Earnings
Ruth’s Hospitality Group, Inc. Reports Second Quarter 2012 Financial Results
July 28, 2012 · 0 Comments
WINTER PARK, Fla.(www.hospitalitybusinessnews.com)–Ruth’s Hospitality Group, Inc. today reported unaudited financial results for its second quarter ended June 24, 2012.
Highlights for the second quarter of 2012 were as follows:
The Company reported net income applicable to preferred and common shareholders of $5.8 million or $0.17 per diluted share in the second quarter of 2012. In the comparable period of 2011 a tax benefit of $4.4 million contributed to GAAP earnings. Excluding the second quarter 2011 tax benefit, earnings per diluted share for the second quarter of 2012 increased 70% to $0.17 from $0.10. (See accompanying Reconciliation of Non-GAAP Financial Measure table.)
Total revenues in the second quarter rose 6.2% to $97.7 million compared to $92.0 million in the prior year.
- Company-owned comparable restaurant sales for Ruth’s Chris Steak House increased 6.0%.
- Company-owned comparable restaurant sales for Mitchell’s Fish Market increased 2.3%.
Total operating costs in the second quarter increased by 6.1% or $5.1 million, compared to the second quarter of 2011.
- Food and beverage costs, as a percentage of restaurant sales, increased 170 basis points in the second quarter to 32.2% and continue to be driven by unfavorable beef costs.
- Restaurant operating expenses, as a percentage of restaurant sales, decreased 60 basis points in the second quarter to 51.1% as increased sales leverage offset higher health insurance costs.
- Marketing and advertising costs, as a percentage of total revenues, decreased 90 basis points to 2.5% in the second quarter due to a timing shift in local media advertising to the third and fourth quarters of 2012.
- General and administrative expenses increased $0.9 million to $6.2 million in the second quarter due to increased personnel costs.
Michael P. O’Donnell, Chairman, President and Chief Executive Officer of Ruth’s Hospitality Group, Inc., stated, “Our business momentum continued during the quarter led by the ninth consecutive quarter of comparable store sales growth and the tenth straight period of traffic growth at our Ruth’s Chris brand despite a challenging environment. We are also pleased with the recent sales improvement at Mitchell’s and are excited about the efforts of the new leadership team that has been in place just a few short months. While beef costs continued to pose a significant headwind, through the combined efforts of our entire team we drove strong second quarter results.”
O’Donnell added, “We enter the second half of 2012 excited about our future growth prospects and with a healthier capital structure, we are better positioned for earnings leverage to drive improved profitability and creating more value for our shareholders.”
At the end of the second quarter of 2012, the Company had $71 million in debt outstanding under its senior credit facility, a decrease of $6 million from $77 million at the end of the first quarter of 2012.
A new Ruth’s Chris Steak House located at Harrah’s casino in Cherokee, NC opened in May 2012 under a management agreement between the Company and the Eastern Band of Cherokee Indians. Additionally a second franchise-owned restaurant located in Dubai was opened in April 2012.
A Company-owned Ruth’s Chris Steak House is scheduled to open in Cincinnati, OH in November 2012 and management anticipates that an additional three franchise-owned restaurants will open in 2012. The Company continues to work towards developing new Ruth’s Chris Steak Houses in the future. At this time, the Company’s plans for 2013 include opening a new company-owned restaurant in Denver, CO, relocating its Houston, TX location and opening four to five franchise locations.
Review of Second Quarter 2012 Operating Results
Total revenues, which include Company-owned restaurant sales, franchise income, and other operating income, were $97.7 million in the second quarter of 2012 compared to $92.0 million in the same quarter last year.
Company-owned restaurant sales increased 5.6% to $91.8 million for the second quarter of 2012 from $86.9 million in the same quarter last year. Total operating weeks for all brands during the second quarter increased to 1,105 from 1,104.
Ruth’s Chris Steak House Sales
- 63 Company-owned Ruth’s Chris Steak House restaurants were open at the end of the second quarter of 2012 compared to 62 at the end of the prior year second quarter.
- Total operating weeks for the quarter increased to 819 from 818, and exclude discontinued operations in Santa Barbara, CA.
- Average weekly sales for Ruth’s Chris Steak House were $87.5 thousand in the second quarter of 2012, an increase of 6.5% compared to $82.2 thousand in the second quarter of 2011.
- For the second quarter of 2012, Company-owned comparable restaurant sales at Ruth’s Chris Steak House increased 6.0%, which consisted of an entrée increase of 3.8% along with an average check increase of 2.1%.
Mitchell’s Fish Market Sales
- 19 Company-owned Mitchell’s Fish Market restaurants were open at the end of the second quarter of 2012 compared to 20 at the end of the prior year second quarter.
- Total operating weeks for the quarter were flat year-over-year at 247, and exclude discontinued operations in Glenview, IL.
- Average weekly sales at Mitchell’s Fish Market were $73.3 thousand in the second quarter of 2012, an increase of 2.3% compared to $71.7 thousand in the second quarter of 2011.
- Comparable restaurant sales at Mitchell’s Fish Market increased 2.3%, which consisted of an entrée increase of 3.2% and an average check decrease of 0.9%.
Franchise Income
- 69 franchise-owned Ruth’s Chris Steak House restaurants were open at the end of the second quarter of 2012 compared to 67 at the end of the prior year second quarter.
- Franchise income increased 12.6% to $3.2 million in the second quarter of 2012 from $2.9 million in the prior year period, partially driven by the opening of two new locations in the second half of 2011 (Grand Rapids, MI and Asheville, NC) and one new location in the second quarter of 2012 (Dubai Marina).
- Comparable franchise-owned restaurant sales increased 4.4% in the second quarter of 2012, which consisted of an entrée increase of 0.2% and an average check increase of 4.2%. The increase was driven by a 6.1% increase in domestic comparable franchise-owned restaurant sales.
Financial Outlook
The following statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks that could impact future operating results and financial conditions.
Based on current information, Ruth’s Hospitality Group, Inc. is reiterating its full year 2012 outlook:
- Cost of goods sold of 31.5% to 32.5% of restaurant sales
- Restaurant operating expenses of 51.0% to 52.0% of restaurant sales
- Marketing and advertising of 3.0% to 3.5% of total revenues
- General and administrative expenses of $25 million to $26 million
- Effective tax rate of 28% to 32%
- Capital expenditures of $10 to $12 million
| &nbs p; |
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| RUTH’S HOSPITALITY GROUP, INC AND SUBSIDIARIES | |||||||||||||||||||||
| Condensed Consolidated Statements of Income (Loss) – Unaudited | |||||||||||||||||||||
| (Amounts in thousands, except share and per share data) | |||||||||||||||||||||
| 13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||
| June 24, | June 26, | June 24, | June 26, | ||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
| Revenues: | |||||||||||||||||||||
| Restaurant sales | $ | 91,819 | $ | 86,947 | $ | 189,106 | $ | 181,111 | |||||||||||||
| Franchise income | 3,243 | 2,881 | 6,698 | 5,938 | |||||||||||||||||
| Other operating income | 2,651 | 2,198 | 2,911 | 2,698 | |||||||||||||||||
| Total revenues | 97,713 | 92,026 | 198,715 | 189,747 | |||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||
| Food and beverage costs | 29,537 | 26,560 | 60,664 | 55,444 | |||||||||||||||||
| Restaurant operating expenses | 46,938 | 44,976 | 94,432 | 91,315 | |||||||||||||||||
| Marketing and advertising | 2,419 | 3,167 | 4,159 | 6,097 | |||||||||||||||||
| General and administrative costs | 6,227 | 5,353 | 13,112 | 11,230 | |||||||||||||||||
| Depreciation and amortization expenses | 3,639 | 3,649 | 7,346 | 7,360 | |||||||||||||||||
| Pre-opening costs | 75 | 41 | 120 | 42 | |||||||||||||||||
| Restructuring benefit | - | - | - | (502 | ) | ||||||||||||||||
| Total costs and expenses | 88,835 | 83,745 | 179,833 | 170,985 | |||||||||||||||||
| Operating income | 8,878 | 8,280 | 18,882 | 18,761 | |||||||||||||||||
| Other expense: | |||||||||||||||||||||
| Interest expense, net | (598 | ) | (739 | ) | (1,079 | ) | (1,569 | ) | |||||||||||||
| Debt issuance costs written-off | - | - | (807 | ) | - | ||||||||||||||||
| Other | (47 | ) | (219 | ) | (60 | ) | (419 | ) | |||||||||||||
| Income from continuing operations before income tax expense | 8,233 | 7,322 | 16,936 | 16,773 | |||||||||||||||||
| Income tax expense (benefit) | 2,392 | (1,814 | ) | 4,983 | 1,032 | ||||||||||||||||
| Income from continuing operations | 5,841 | 9,136 | 11,953 | 15,741 | |||||||||||||||||
| Loss (income) from discontinued operations, net of income tax benefit (expense) | 9 | (70 | ) | 26 | (397 | ) | |||||||||||||||
| Net income | $ | 5,832 | $ | 9,206 | $ | 11,927 | $ | 16,138 | |||||||||||||
| Preferred stock dividends | - | 623 | 514 | 1,247 | |||||||||||||||||
| Accretion of preferred stock redemption value | - | 88 | 73 | 176 | |||||||||||||||||
| Excess of redemption value over carrying value of preferred shares redeemed | - | - | 35,776 | - | |||||||||||||||||
| Net income (loss) applicable to preferred and common shareholders | $ | 5,832 | $ | 8,495 | $ | (24,436 | ) | $ | 14,715 | ||||||||||||
| Basic earnings (loss) per common share: | |||||||||||||||||||||
| Continuing operations | $ | 0.17 | $ | 0.20 | $ | (0.71 | ) | $ | 0.34 | ||||||||||||
| Discontinued operations | - | - | - | 0.01 | |||||||||||||||||
| Basic earnings (loss) per share | $ | 0.17 | $ | 0.20 | $ | (0.71 | ) | $ | 0.35 | ||||||||||||
| Diluted earnings (loss) per common share: | |||||||||||||||||||||
| Continuing operations | $ | 0.17 | $ | 0.20 | $ | (0.71 | ) | $ | 0.33 | ||||||||||||
| Discontinued operations | - | - | - | 0.01 | |||||||||||||||||
| Diluted earnings (loss) per share | $ | 0.17 | $ | 0.20 | $ | (0.71 | ) | $ | 0.34 | ||||||||||||
| Shares used in computing net income (loss) per common share: | |||||||||||||||||||||
| Basic | 34,304,948 | 34,075,604 | 34,237,788 | 34,037,818 | |||||||||||||||||
| Diluted | 35,133,6 37 |
43,233,207 | 34,237,788 | 43,196,850 | |||||||||||||||||
| RUTH’S HOSPITALITY GROUP, INC | ||||||||
| Selected Balance Sheet Data | ||||||||
| (dollar amounts in thousands) | ||||||||
| (Unaudited) | ||||||||
| June 24, | December 25, | |||||||
| 2012 | 2011 | |||||||
| Cash and cash equivalents | $ | 4,489 | $ | 3,925 | ||||
| Total assets | 230,475 | 240,220 | ||||||
| Long-term debt | 71,000 | 22,000 | ||||||
| Total shareholders’ equity | 76,577 | 99,640 | ||||||
Non-GAAP Measure
We prepare our financial statements in accordance with 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 certain non-cash items and income (loss) on discontinued operations. 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 accounting principles generally accepted in the United States, 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 measure is presented as supplemental information and not as alternatives to any GAAP measurements.
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Reconciliation of Non-GAAP Financial Measure (Unaudited – amounts in dollars, except share data) |
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| 13 Weeks Ended | ||||||||||
| June 24, | June 26, | |||||||||
| 2012 | 2011 | |||||||||
| GAAP net income applicable to preferred and common shareholders | $ | 5,832 | $ | 8,495 | ||||||
| Net impact of excluding certain tax benefits – See Note |
- |
(4,371 | ) | |||||||
| Non-GAAP net income applicable to preferred and common shareholders | $ | 5,832 | $ | 4,124 | ||||||
| Non-GAAP diluted earnings per share | $ | 0.17 | $ | 0.10 | ||||||
| Shares: | ||||||||||
| Weighted average number of common shares outstanding – basic | 34,304,948 | 34,075,604 | ||||||||
| Dilutive shares | 828,689 | 536,913 | ||||||||
| Dilutive convertible preferred stock | - | 8,620,690 | ||||||||
| Weighted-average number of common shares outstanding – diluted | 35,133,637 | 43,233,207 | ||||||||
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Note – excludes the 2011 beneficial impact of a reduction of the valuation allowance on certain state deferred tax assets.
By erichertha