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 fourth
quarter and fiscal year ended December 27, 2020.
Business and Liquidity Update:
- At the end of the fourth quarter of 2020, 91% (70 of 77) of
company-owned and managed restaurants were open, which included 48
restaurants offering limited capacity dining service, three
restaurants offering outdoor seating only, and 19 restaurants
offering to-go and delivery service only. Beginning in the second
half of November, the Company faced an increasing number of local
COVID-19 pandemic-related governmental restrictions, including all
of the Company’s California-based restaurants being limited to
to-go and delivery service only.
- 93% (67 of 72) of the Company’s franchisee-owned restaurants
were open as of the end of the fourth quarter, which included 60
restaurants offering limited capacity dining service, two
restaurants offering outdoor seating only, and five restaurants
offering to-go and delivery service only.
- Fourth quarter comparable restaurant sales at Company-owned
restaurants decreased 39.7% compared to the fourth quarter of 2019.
While sales trends improved in October with comparable sales down
26.1% at Company-owned restaurants compared to 2019, the renewed
COVID-related restrictions negatively impacted sales trends in
November and December, with comparable sales down 35.2% and 53.9%
compared to 2019, respectively. In 2021, we have seen improved
performance in January and February with Company-owned comparable
sales down 38.9% and 25.6% compared to 2020, respectively,
reflecting restaurants shifting to open or outdoor dining
status.
- Fourth quarter comparable sales for Company-owned restaurants
with open dining rooms decreased 24.4% compared to the fourth
quarter of 2019. In 2021, comparable sales for Company-owned
restaurants with open dining rooms decreased 16.3% through February
compared to 2020.
- As of December 27, 2020, the Company’s cash balance was
approximately $95.4 million, with $115.0 million of debt
outstanding under its senior credit facility and $4.8 million of
outstanding letters of credit.
- During the fourth quarter, the Company repaid $20.2 million in
debt and secured a term extension to February 2023 on its senior
credit facility.
- On January 28, 2021, the Company entered into an amendment to
its existing $120.0 million credit agreement that provided for a
$10.0 million commitment reduction from the existing credit
agreement. The amendment also extended relief from the financial
covenants to maintain a specified quarterly minimum adjusted Fixed
Charge Coverage Ratio and maximum Consolidated Leverage Ratio until
the second fiscal quarter of 2021.
- As of February 26, 2021, the Company’s cash balance was
approximately $112.0 million.
Highlights for the Fourth Quarter 2020
- Total revenue in the fourth quarter of 2020 was $77.4 million,
compared to $135.0 million in the fourth quarter of 2019.
- Net income in the fourth quarter of 2020 was $1.4 million, or
$0.04 per diluted share, compared to net income of $14.5 million,
or $0.50 per diluted share, in the fourth quarter of 2019.
- Net income in the fourth quarter of 2020 included a $2.5
million employee retention payroll tax credit, which reduced
restaurant operating expenses; $322 thousand in severance costs and
accelerated stock expense; $28 thousand in gain related to lease
modifications; a $295 thousand impairment loss related to
restaurant closures, and a $1.1 million income tax expense related
to the impact of discrete income tax items. Net income in the
fourth quarter of 2019 included $124 thousand in
acquisition-related expenses associated with the previously
completed acquisition of the three restaurants from our
Philadelphia and Long Island franchisee and $374 thousand in
closure costs associated with accelerating the closure of a
restaurant in Washington, DC.
- Excluding these items, non-GAAP diluted earnings per common
share was $0.03 in the fourth quarter of 2020, compared to $0.52 in
the fourth 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, “2020 was truly a challenging year
for our Ruth’s Chris team and our franchisees. We managed through
two significant shutdowns during the year, the first in late March,
and the other most recently during our fourth quarter. Despite
these challenges, I’m pleased that our amazing team and franchise
partners displayed resilience and agility in the face of
uncertainty, resulting in strong fourth quarter results.”
Henry added, “COVID has taught us flexibility and innovation,
which includes new operating procedures at the restaurant level as
well as a more flexible labor model, better capacity utilization,
and the adoption of technology not only by us as an organization,
but by our customers. With an iconic, 55-year old brand behind
these efforts we are proud of where we are today and optimistic
about the future.”
Review of Fourth Quarter 2020 Operating Results
Restaurant sales in the fourth quarter of 2020 were $72.2
million compared to $127.1 million in the fourth quarter of 2019.
Average unit weekly sales for restaurants with open dining rooms
were $90.2 thousand in the fourth quarter of 2020, compared to
$118.8 thousand in the fourth quarter of 2019.
Company-owned Sales
- Comparable restaurant sales at Company-owned restaurants
decreased 39.7% compared to the fourth quarter of 2019, which
consisted of a 34.7% decrease in traffic, as measured by entrees,
and a 7.6% decrease in average check.
- At the end of the fourth quarter of 2020, 70 Company-owned and
managed Ruth’s Chris Steak House restaurants were in operation,
which included 48 restaurants offering limited capacity dining
service, three restaurants offering outdoor seating only, and 19
restaurants offering to-go and delivery service only. Seven
Company-owned restaurants remained temporarily closed as of
December 27, 2020. At the end of the fourth quarter of 2019, 86
Company-owned and managed Ruth’s Chris Steak House restaurants were
in operation.
Franchise Income
- Franchise income in the fourth quarter of 2020 was $3.6 million
compared to $5.0 million in the fourth quarter of 2019. The
reduction in franchise income was due to a decrease in sales from
franchise operations.
- At the end of the fourth quarter of 2020, 67 franchisee-owned
Ruth’s Chris Steak House restaurants were open, which included 60
restaurants offering limited capacity dining service, two
restaurants offering outdoor seating only, and five restaurants
offering to-go and delivery service only. Five franchise
restaurants remained temporarily closed as of December 27, 2020. At
the end of the fourth quarter of 2019, 73 franchisee-owned
restaurants were open.
Operating Expenses
- Food and beverage costs, as a percentage of restaurant sales,
decreased 34 basis points to 29.5% compared to the fourth quarter
of 2019. Total beef costs decreased 2.0% compared to the fourth
quarter of 2019.
- Restaurant operating expenses, as a percentage of restaurant
sales, decreased 19 basis points to 46.0% compared to the fourth
quarter of 2019. Restaurant operating expenses in the fourth
quarter of 2020 were reduced by a $2.5 million employee retention
payroll tax credit.
- Marketing and advertising costs decreased $2.9 million (65.1%)
from the fourth quarter of 2019.
- General and administrative expenses increased $2.0 million to
$10.6 million compared to the fourth quarter of 2019. The increase
was largely due to the timing of the accrual of bonus expense for
home office team members.
- Pre-opening costs were $448 thousand in the fourth quarter of
2020, compared to $948 thousand in the fourth 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.
Highlights for Fiscal Year 2020
- Total revenues in 2020 decreased 40.7% to $277.7 million,
compared to $468.0 million in 2019.
- Net loss in 2020 was $25.3 million, or ($0.80) per diluted
share, compared to net income of $42.2 million, or $1.44 per
diluted share, in 2019.
- Net loss in 2020 included a $2.5 million employee retention
payroll tax credit; $1.8 million in severance costs and accelerated
stock expense; $0.2 million in gain related to lease modifications;
a $16.5 million impairment loss primarily related to restaurant
closures, and a $1.5 million income tax expense related to the
impact of discrete income tax items. Net income in 2019 included
$0.5 million in acquisition-related expenses associated with the
acquisition of the three restaurants from our Philadelphia and Long
Island franchisee, $0.4 million in closure costs associated with
accelerating the closure of a restaurant in Washington, DC and a
$0.8 million benefit related to other discrete income tax
items.
- Excluding these adjustments, as well as the results from
discontinued operations and certain discrete income tax items,
non-GAAP diluted loss per common share was ($0.38) in 2020,
compared to a non-GAAP diluted earnings per common share of $1.43
in 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.
Review of Fiscal Year 2020 Operating Results
Restaurant sales in 2020 were $260.8 million compared to $441.4
million in 2019.
Company-owned Sales
- Comparable restaurant sales at Company-owned restaurants
decreased 40.2% compared to 2019, which consisted of a 36.1%
decrease in traffic, as measured by entrees, and an average check
decrease of 6.4%.
Franchise Income
- Franchise income in 2020 was $11.7 million compared to $17.9
million compared to 2019. The reduction in franchise income was due
to a decrease in sales from franchise operations.
Operating Expenses
- Food and beverage costs, as a percentage of restaurant sales,
increased 17 basis points to 29.1%. Total beef costs decreased 1.6%
compared to 2019.
- Restaurant operating expenses, as a percentage of restaurant
sales, increased to 57.7% compared to 48.6% in 2019, primarily due
to the impact of fixed costs on lower restaurant sales in
2020.
- Marketing and advertising costs decreased $8.6 million (55.6%)
from 2019.
- General and administrative expenses decreased $1.4 million to
$33.2 million compared to 2019. The decrease in G&A expenses
was primarily due to lower compensation related expenses.
- Pre-opening costs were $1.6 million in 2020, compared to $1.8
million in 2019.
Development Update
The Company currently expects to open a new restaurant in 2021
in Short Hills, NJ early in the third quarter. The Company will
begin construction of a new restaurant in Aventura, FL in 2021 with
an expected opening date in the second quarter of 2022.
Leadership Update
The Company today announced that the Board of Directors has
appointed Cheryl J. Henry, the Company’s President and Chief
Executive Officer, to the role of Chairperson effective upon her
re-election to the Board of Directors at the Annual Meeting to be
held on May 25, 2021. Michael O’Donnell, currently Chairman of the
Board, will step down at that time and continue to serve as a
Director of Ruth’s Hospitality Group, Inc. upon his re-election.
This is consistent with the Board’s long-term succession
planning.
Henry said, “On behalf of the Company, I would like to thank
Mike for his leadership and the contribution he has made as
Chairman. I am very proud to have been asked by the Board to serve
as Chairperson to continue our work for the benefit of our
shareholders, team members and guests.”
Financial Outlook
Due to the ongoing uncertainty around the duration and severity
of the COVID-19 pandemic, the Company will not be providing
financial guidance for fiscal year 2021 at this time.
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 fourth
quarter 2020 and fiscal year 2020 financial results today at 8:30
AM Eastern Time. Hosting the call will be Cheryl J. Henry,
President and Chief Executive Officer, and Kristy Chipman, 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
13716005. The replay will be available until Friday, March 12,
2021. 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 September 27, 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
52 Weeks Ended
December 27,
December 29,
December 27,
December 29,
2020
2019
2020
2019
Revenues: Restaurant sales
$
72,151
$
127,132
$
260,763
$
441,361
Franchise income
3,644
4,972
11,737
17,879
Other operating income
1,577
2,929
5,248
8,786
Total revenues
77,372
135,033
277,748
468,026
Costs and expenses: Food and beverage costs
21,268
37,909
75,831
127,597
Restaurant operating expenses
33,195
58,740
150,420
214,715
Marketing and advertising
1,574
4,508
6,859
15,432
General and administrative costs
10,581
8,627
33,248
34,643
Depreciation and amortization expenses
5,304
5,901
21,964
21,354
Pre-opening costs
448
948
1,633
1,824
Gain on lease modifications
(28
)
—
(206
)
—
Loss on impairment
295
—
16,548
—
Total costs and expenses
72,637
116,633
306,297
415,565
Operating income (loss)
4,735
18,400
(28,549
)
52,461
Other income (expense): Interest expense, net
(1,340
)
(737
)
(4,681
)
(2,197
)
Other
38
82
26
115
Income (loss) before income taxes
3,433
17,745
(33,204
)
50,379
Income tax expense (benefit)
2,010
3,287
(7,910
)
8,173
Net income (loss)
$
1,423
$
14,458
$
(25,294
)
$
42,206
Basic earnings (loss) per share
$
0.04
$
0.51
$
(0.80
)
$
1.46
Diluted earnings (loss) per share
$
0.04
$
0.50
$
(0.80
)
$
1.44
Shares used in computing net income per common share: Basic
34,256,769
28,513,764
31,683,920
28,998,382
Diluted
34,396,700
28,835,275
31,683,920
29,376,980
Dividends declared per common share
$
-
$
0.13
$
0.15
$
0.52
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,
employee retention payroll tax credit, accelerated stock
compensation and severance payments, gain on lease modifications,
loss on impairment and restaurant closure costs and certain
discrete income tax items. We exclude the impact of the acquisition
costs, employee retention payroll tax credit, accelerated stock
compensation and severance payments, gain on lease modifications,
loss on impairment and restaurant closure costs and certain
discrete income tax items to improve comparability of diluted
earnings per common share between periods. 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
52 Weeks Ended
December 27,
December 29,
December 27,
December 29,
2020
2019
2020
2019
GAAP Net income (loss)
$
1,423
$
14,458
$
(25,294
)
$
42,206
GAAP Income tax expense (benefit)
2,010
3,287
(7,910
)
8,173
GAAP Income (loss) from continuing operations before income taxes
3,433
17,745
(33,204
)
50,379
Adjustments: Franchisee acquisition costs
—
124
—
536
Employee retention payroll tax credit
(2,525
)
—
(2,525
)
—
Accelerated stock compensation and severance payments
322
—
1,824
—
Gain on lease modifications
(28
)
—
(206
)
—
Loss on impairment and restaurant closure costs
295
374
16,548
374
Adjusted net income before income taxes
1,497
18,243
(17,563
)
51,289
Adjusted income tax benefit (expense) (1)
(1,526
)
(3,411
)
4,000
(8,400
)
Impact of excluding certain discrete income tax items
1,142
36
1,455
(849
)
Non-GAAP Net income (loss)
$
1,113
$
14,868
$
(12,108
)
$
42,040
GAAP Diluted earnings (loss) per common share
$
0.04
$
0.50
$
(0.80
)
$
1.44
Non-GAAP Diluted earnings (loss) per common share
$
0.03
$
0.52
$
(0.38
)
$
1.43
Weighted-average number of common shares outstanding -
diluted
34,396,700
28,835,275
31,683,920
29,376,980
(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/20210305005090/en/
Investor Relations Fitzhugh
Taylor ftaylor@icrinc.com
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