Provides Updates on Fresh Start Initiatives and
Fiscal 2017 Outlook
Ruby Tuesday, Inc. (NYSE:RT) today announced financial results
for the fiscal quarter ended August 30, 2016.
Fiscal First Quarter 2017 Highlights (13 weeks ended August
30, 2016, compared to the 13 weeks ended September 1,
2015):
- Total revenue declined 8.2% to $256.7
million, which included a net reduction of 109 Company-owned Ruby
Tuesday restaurants compared to the first quarter of the prior
fiscal year, including 95 restaurants closed in the current quarter
in connection with our previously-announced Fresh Start
Initiative.
- Same-restaurant sales declined 2.7%
following a 0.6% increase in the first quarter of the prior fiscal
year.
- Closure and Impairment expense was
$30.2 million primarily due to the previously-announced 95
restaurant closures, compared to $2.7 million in the first quarter
of the prior fiscal year.
- Net Loss was $39.7 million, or ($0.66)
per diluted share, compared to a Net Loss of $4.2 million, or
($0.07) per diluted share in first quarter of the prior fiscal
year.
- Restaurant level margin* declined 200
basis points to 13.9%.
- Adjusted Net Loss* was $6.8 million, or
($0.11) per diluted share, compared to an Adjusted Net Loss of $1.6
million, or ($0.03) per diluted share in the first quarter of the
prior fiscal year.
- Adjusted EBITDA* was $4.9 million
compared to $15.0 million in the first quarter of the prior fiscal
year.
- As of August 30, 2016, the Company had
cash on hand of $68.7 million.
* Restaurant Level Margin, EBITDA, Adjusted EBITDA, Adjusted Net
Loss and Adjusted Net Loss per share are non-GAAP measures.
Reconciliations of Restaurant Level Margin, EBITDA, Adjusted
EBITDA, Adjusted Net Loss and Adjusted Net Loss per share to the
most directly comparable financial measures presented in accordance
with United States Generally Accepted Accounting Principles (GAAP)
are set forth in the schedules accompanying this release. See
“Non-GAAP Financial Measures” and “Condensed Consolidated
Statements of Operations.”
Lane Cardwell, Interim President and Chief Executive Officer,
commented, “While the casual dining environment remains highly
competitive and challenging as evidenced by our negative quarterly
same-restaurant sales, our trend improved sequentially during the
first quarter as we made investments in highlighting value aimed at
building guest counts. In fact, we generated positive traffic in
August through a successful 3 Course Meal offer for $12.99.”
Cardwell continued, “Our underlying goal is to drive traffic
through the key strategies of our Fresh Start initiatives that we
are launching in the coming months. These include our Fresh New
Menu, Fresh New Garden Bar, and Fresh Experience. In each of these
key areas, we are accelerating our actions as we believe these
improvements will have a positive impact on our performance through
increasing guest count and frequency. We are focused on showcasing
the affordability and value that Ruby Tuesday offers through a
redesign of our core menu. Our team has never been more excited and
focused on the plan ahead. We are moving with greater urgency to
change the trajectory of our business through a renewed focus on
our guests.”
Fiscal First Quarter 2017 Financial
Results
Total revenue was $256.7 million, a decrease of 8.2% or $22.8
million from the first quarter of the prior fiscal year. This
decrease was due to a net reduction of 109 Company-owned Ruby
Tuesday restaurants as compared to the first quarter of the prior
fiscal year and a same-restaurant sales decline of 2.7% at
Company-owned Ruby Tuesday restaurants.
The first quarter same-restaurant sales decrease was driven in
part by guest traffic declines resulting from a challenging and
competitive external environment. Year-over-year guest counts fell
3.1% while average check rose 0.3%.
Selling, general and administrative expenses, net (SG&A)
increased to $31.6 million from $29.4 million in the first quarter
of the prior fiscal year. As a percentage of total revenue,
SG&A expenses increased 180 basis points to 12.3% from 10.5%.
The increase in SG&A was primarily due to an increase in
marketing spend and, to a lesser extent, higher incentive
compensation expense.
Net Loss was $39.7 million, or ($0.66) per diluted share,
compared to Net Loss of $4.2 million, or ($0.07) per diluted share,
in the first quarter of the prior fiscal year.
Restaurant level margin* decreased to $35.6 million from $44.1
million in the first quarter of the prior fiscal year. As a
percentage of restaurant sales and operating revenue, restaurant
level margin declined 200 basis points to 13.9% driven mainly by
increases in payroll and related costs and cost of goods sold.
Adjusted Net Loss* was $6.8 million, or ($0.11) per diluted
share, compared to Adjusted Net Loss of $1.6 million, or ($0.03)
per diluted share, in the first quarter of the prior fiscal year.
Adjusted Net Loss for the first quarter of fiscal year 2017
excluded adjustments of $32.9 million, primarily related to closure
and impairment charges. Adjusted Net Loss for the first quarter of
fiscal year 2016 excluded adjustments of $2.6 million, primarily
related to closure and impairment charges, debt prepayment
penalties, and deferred financing fees, partially offset by
executive transition. A reconciliation between Net Loss and
Adjusted Net Loss is included in the accompanying financial
data.
Balance Sheet
The Company ended the fiscal 2017 first quarter with cash and
cash equivalents totaling $68.7 million and debt of $223.5 million.
This compares to cash and cash equivalents totaling $67.3 million
and debt of $223.7 million as of May 31, 2016.
Restaurant Activity
As of August 30, 2016, there were 615 Ruby Tuesday
restaurants system-wide, of which 547 were Company-owned. During
the first quarter, 99 Company-owned Ruby Tuesday restaurants were
closed, including 95 restaurants closed in connection with the
Fresh Start Initiative. The Company also closed one Company-owned
Lime Fresh Mexican Grill restaurant during the quarter.
Additionally, one domestic franchised Ruby Tuesday restaurant was
opened and ten were closed. One international franchised Ruby
Tuesday restaurant was closed during the current quarter.
Sale of Property
On September 22, 2016, Ruby Tuesday announced that it has
entered into an agreement to sell its property at 150 W. Church
Avenue in Maryville, Tennessee for $2.8 million. The completion of
the transaction is targeted for October 2016, subject to customary
closing conditions. Team members of the impacted property will be
relocated into the Company’s other Tennessee-based Restaurant
Support Center at 333 E. Broadway Avenue in Maryville, Tennessee by
the end of January 2017.
Update on Fresh Start
Initiatives
- Asset Rationalization Plan – 95
restaurants have closed under the Company’s asset rationalization
plan which was announced on August 11, 2016. Additionally, these
locations have been excluded from the calculation of the Company’s
same restaurant sales performance for the fiscal first quarter and
will be excluded on a go-forward basis.
- Fresh New Menu – The Company will be
launching a new core menu in November 2016 across all Ruby Tuesday
restaurants. The Fresh New Menu will include new shareable
appetizers, garden fresh salads, pastas, and desserts, as well as a
new drink and kids menu. It will also include a new menu design
that better communicates freshness and value to guests.
- Fresh New Garden Bar – In January 2017
the Company will be rolling out its Fresh New Garden Bar nationally
across all Ruby Tuesday restaurants. The Company has fine-tuned the
product offering to over 50 items, streamlined the implementation
and execution, and determined the appropriate price point to
provide value to guests in a cost effective and profitable
way.
- Fresh Experience – The Company remains
on track to complete 11 to 13 store remodels by the end of the
calendar year in the Charlotte, NC and Jacksonville, FL markets.
Additionally, Ruby Tuesday anticipates executing six to eight
remodels between January and May of 2017 and will provide an update
on which markets will be targeted in the coming quarter.
Fiscal 2017 Outlook
Cardwell commented “We are embarking on a period of accelerated
strategic change for Ruby Tuesday, and we believe that with a
thoughtful but decisive approach, we can deliver improved
profitability and enhance shareholder value. We are excited about
the new products coming to market this fiscal year including our
new menu in November, the relaunch of successful promotions, and
the roll out of the enhanced Garden Bar system-wide in January. I
am confident that these strategies coupled with our service
improvements will bring same-restaurant sales back into positive
territory in fiscal 2017.”
The Company plans to accelerate the execution of its Fresh Start
Initiatives under new leadership to better address the challenges
currently facing the business, and as a result is discontinuing
providing guidance so that it can focus on long-term strategic
objectives.
Conference Call &
Webcast
The Company will host a conference call today to discuss fiscal
first quarter 2017 financial results at 5:00 PM Eastern Time. The
conference call can be accessed live by dialing 888-670-2260 or for
international callers by dialing 913-312-0686. A replay will be
available after the call and can be accessed by dialing
877-870-5176 or for international callers by dialing 858-384-5517.
The passcode is 9127398. The replay will be available through
Sunday, November 6, 2016.
The conference call will also be webcast live and later archived
on the Investor Relations page of Ruby Tuesday’s corporate website
at www.rubytuesday.com under the ‘Events & Presentations’
section.
About Ruby Tuesday, Inc.
Ruby Tuesday, Inc. owns and franchises Ruby Tuesday brand
restaurants. As of August 30, 2016, there were 615 Ruby Tuesday
restaurants in 42 states, 14 foreign countries, and Guam. Of those
restaurants, we owned and operated 547 Ruby Tuesday restaurants and
franchised 68 Ruby Tuesday restaurants, comprised of 18 domestic
and 50 international restaurants. Our Company-owned and operated
restaurants are concentrated primarily in the Southeast, Northeast,
Mid-Atlantic, and Midwest of the United States, which we consider
to be our core markets. We also owned and operated one Lime Fresh
Mexican Grill restaurant as of August 30, 2016. For more
information about Ruby Tuesday, please visit www.rubytuesday.com.
Ruby Tuesday, Inc. is traded on the New York Stock Exchange
(Symbol: RT).
Forward-looking Information
This press release contains various forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements represent our expectations or
beliefs concerning future events, including one or more of the
following: future financial performance (including our estimates of
changes in same-restaurant sales, average unit volumes, operating
margins, expenses, and other items), future capital expenditures,
the effect of strategic initiatives (including statements relating
to our asset rationalization project, cost savings initiatives, and
the benefits of our marketing), the opening or closing of
restaurants by us or our franchisees, sales of our real estate or
purchases of new real estate, future borrowings and repayments of
debt, availability of financing on terms attractive to the Company,
compliance with financial covenants in our debt instruments,
payment of dividends, stock and bond repurchases, restaurant
acquisitions and dispositions, and changes in senior management and
in the Board of Directors. 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, including, without
limitation, the following: general economic conditions; changes in
promotional, couponing and advertising strategies; changes in our
customers’ disposable income; consumer spending trends and habits;
increased competition in the restaurant market; laws and
regulations, including those affecting labor and employee benefit
costs, such as further potential increases in state and federally
mandated minimum wages and healthcare reform; changes in senior
management or in the Board of Directors; the impact of pending
litigation; customers’ acceptance of changes in menu items; changes
in the availability and cost of capital; potential limitations
imposed by debt covenants under our debt instruments; weather
conditions in the regions in which Company-owned and franchised
restaurants are operated; costs and availability of food and
beverage inventory, including supply and delivery shortages or
interruptions; significant fluctuations in energy prices; security
breaches of our customers’ or employees’ confidential information
or personal data or the failure of our information technology and
computer systems; 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 one of our restaurant concepts or other
competing restaurant concepts; effects of actual or threatened
future terrorist attacks in the United States; and other risks and
uncertainties described in the Risk Factors included in Part I,
Item A of our Annual Report on Form 10-K for the year ended May 31,
2016.
Non-GAAP Financial
Measures
The Company believes excluding certain items from its financial
results provides investors with a clearer understanding of the
Company’s operating performance and comparison to prior-period
results. In addition, management uses these non-GAAP financial
measures and ratios to assess the results of the Company’s
operations.
We have included Restaurant Level Margin, EBITDA, Adjusted
EBITDA, Adjusted Net Loss and Adjusted Net Loss per share to
provide investors with supplemental measures of our operating
performance. We believe these are important supplemental measures
of operating performance because they eliminate items that have
less bearing on our Company-wide operating performance and thus
highlight trends in our core business that may not otherwise be
apparent when relying solely on financial measures in accordance
with GAAP. We also believe that securities analysts, investors and
other interested parties frequently use Restaurant Level Margin,
EBITDA, Adjusted EBITDA, Adjusted Net Income/(Loss) and Adjusted
Net Income (Loss) per share in evaluating issuers. Because other
companies in some cases calculate Restaurant Level Margin, Adjusted
EBITDA, Adjusted Net Income (Loss), or Adjusted Net Income (Loss)
per share differently from the way we calculate such measures,
these metrics may not be comparable to similarly titled measures
reported by other companies. Additionally, supplemental non-GAAP
financial measures should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
GAAP.
The use of these measures permits a comparative assessment of
the Company's operating performance relative to its performance
based on GAAP results, while isolating the effects of certain items
that vary from period to period without correlation to core
operating performance and certain items that vary widely among
similar companies. However, the inclusion of these adjusted
measures should not be construed as an indication that future
results will be unaffected by unusual or infrequent items or that
the items for which the adjustments have been made are necessarily
unusual or infrequent.
Available in this release is the reconciliation of Net Loss, the
most directly comparable GAAP measure, to EBITDA, Adjusted EBITDA,
Adjusted Net Loss and Adjusted Net Loss per share, all of which are
non-GAAP financial measures. Reconciliation of Restaurant Level
Margin, which is also a non-GAAP measure, to Net Loss are presented
in the Condensed Consolidated Statements of Operations. The Company
defines Restaurant Level Margin as Restaurant Sales and Operating
Revenue less Cost of Goods Sold, Payroll and Related Costs, and
Other Restaurant Operating Costs. EBITDA is defined as Net Loss
before interest, taxes, and depreciation and amortization and
Adjusted EBITDA as EBITDA, excluding certain expenses (income)
including, but not limited to, Closures and Impairments, Net, and
Executive Transition. Adjusted Net Loss is defined as Net Loss,
excluding certain expenses/(income) as detailed in Adjusted EBITDA
as well as adjustments related to Debt Prepayment Penalties,
Deferred Financing Fees, Income Tax Benefit from Adjustments, and
Income Tax Benefit Adjusted to the Statutory Rate. Adjusted Net
Loss per share is defined as Adjusted Net Loss divided by diluted
shares outstanding.
Financial Results For the
First Quarter of Fiscal Year 2017 (Amounts in thousands)
(Unaudited) August 30,
May
31,
CONDENSED BALANCE SHEETS 2016
2016
Assets Cash and Cash Equivalents $ 68,661 $ 67,341 Accounts
and Other Receivables 7,108 12,827 Inventories 18,658 21,595 Income
Tax Receivable 4,721 3,003 Prepaid Rent and Other Expenses 10,643
11,508 Assets Held for Sale 11,849 4,642 Total
Current Assets 121,640 120,916 Property and Equipment, Net
651,777 671,250 Other Assets 44,742 45,751
Total Assets $ 818,159 $ 837,917 Liabilities Current
Maturities of Long-Term Debt, including Capital Leases $ 9,781 $
9,934 Other Current Liabilities 114,191 87,772
Total Current Liabilities 123,972 97,706 Long-Term Debt and
Capital Leases, less Current Maturities 213,728 213,803 Deferred
Escalating Minimum Rents 45,787 51,535 Other Deferred Liabilities
65,393 67,093 Total Liabilities 448,880
430,137 Shareholders' Equity 369,279 407,780
Total Liabilities and Shareholders' Equity $ 818,159 $
837,917
Financial Results For the First Quarter of Fiscal Year 2017
(Amounts in thousands except per share amounts)
(Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS 13 Weeks 13 Weeks Ended Percent of Ended
Percent of August 30, Total September 1, Total 2016 Revenue 2015
Revenue
Revenue: Restaurant sales and operating
revenue $ 255,764 99.7 $ 277,907 99.4 Franchise revenue 893
0.3 1,573 0.6
Total Revenue
256,657 100.0
279,480 100.0
Operating Costs and Expenses: (as a percent of Restaurant
sales and operating revenue) Cost of goods sold 72,190 28.2 76,241
27.4 Payroll and related costs 90,607 35.4 95,335 34.3 Other
restaurant operating costs 57,363 22.4 62,207
22.4
Restaurant Level Margin (excludes franchise
revenue). 35,604 13.9
44,124
15.9 Depreciation and amortization 11,229 4.4 12,806
4.6 (as a percent of Total revenue) Selling, general and
administrative, net 31,585 12.3 29,396 10.5 Closures and
impairments, net 30,192 11.8 2,712 1.0
Total operating costs and expenses 293,166
278,697
(Loss)/Earnings From Operations
(36,509 ) (14.2 )
783 0.3
Interest expense, net
4,877 1.9 6,000 2.1 Loss before income taxes (41,386 ) (16.1
) (5,217 ) (1.9 ) Benefit for income taxes (1,694 ) (0.7 )
(1,023 ) (0.4 )
Net Loss $
(39,692 ) (15.5 ) $
(4,194 ) (1.5 ) Net
Loss Per Share: Basic $ (0.66 ) $ (0.07 ) Diluted $ (0.66 ) $
(0.07 )
Shares: Basic
59,790
61,344 Diluted
59,790
61,344 Non-GAAP
Reconciliation Table Reconciliation of EBITDA, Adjusted
EBITDA, Adjusted Net Loss, and Adjusted Net Loss Per Share
(Amounts in thousands except per share amounts)
(Unaudited) 13 Weeks
13 Weeks Ended Ended August 30, September 1, 2016 2015
Net Loss $ (39,692 ) $
(4,194 ) Depreciation and Amortization 11,229
12,806 Interest Expense, net 4,877 6,000 Benefit for Income Taxes
(1,694 ) (1,023 )
EBITDA $
(25,280 ) $ 13,589 Closures and
Impairments, Net (1) 30,192 2,712 Executive Transition (2) -
(1,274 )
Adjusted EBITDA $ 4,912
$ 15,027 Net Loss
$ (39,692 ) $ (4,194 )
Closures and Impairments, Net (1) 30,192 2,712 Executive
Transition (2) - (1,274 ) Debt Prepayment Penalties & Deferred
Financing Fees (3) - 1,085 Income Tax Benefit from Adjustments (4)
(11,983 ) (1,001 ) Income Tax Benefit Adjusted to Statutory Rate
(5) 14,732 1,048
Adjusted Net
Loss $ (6,751 ) $ (1,624
) Net Loss Per Share $
(0.66 ) $ (0.07 )
Adjusted Net Loss Per Share $ (0.11 )
$ (0.03 ) Basic Shares
Outstanding (6) 59,790 61,344
Diluted Shares Outstanding (6) 59,790
61,344 (1) Includes property impairments, closed
restaurant lease reserves, other closing expenses, and gain on sale
of surplus properties. (2) On July 25, 2015, our then President
Ruby Tuesday Concept and Chief Operations Officer left the Company.
Accordingly, included within our share-based compensation expense
for Q1 FY16 is a forfeiture credit of $1.3 million in connection
with the forfeiture of 333,000 unvested stock options and 137,000
unvested shares of restricted stock. (3) Debt prepayment penalties
and the write-off of deferred financing fees are classified within
Interest Expense and included in the EBITDA calculation and
therefore not a separate add-back for Adjusted EBITDA. (4)
Represents the tax impact of the adjustments to Net Loss at the
Company's statutory tax rate (39.69%). (5) Represents the Company's
Income Tax Benefit adjusted to the Company's statutory tax rate.
(6) Net Loss and Adjusted Net Loss per share figures are calculated
based on diluted shares outstanding. Ruby Tuesday,
Inc. Number of Restaurants at End of Period
August
30,
September 1,
2016
2015
Ruby Tuesday: Company-Owned 547 656 Domestic Franchised 18
28 International Franchised 50 50 Total 615 734
Lime
Fresh: Company-Owned 1 19 Domestic Franchised 0 8 Total 1 27
Total Restaurants: Company-Owned 548 675 Domestic
Franchised 18 36 International Franchised 50 50
System-wide
total 616 761
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161006006389/en/
ICRInvestor RelationsMelissa Calandruccio,
646-277-1273RubyTuesdayIR@icrinc.comorMedia
RelationsChristine Beggan,
203-682-8329RubyTuesday@icrinc.com
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