- The Company reported net income of $3.6 million, or $0.11 per diluted share, in the third quarter of 2016 compared to net income of $2.6 million, or $0.08 per diluted share, in the third quarter of 2015.
- Income from continuing operations was $3.5 million, or $0.11 per diluted share, compared to income from continuing operations of $2.6 million, or $0.08 per diluted, share in the third quarter of 2015.
- Net income in the third quarter of 2016 included a non-recurring $335 thousand benefit related to the settlement of disputed rent charges from 2006 through 2015 for a leased Company restaurant, which were incurred in the second quarter of 2016.
- Excluding the previously noted benefit and results from discontinued operations, non-GAAP diluted earnings per common share were $0.10 in the third quarter of 2016 compared to $0.08 in the third quarter of 2015. The Company believes that non-GAAP diluted earnings per common share provides a useful alternative measure of financial performance. Investors are advised to see the attached Reconciliation of non-GAAP Financial Measure table for additional information.
- During the third quarter the Company repurchased 553 thousand shares of common stock under its current share repurchase program.
- One Company-owned Ruth's Chris Steak House restaurant opened in the third quarter of 2016, in El Paso, TX.
O'Donnell added, "During the third quarter, we opened our newest Ruth's Chris Steak House, in El Paso, TX. The restaurant's comfortably elegant atmosphere is enhanced by a large open bar and an outdoor patio with beautiful city views. I am pleased with the early success of this restaurant and the focus of our team members as they were profitable in their very first month of operation."Review of Third Quarter 2016 Operating Results Total revenues in the third quarter of 2016 were $83.8 million, an increase of 4.3% compared to $80.3 million in the third quarter of 2015. Company-owned Sales
- For the third quarter of 2016, Company-owned comparable restaurant sales increased 2.1%, which consisted of an average check increase of 3.6%, offset by a traffic decrease of 1.5%.
- Average unit weekly sales were $89.8 thousand in the third quarter of 2016, compared to $87.7 thousand in the third quarter of 2015.
- 68 Company-owned Ruth's Chris Steak House restaurants were open at the end of the third quarter of 2016, compared to 66 Ruth's Chris Steak House restaurants at the end of the third quarter of 2015. Total operating weeks for the third quarter of 2016 increased to 877 from 858 in the third quarter of 2015.
- Franchise income in the third quarter of 2016 was flat year-over-year at $3.9 million.
- 80 franchisee-owned restaurants were open at the end of the third quarter of 2016 compared to 79 at the end of the third quarter of 2015.
- Food and beverage costs, as a percentage of restaurant sales, decreased 140 basis points in the third quarter of 2016 to 30.1%, primarily driven by a 3.5% increase in average check and a 6.3% decline in total beef costs.
- Restaurant operating expenses, as a percentage of restaurant sales, decreased 80 basis points in the third quarter of 2016 to 51.5%, due to the previously noted benefit for disputed rent costs and leverage from higher sales.
- General and administrative expenses, as a percentage of total revenues, decreased 50 basis points in the third quarter of 2016 to 8.8% driven primarily by a decrease in performance based compensation.
- Pre-opening costs were $0.6 million in the third quarter of 2016 compared to $0.1 million in the third quarter of 2015 driven by a new restaurant opening in El Paso, TX during the third quarter of 2016 as well pre-opening rent costs related to early 2017 restaurant openings.
At the end of the third quarter of 2016, the Company had $38 million in debt outstanding under its senior credit facility.Quarterly Cash Dividend Subsequent to the end of the third quarter of 2016, the Company's Board of Directors approved the payment of a quarterly cash dividend to shareholders of $0.07 per share. This dividend will be paid on November 23, 2016 to shareholders of record as of the close of business on November 10, 2016, and represents a 17% increase from the quarterly cash dividend paid in November of 2015. Development Update During the third quarter, the Company opened one new Ruth's Chris Steak House restaurant in El Paso, TX. Subsequent to the end of the third quarter of 2016, the Company signed an agreement to operate a new restaurant in Tulsa, OK which is expected to open in the first quarter of 2017. This restaurant will be located in the River Spirit Casino and is under an operating agreement, similar to our Cherokee, NC restaurant. New Ruth's Chris Steak House restaurants in Cleveland, OH and Waltham, MA are expected to open during the first quarter of 2017. As a result of early 2017 restaurant openings, we expect higher year over year pre-opening costs in the fourth quarter of 2016. Subsequent to the end of the third quarter of 2016, new franchised restaurants opened in Odenton, MD and Greenville, SC. As a result of the opening of the new Odenton, MD restaurant, one of the franchised locations in downtown Baltimore, MD is expected to close in the fourth quarter of 2016. Franchisees are currently expected to complete the relocation of restaurants in Huntsville, AL in the fourth quarter of 2016, and Mississauga, Canada during the first half of 2017. Financial Outlook Based on current information, Ruth's Hospitality Group, Inc. is reaffirming its full year 2016 outlook, and revising expectations of the full year share count for recent repurchases, as follows:
- Food and beverage costs of 29.0% to 31.0% of restaurant sales
- Restaurant operating expenses of 47.0% to 49.0% of restaurant sales
- Marketing and advertising costs of 2.9% to 3.1% of total revenues
- General and administrative expenses of $28.5 million to $30.5 million
- Effective tax rate of 32% to 34%
- Capital expenditures of $28 million to $30 million
- Fully diluted shares outstanding of 32.0 million to 32.5 million (exclusive of any future share repurchases under the Company's share repurchase program)
Conference CallThe Company will host a conference call to discuss third quarter 2016 financial results today at 8:00 AM Eastern Time. Hosting the call will be Michael P. O'Donnell, Chairman and Chief Executive Officer, and Arne G. Haak, Executive Vice President and Chief Financial Officer. The conference call can be accessed live over the phone by dialing 719-325-2330. A replay will be available one hour after the call and can be accessed by dialing 858-384-5517; the password is 1595138. The replay will be available until November 4, 2016. 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 145 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, to make reservations, 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 new restaurant openings, capital expenditures and the impact of healthcare inflation and minimum wage legislation, 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: 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 Company employees, the sale or preparation of food, the sale of alcoholic beverages and the opening of new restaurants; harmful actions taken by the Company's franchisees; a material failure, interruption or security breach of the Company's information technology network; repeal or reduction of the federal FICA tip credit; unexpected expenses incurred as a result of the 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; the impact of litigation; the restrictions imposed by the Company's Amended and Restated Credit Agreement; and changes in, or the discontinuation of, the Company's quarterly cash dividend payments or share repurchase program. 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 27, 2015, which is 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 Income - Preliminary and Unaudited|
|(Amounts in thousands, except share and per share data)|
|13 Weeks Ended||39 Weeks Ended|
|September 25,||September 27,||September 25,||September 27,|
|Other operating income||1,086||1,078||3,914||3,497|
|Costs and expenses:|
|Food and beverage costs||23,723||23,709||78,022||77,971|
|Restaurant operating expenses||40,549||39,321||127,026||121,286|
|Marketing and advertising||2,546||2,312||7,134||6,352|
|General and administrative costs||7,346||7,442||22,068||21,334|
|Depreciation and amortization expenses||3,435||3,241||9,907||9,347|
|Total costs and expenses||78,173||76,137||245,822||236,917|
|Other income (expense):|
|Interest expense, net||(333||)||(188||)||(799||)||(588||)|
|Income from continuing operations before income tax expense||5,176||3,976||31,757||31,220|
|Income tax expense||1,668||1,338||10,410||10,145|
|Income from continuing operations||3,508||2,638||21,347||21,075|
|Income (loss) from discontinued operations, net of income taxes||75||(73||)||(94||)||(582||)|
|Basic earnings (loss) per common share:|
|Basic earnings per share||$||0.11||$||0.08||$||0.67||$||0.60|
|Diluted earnings (loss) per common share:|
|Diluted earnings per share||$||0.11||$||0.08||$||0.66||$||0.59|
|Shares used in computing net income (loss) per common share:|
|Dividends declared per common share||$||0.07||$||0.06||$||0.21||$||0.18|
|Reconciliation of Non-GAAP Financial Measure - Unaudited|
|(Amounts in thousands, except share data)|
|13 Weeks Ended||39 Weeks Ended|
|September 25,||September 27,||September 25,||September 27,|
|GAAP net income||$||3,583||$||2,565||$||21,253||$||20,493|
|GAAP Income tax expense||1,668||1,338||10,410||10,145|
|GAAP Income (loss) from discontinued operations||(75||)||73||94||582|
|GAAP Income from continuing operations before income tax expense||5,176||3,976||31,757||31,220|
|Restaurant closing costs||-||-||148||-|
|Accrual of prior years' rent dispute costs||(335||)||-||130||-|
|Adjusted net income from continuing operations before income taxes||4,841||3,976||32,035||31,220|
|Adjusted income tax expense (1)||1,537||1,338||10,519||10,145|
|Non-GAAP net income||$||3,304||$||2,638||$||21,516||$||21,075|
|GAAP diluted earnings per common share||0.11||0.08||0.66||0.59|
|Non-GAAP diluted earnings per common share||0.10||0.08||0.66||0.61|
|Weighted-average number of common shares outstanding - diluted||31,737,036||34,338,440||32,437,142||34,537,553|
|(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.|