Ruth’s Hospitality Group, Inc. (NASDAQ: RUTH) today reported unaudited financial results for its first quarter ended March 25, 2012. For the first quarter of fiscal year 2012, the Company reported net income of $6.1 million. Due to the previously announced retirement of the Company’s preferred shares in March, the net income applicable to preferred and common shareholders was reduced by $35.8 million to a loss of $30.3 million or $0.89 loss per diluted share. The reduction reflects the excess of redemption value over the carrying value of preferred shares redeemed during the quarter. In the first quarter of 2011, the Company reported net income applicable to preferred and common shareholders of $6.2 million, or $0.14 per diluted share. Highlights for the first quarter of 2012 compared to the first quarter of 2011 were as follows: Total revenues in the first quarter rose 3.4% to $101.0 million compared to $97.7 million in the prior year.
- Company-owned comparable restaurant sales for Ruth’s Chris Steak House increased 3.7%.
- Company-owned comparable restaurant sales for Mitchell’s Fish Market were flat.
- Food and beverage costs, as a percentage of restaurant sales, increased 130 basis points in the first quarter to 32.0% driven by unfavorable beef costs.
- Restaurant operating expenses, as a percentage of restaurant sales, decreased 40 basis points in the first quarter to 48.8% as increased sales leverage offset higher health insurance costs.
- Marketing and advertising costs, as a percentage of total revenues, decreased 130 basis points to 1.7% in the first quarter due to a decrease in TV production costs and a shift in the timing of advertising campaigns.
- General and administrative expenses increased $1.0 million to $6.9 million in the first quarter due to increases in legal fees and personnel costs. The increased legal fees pertained to the amendment to our senior credit facility, the redemption of our preferred stock, and on-going litigation.
- In February of 2012, the Company successfully amended its senior credit facility, which among other items, extends the agreement until 2017 and results in increased financial flexibility and lower borrowing costs. In conjunction with the refinancing, the Company recorded a one-time pre-tax expense of $0.9 million related to legal fees and the write-off of financing costs previously deferred.
- In March of 2012, the Company repurchased and retired all of its Series A 10% Redeemable Convertible Preferred Stock for $60 million. The purchase was funded using borrowings from the Company’s amended senior credit facility. After the repurchase and retirement of the preferred stock, the Company’s fully diluted common share base decreased by approximately 8.6 million shares and the 10% annual dividend on the preferred stock, which amounted to $2.5 million in fiscal year 2011, was eliminated.
Michael P. O'Donnell, Chairman, President and Chief Executive Officer of Ruth's Hospitality Group, Inc., stated, “We continue to be pleased with the overall strength of our business, in particular the ongoing momentum of the Ruth’s Chris brand. Same store sales at Ruth’s grew for the eighth consecutive quarter, while traffic grew for the ninth straight period. This growth helped offset higher beef costs and was a key driver of our year-over-year non-GAAP diluted earnings per share growth. During the quarter, we also significantly improved our capital structure with the refinancing of our credit facility and the repurchase and retirement of our preferred stock. We believe the two transactions reflect the tangible progress our entire team has made since the issuance of the preferred shares two years ago and positions the Company for improved earnings and cash flow, while the flexibility to invest in our business and create long-term value for our shareholders.”At the end of the first quarter of 2012, the Company had $77 million in debt outstanding under its senior credit facility, an increase of $55 million from $22 million at the end of the fourth quarter of 2011. Management expects to grow the number of Company-owned and franchise-owned restaurants. A new Ruth's Chris Steak House located at Harrah's casino in Cherokee, NC is targeted to be opened in May 2012 under a management agreement between the Company and the Eastern Band of Cherokee Indians. A Company-owned Ruth’s Chris Steak House is also scheduled to be opened in Cincinnati, Ohio in November 2012. Additionally a second franchise-owned restaurant located in Dubai was opened in April 2012. Management anticipates that an additional two to four franchise-owned restaurants will open in 2012. Review of First Quarter 2012 Operating Results Total revenues, which include Company-owned restaurant sales, franchise income, and other operating income, were $101.0 million in the first quarter of 2012 compared to $97.7 million in the same quarter last year.
Company-owned restaurant sales increased 3.3% to $97.3 million for the first quarter of 2012 from $94.2 million in the same quarter last year. Total operating weeks for all brands during the first quarter were flat year-over-year at 1,105, excluding restaurants that closed later in fiscal 2011.Ruth’s Chris Steak House Sales
- 63 Company-owned Ruth’s Chris Steak House restaurants were open at the end of the first quarter of 2012 compared to 64 at the end of the prior year first quarter.
- Total operating weeks for the quarter were flat year-over-year at 819 and exclude discontinued operations in Santa Barbara, CA.
- Average weekly sales for Ruth’s Chris Steak House were $94.8 thousand in the first quarter of 2012 compared to $91.0 thousand in the first quarter of 2011.
- For the first quarter of 2012, Company-owned comparable restaurant sales at Ruth’s Chris Steak House increased 3.7%, which consisted of an entrée increase of 2.2% along with an average check increase of 1.5%.
- 19 Company-owned Mitchell’s Fish Market restaurants were open at the end of the first quarter of 2012 compared to 20 at the end of the prior year first 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 flat year over year at $70.2 thousand in the first quarter.
- Comparable restaurant sales at Mitchell’s Fish Market were also flat due to an entrée increase of 0.1% and an average check decrease of 0.1%.
- 68 franchise-owned Ruth’s Chris Steak House restaurants were open at the end of the first quarter of 2012 compared to 67 at the end of the prior first year quarter.
- Franchise income increased 13.1% to $3.5 million in the first quarter of 2012 from $3.1 million in the prior year first quarter, partially driven by the opening of two new locations in 2011: Grand Rapids, MI and Asheville, NC.
- Comparable franchise-owned restaurant sales increased 7.6% in the first quarter of 2012, which consisted of an entrée increase of 4.7% and an average check increase of 2.9%. The increase was driven by a 9.8% increase in international comparable franchise-owned restaurant sales.
Based on current information, Ruth's Hospitality Group, Inc. is revising 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
- Basic shares outstanding of 34.0 million to 34.5 million
- Fully-diluted shares outstanding of 35.0 million to 36.0 million
For further information about our restaurants, to make reservations, or to purchase gift cards, please visit: www.RuthsChris.com, www.MitchellsFishMarket.com, www.MitchellsSteakhouse.com and www.Camerons-Steakhouse.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. These forward-looking statements include all statements other than those made solely with respect to historical facts and include, but are not limited to, statements regarding the Company’s outlook on earnings, cash flow and operational flexibility. Actual results could differ materially from those projected, implied or anticipated by these forward-looking statements. Some of the factors that could cause actual results to differ include the risk factors identified in the reports the Company files with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 25, 2011 and subsequently filed Quarterly Reports on Form 10-Q, all of which 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 after the date hereof.
|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|
|March 25,||March 27,|
|Other operating income||292||500|
|Costs and expenses:|
|Food and beverage costs||31,127||28,885|
|Restaurant operating expenses||47,494||46,339|
|Marketing and advertising||1,740||2,929|
|General and administrative costs||6,886||5,877|
|Depreciation and amortization expenses||3,707||3,711|
|Total costs and expenses||91,031||87,240|
|Other income (expense):|
|Interest expense, net||(481||)||(831||)|
|Debt issuance costs written-off||(807||)||-|
|Income from continuing operations before income tax expense||8,703||9,449|
|Income tax expense||2,591||2,845|
|Income from continuing operations||6,112||6,604|
|Loss (income) from discontinued operations, net of income tax benefit (expense)||17||(327||)|
|Preferred stock dividends||514||623|
|Accretion of preferred stock redemption value||73||88|
|Excess of redemption value over carrying value of preferred shares redeemed||35,776||-|
|Net income (loss) applicable to preferred and common shareholders||$||(30,268||)||$||6,220|
|Basic earnings (loss) per common share:|
|Basic earnings (loss) per share||$||(0.89||)||$||0.15|
|Diluted earnings (loss) per common share:|
|Diluted earnings (loss) per share||$||(0.89||)||$||0.14|
|Shares used in computing net income (loss) per common share:|
|RUTH'S HOSPITALITY GROUP, INC|
|Selected Balance Sheet Data|
|(dollar amounts in thousands)|
|March 25,||December 25,|
|Cash and cash equivalents||$||3,054||$||3,925|
|Total shareholders' equity||69,812||99,640|
|Reconciliation of Non-GAAP Financial Measure|
|(Unaudited - amounts in dollars, except share data)|
|13 Weeks Ended|
|March 25,||March 27,|
|GAAP net income (loss) applicable to preferred and common shareholders||$||(30,268||)||$||6,220|
|Net of tax impact of excluding certain non-recurring items - see Note||648||(354||)|
|Net of tax impact of excluding income on discontinued operations||17||(327||)|
|Net of tax impact of excluding excess of redemption value over carrying value of preferred shares redeemed||35,776||-|
|Non-GAAP net income applicable to preferred and common shareholders||$||6,173||$||5,539|
|Non-GAAP diluted earnings per share||$||0.15||$||0.13|
|Weighted average number of common shares outstanding - basic||34,170,628||34,000,032|
|Dilutive convertible preferred stock||7,104,964||8,620,690|
|Weighted-average number of common shares outstanding - diluted||42,123,372||43,084,686|