MARYVILLE, TN–(hospitalitybusinessnews.com)–Ruby Tuesday, Inc. today announced fiscal third quarter 2016 financial results for the period ended March 1, 2016 and updated its guidance for fiscal year 2016.
Fiscal Third Quarter 2016 Highlights (13 weeks ended March 1, 2016, compared to the 13 weeks ended March 3, 2015):
- Same-restaurant sales decreased 3.1%, which included a 140 basis point negative impact due to temporary store closures resulting from severe winter weather, compared to a 0.3% decline in the third quarter of the prior fiscal year.
- Total revenue declined 5.1% to $271.5 million, which included a net reduction of 20 corporate-owned restaurants.
- Restaurant level margin contracted 10 basis points to 17.1%.
- Net loss was $3.1 million, or ($0.05) per diluted share, compared to a net loss of $800,000, or ($0.01) per diluted share.
- Adjusted Net Income* was $1.6 million, or $0.03 per diluted share, compared to Adjusted Net Income of $1.9 million, or $0.03 per diluted share.
- Adjusted EBITDA was $20.3 million compared to $21.5 million in the prior year quarter.
- The Company invested $10.0 million to repurchase 1.9 million shares of its common stock and $2.5 million to repurchase bonds below par.
- As of March 1, 2016, the Company had cash on hand of $52.5 million.
JJ Buettgen, Chairman of the Board, President, and Chief Executive Officer, commented, “Our third quarter was a volatile period affected by weather, softness in the casual dining industry, and increased promotional activity by our peers. Despite this challenging environment, we continue to believe that our key brand initiatives will drive an improvement in guest counts.”
Buettgen continued, “We are encouraged by our early results in attracting and delighting women and young families with our Garden Bar initiative and by the lift we are seeing so far at our remodeled locations. We remain focused on better in-restaurant execution, refining our media and targeting plans, and incorporating what we’ve learned from our Garden Bar and remodel tests into our go forward strategy. This gives us confidence that we can return to same-restaurant sales growth and higher operating profitability. While not yet visible in our results, we believe that we have the right framework in place to attract more women and families and increase visits from our current Ruby Tuesday guest.”
Fiscal Third Quarter 2016 Financial Results
Total revenue was $271.5 million, a decrease from last year of $14.4 million, or 5.1%, primarily due to a net reduction of 20 corporate-owned restaurants compared to the third quarter last year and a same-restaurant sales decline of 3.1% at corporate-owned Ruby Tuesday restaurants.
- Third quarter same-restaurant sales decrease of 3.1% was driven mainly by traffic declines resulting from temporary store closures due to inclement weather and increased discounting by competitors. Year-over-year guest counts were down 5.9% for the quarter while average check rose 2.8%.
Restaurant level margin, excluding franchise revenue, decreased to $46.1 million from $48.9 million in the prior fiscal year’s third quarter. As a percentage of corporate-owned restaurant sales, restaurant level margin declined approximately 10 basis points to 17.1% from 17.2%. The decrease was primarily driven by an increase in cost of goods sold and payroll and related costs, partially offset by a reduction in other restaurant operating costs.
Selling, general & administrative expenses (SG&A) decreased to $27.4 million from $28.9 million in the prior fiscal year’s third quarter. The decrease in SG&A was primarily due to lower G&A expenses, partially offset by increased marketing spend to support new initiatives.
GAAP net loss was $3.1 million, or ($0.05) per diluted share, compared to a net loss of $0.8 million, or ($0.01) per diluted share in the prior fiscal year’s third quarter.
Adjusted Net Income was $1.6 million, or $0.03 per diluted share, a decline of $300,000 compared to Adjusted Net Income of $1.9 million, or $0.03 per diluted share, in the prior fiscal year’s third quarter. Adjusted Net Income for the period excluded after-tax adjustments of $4.7 million, primarily related to closure and impairment charges, compared to after-tax adjustments of $2.6 million in the prior fiscal year’s third quarter. A reconciliation between GAAP net loss and Adjusted Net Income is included in the accompanying financial data.
The Company ended the fiscal 2016 third quarter with cash and cash equivalents totaling $52.5 million and book debt of $229.1 million. This compares to cash and cash equivalents totaling $45.3 million and book debt of $231.9 million as of December 1, 2015.
As of March 1, 2016, there were 729 Ruby Tuesday restaurants system-wide, of which 649 were corporate-owned, and 16 Lime Fresh Mexican Grills, eight of which were corporate-owned and are in the process of being sold. During the third quarter, six corporate-owned Ruby Tuesday restaurants were closed and two international franchised Ruby Tuesday restaurants were opened.
Fiscal Year 2016 Financial Outlook
The Company is updating its full-year Adjusted Net Income per share guidance to $0.05 to $0.08 (vs. $0.12 to $0.17 previously) based on the following updated assumptions:
- Same-Restaurant Sales – Fiscal 2016 same-restaurant sales down approximately 1% (vs. flat to up 1% previously).
- Unit Development – A net reduction of 11-14 corporate-owned Ruby Tuesday restaurants.
- Restaurant Level Margin – Fiscal 2016 restaurant level margin of 16.7% to 17.0% (vs. 17.3% to 17.6% previously).
- Selling, General, and Administrative Expense – Fiscal 2016 SG&A ranging from $110 million to $112 million (vs. $114 million to $117 million previously).
- Tax Rate – Adjusted Net Income is calculated using the statutory tax rate of 39.69%. This provides a more consistent tax rate to facilitate review and analysis of the Company’s financial performance. The Company is limited in the amount of tax credits that can be utilized each year based upon taxable income for that year and cannot recognize a full benefit of any year’s currently generated tax credits or tax credit carry-forwards due to the Company’s tax valuation allowance.
- Capital Expenditures – Fiscal 2016 capital expenditures ranging from $34 million to $36 million (vs. $36 million to $38 million previously).
|Financial Results For the Third Quarter and First 39 Weeks of Fiscal Year 2016|
|(Amounts in thousands except per share amounts)|
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS|
|13 Weeks||13 Weeks||39 Weeks||39 Weeks|
|March 1,||Percent||March 3,||Percent||March 1,||Percent||March 3,||Percent|
|Restaurant sales and operating revenue||$||269,868||99.4||$||284,392||99.5||$||807,105||99.4||$||825,055||99.4|
|Operating Costs and Expenses:|
|(as a percent of Restaurant sales and operating revenue)|
|Cost of goods sold (excluding depreciation and amortization shown below)||75,143||27.8||77,796||27.4||221,689||27.5||224,589||27.2|
|Payroll and related costs||93,357||34.6||96,680||34.0||280,976||34.8||286,486||34.7|
|Other restaurant operating costs (1)||55,311||20.5||60,972||21.4||173,903||21.5||179,706||21.8|
Restaurant Level Margin (excludes franchise revenue) (1)
|Depreciation and amortization (1)||12,732||4.7||12,961||4.6||38,474||4.8||39,319||4.8|
|(as a percent of Total revenue)|
|Selling, general and administrative, net||27,378||10.1||28,948||10.1||84,622||10.4||87,141||10.5|
|Closures and impairments, net||6,123||2.3||3,991||1.4||18,908||2.3||6,548||0.8|
|Total operating costs and expenses||270,044||281,348||820,571||823,789|
|Earnings/(Loss) From Operations||1,426||0.5||4,565||1.6||(8,665||)||(1.1||)||5,965||0.7|
|Interest expense, net||5,005||1.8||5,446||1.9||16,110||2.0||16,783||2.0|
|Gain on extinguishment of debt||(10||)||–||–||–||(10||)||–||–||–|
|Loss before income taxes||(3,569||)||(1.3||)||(881||)||(0.3||)||(24,765||)||(3.1||)||(10,818||)||(1.3||)|
|Benefit for income taxes||(483||)||(0.2||)||(112||)||–||(1,686||)||(0.2||)||(3,341||)||(0.4||)|
|Net Loss Per Share:|
(1) Beginning in the first quarter of 2016, the Company reclassified its Amortization of intangible assets from “Other restaurant operating costs” to “Depreciation and amortization.” The Company believes this reclassification better aligns the Company with its peers and increased both current and prior period restaurant level margin by approximately 20 basis points. The schedule accompanying the condensed unaudited consolidated financial statements has been revised to reflect the reclassification of Amortization of intangible assets.
|Financial Results For the Third Quarter of Fiscal Year 2016|
|(Amounts in thousands)|
|March 1,||June 2,|
|CONDENSED BALANCE SHEETS||2016||2015|
|Cash and Cash Equivalents||$||52,458||$||75,331|
|Income Tax Receivable||2,958||–|
|Prepaid Rent and Other Expenses||11,520||12,398|
|Assets Held for Sale||3,402||5,453|
|Total Current Assets||98,791||118,880|
|Property and Equipment, Net||722,570||752,174|
|Deferred Income Taxes, Net||1,995||–|
|Current Portion of Long-Term Debt, including|
|Income Tax Payable||–||1,069|
|Deferred Income Taxes, Net||2,612||7|
|Other Current Liabilities||85,308||
|Total Current Liabilities||98,884||110,381|
|Long-Term Debt and Capital Leases||218,117||231,017|
|Deferred Income Taxes, Net||–||1,442|
|Deferred Escalating Minimum Rents||51,793||50,768|
|Other Deferred Liabilities||66,116||66,261|
|Total Liabilities and|
|Non-GAAP Reconciliation Table|
|Reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net (Loss)/Income, and Adjusted Net (Loss)/Income Per Share|
|(Amounts in thousands except per share amounts)|
|13 Weeks||13 Weeks||39 Weeks||39 Weeks|
|March 1,||March 3,||March 1,||March 3,|
|Depreciation and Amortization||12,732||12,961||38,474||39,319|
Interest Expense and Gain on Extinguishment of Debt
|Benefit for Income Taxes||(483||)||(112||)||(1,686||)||(3,341||)|
|Closures and Impairments, Net (1)||6,123||3,991||18,908||6,548|
|Trademark Impairment (2)||–||–||1,999||–|
|Executive Transition (3)||
|Closures and Impairments, Net (net of tax) (1)(5)||3,692||2,407||11,403||3,949|
|Trademark Impairment (net of tax) (2)(5)||–||–||1,205||–|
|Executive Transition (net of tax) (3)(5)||–||–||(768||)||–|
|Debt Prepayment Penalties & Deferred Financing Fees (net of tax) (4)(5)||36||–||690||293|
|Income Tax (Benefit)/Provision Adjusted to Statutory Rate (6)||933||238||8,143||953|
|Adjusted Net (Loss)/Income||$||1,575||$||1,876||$||(2,406||)||$||(2,282||)|
|Net Loss Per Share||$||(0.05||)||$||(0.01||)||$||(0.38||)||$||(0.12||)|
|Adjusted Net (Loss)/Income Per Share||$||0.03||$||0.03||$||(0.04||)||$||(0.04||)|
|Basic Shares Outstanding||60,918||60,643||61,239||60,532|
|Diluted Shares Outstanding (7)||61,232||61,506||61,239||60,532|
|(1) Includes property impairments, restaurant lease reserves, closing cost adjustments, and gain on the sale of surplus properties.|
|(2) In connection with the planned sale and closures of our Company-owned Lime Fresh restaurants, we recorded a $2.0 million trademark impairment charge representing a partial impairment of the Lime Fresh trademark during the second quarter of fiscal year 2016. The Lime Fresh trademark has a net book value of $0.9 million remaining at March 1, 2016.|
|(3) 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 the first quarter 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.|
|(4) Debt prepayment penalties and the write-off of deferred financing fees are classified within Interest Expense and Gain on Extinguishment of Debt, which are already included in EBITDA calculation and therefore not a separate add-back for Adjusted EBITDA.|
|(5) Adjusted for income taxes based on a statutory tax rate of 39.69%.|
|(6) Represents the difference between the benefit for Taxes at the quarterly effective tax rate versus the statutory tax rate of 39.69%. Adjusted Net (Loss)/Income per share applies the statutory rate to pre-tax loss and adjustments to loss.|
|(7) Adjusted Net Income per share figures are calculated based on diluted shares outstanding whereas Net Loss and Adjusted Net Loss per share figures are calculated based on basic shares outstanding.|
|Ruby Tuesday, Inc.|
|Number of Restaurants at End of Period|
|March 1,||March 3,|