313 525,929
Shareholders' Equity 591,713 538,100
Total Liabilities and Shareholders'
Equity
$1,187,026 $1,064,029
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