Ruby Tuesday reports fiscal Q3 net loss of US$7.3M, compared to year-ago earnings of US$2.2M, as total revenue falls 3.8% to US$295.6M
April 9, 2014
– Ruby Tuesday, Inc. (RT) today reported financial results for the fiscal third quarter ended March 4, 2014.
Results for the third quarter include:
Total revenue from continuing operations of $295.6 million compared to $307.4 million in the same quarter of the prior year, a decrease of $11.8 million due to a net reduction of 30 Company-owned restaurants since the third quarter of the prior year and a decrease in same-restaurant sales at Company-owned Ruby Tuesday restaurants.
Same-restaurant sales decreased 1.9% at Company-owned Ruby Tuesday restaurants and decreased 2.2% at domestic Ruby Tuesday franchise restaurants compared to the same quarter of the prior year. Same-restaurant guest counts were down 1.7% for the quarter, reflecting an improvement over the second quarter decline of 6.3%.
Net loss from continuing operations of $7.4 million compared to net income of $4.7 million from continuing operations for the same quarter in the prior year. Excluding special items, net loss from continuing operations was $4.5 million compared to net income from continuing operations of $6.3 million in the same quarter of the prior year. (See non-GAAP reconciliation table below)
Diluted loss per share from continuing operations of $0.12 compared to diluted earnings per share from continuing operations of $0.08 in the same quarter of the prior year. Excluding special items, diluted loss per share from continuing operations was $0.07 compared to diluted earnings per share from continuing operations of $0.10 in the same quarter of the prior year. (See non-GAAP reconciliation table below)
Increased our income tax valuation allowance by $5.6 million, primarily related to current and prior year federal tax credits and state net operating loss carryforwards. Due to losses in recent years, we recorded a valuation allowance for substantially all net deferred tax assets in the prior year and increased the valuation allowance in the current period for increases in deferred tax assets arising from our tax credit and state net operating loss carryforwards. Our valuation allowance for deferred tax assets will not be reversed until we have sufficient taxable income.
Total book debt of $267 million at the end of the third quarter compared to $306 million for the prior-year quarter, a decrease of $39 million. Additionally, we had $44.5 million of cash at quarter end compared to $31.8 million a year ago.
During the quarter, 24 Company-owned Ruby Tuesday restaurants were closed. Domestic and international franchisees opened two and closed two Ruby Tuesday restaurants. One Company-owned Lime Fresh restaurant was closed during the quarter. Franchisees did not open or close any Lime Fresh restaurants.
JJ Buettgen, Chairman, President and CEO, commented, “We have made solid progress over the past eight months on our brand transformation strategy. The execution of this strategy resulted in sequential quarterly improvement in our same-restaurant sales and guest counts, both of which also reflected sequential improvement by month during the third quarter. We continue to make progress on the four primary touch points of our strategy: menu, service, atmosphere, and communication, and we have made advances on key initiatives as we work to reposition the brand as more energetic, affordable, and broadly-appealing.
We believe there is great opportunity as we execute on our brand transformation strategy and continue to build on this early momentum. We still have work to do, but we are pleased with our progress over the last two quarters. We are confident in our brand transformation strategy and believe we have the right teams in place to support our goal of increasing guest counts, growing same-restaurant sales, and increasing shareholder value.”
Update on Cost Structure Initiatives
As announced earlier in the year, the Company has undertaken a comprehensive review of its cost structure. In our second quarter earnings release we announced that we had identified initiatives that will reduce cost of goods sold by $6.0 million annually and SG&A expense by $7.0 million annually. All initiatives have been implemented and are starting to deliver their projected savings. These initiatives are expected to save $3.0 million in the fourth quarter of fiscal 2014 and deliver their targeted annual savings in fiscal year 2015.
We continue to review all aspects of our business to ensure that we are operating efficiently and cost effectively. Key areas that we are focusing on include supply chain, restaurant operations, and marketing.
Fourth Quarter Outlook
As we discussed on our fourth quarter fiscal 2013 earnings call, as a result of a number of strategic initiatives we are implementing to reposition our brand, combined with the challenging casual dining environment, we are not providing earnings guidance. There are, however, certain items we would like to highlight, including the following:
Same-Restaurant Sales – We anticipate same-restaurant sales for the fourth quarter to be down 1.0% to up 1.0%.
Restaurant Closings – We plan to close approximately six to nine additional Ruby Tuesday restaurants during the fourth quarter, for a total of 30 to 33 closures in the second half of this year, in connection with the previously announced plan. In conjunction with the closing of these restaurants, we expect to incur a charge in the range of $2.5 to $3.5 million in the fourth quarter for lease reserves and other closure related costs.
Tax Credits – We do not anticipate recognizing a benefit from FICA Tip and Work Opportunity Tax Credits generated during fiscal 2014. The historical income tax benefit from these tax credits has been $2.2 to $2.4 million per quarter. As was the case in our third quarter, further taxable losses in fiscal 2014 would result in additional tax credit deferred tax valuation allowances above historical levels as credits previously utilized in prior years would become limited due to the carryback of fiscal 2014’s net operating loss to those years.
Capital Expenditures – Estimated to be $7 to $10 million in the fourth quarter and approximately $30 to $33 million for the year.
Excess Real Estate – In the fourth quarter, we expect to generate $2 to $4 million of cash proceeds from the disposition of excess real estate and $13 to $15 million for the year.
Non-GAAP Earnings Reconciliation
The Company believes excluding special items from its financial results provides investors with a clearer understanding of the Company’s ongoing operating performance and comparison to prior-period results.
ABOUT RUBY TUESDAY
Ruby Tuesday, Inc. has 755 Company-owned, operated, and/or franchised Ruby Tuesday brand restaurants in 45 states, the District of Columbia, 11 foreign countries, and Guam, in addition to 28 Company-owned and/or franchised Lime Fresh brand restaurants in five states, the District of Columbia, and one foreign country. As of March 4, 2014, we owned and operated 679 Ruby Tuesday restaurants and franchised 76 Ruby Tuesday restaurants, comprised of 31 domestic and 45 international restaurants. We also owned and operated 20 Lime Fresh restaurants and franchised eight Lime Fresh restaurants, comprised of six domestic and two 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.
Ruby Tuesday, Inc. is traded on the New York Stock Exchange (RT).
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