Industry News | April 12, 2007

Ruby Tuesday, Inc. Reports 3QT 2007 Results

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Ruby Tuesday, Inc. (NYSE: RI) reported diluted earnings per share of $0.49 on net income of $28.7 million for the Company’s third quarter of fiscal 2007, which ended on March 6, 2007. This compares to diluted earnings per share of $0.50 on net income of $30.2 million for the third quarter of the prior year. During the first quarter of fiscal year 2007, the Company adopted Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (“SFAS 123R”) on a modified prospective basis, which reduced diluted earnings per share by $0.02 in the third quarter. During the third quarter of fiscal year 2007, the Company recorded a lease-related charge associated with the bankruptcy of Specialty Restaurant Group, LLC (“SRG”), which reduced diluted earnings per share by $0.06. Excluding the impact of SFAS 123R and the charge for SRG, adjusted diluted earnings per share was $0.57 and increased 14% over the prior year. Effective at the start of trading on April 12, 2007, the Company’s NYSE ticker symbol will be changed from RI to RT.

Quarterly Highlights

Same-restaurant sales for the third quarter decreased 1.0% and increased 1.8% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively, as compared to same-restaurant sales increases of 4.7% and 5.4%, respectively, in the third quarter of the prior year. The Company estimates the third quarter of fiscal 2007 was negatively impacted by approximately 0.5% due to heavier winter weather than in the same period of the prior year. From March 7, 2007 through April 3, 2007, period-to-date same-restaurant sales were down approximately 4.7% and 2.6% at Company-owned and domestic franchise restaurants, respectively, as compared to same-restaurant sales increases of 6.3% and 10.6% for the same period in the prior year. Included in March sales is an estimated 1.0% negative impact due to heavier winter weather compared to the same period of fiscal 2006.

Sandy Beall, Founder and CEO commented, “We had a good quarter. Our financial performance excluding the SRG write off was very good. Our sales, while not great, were reasonably good as compared to our competitors and our very positive same-restaurant sales last year. In addition, we made significant headway on our three key initiatives of uncompromising freshness and quality, gracious hospitality, and our remodeling / re-imaging program, that we are especially excited about, which continue to move our brand towards a high-quality casual dining restaurant.

“Our fourth quarter sales started off weaker than we would have liked, and we believe this is due to a combination of very strong same-restaurant sales performance last March where we were up 6.3% and 10.6% at Company-owned and domestic franchise restaurants, respectively, for the first four weeks, combined with weather, an even softer economic environment, and significant discount pricing by almost all of our competitors. We will continue focusing on our plans and profitability until the economic and consumer restaurant spending environment improves.

“As a result of our focused plans and strategies, we continued to create value for our shareholders. We generated solid free cash flow from our business, our normalized earnings were up 14%, and we executed on our capital structure plans resulting in significantly fewer outstanding shares – approximately 7% repurchased this quarter and almost 20% of shares repurchased over the last 18 months. Finally, we paid out a dividend which amounts to an approximate 1.7% yield on an annual basis.”

Other highlights for the 13-week third quarter:

* Total revenue increased 11.6% over the same period of the prior year.

* Average restaurant volumes at Company-owned Ruby Tuesday restaurants increased 0.8% over the same period of the prior year.

* The Company opened six new Ruby Tuesday restaurants during the quarter and acquired eleven restaurants from its South Florida franchisee. Eight restaurants were closed during the quarter, while four were sold to an existing franchisee.

* Domestic and international franchisees opened three new Ruby Tuesday restaurants during the quarter and closed one.

* Sales at domestic and international franchise Ruby Tuesday restaurants (which is the basis for determining royalty fees included in franchise income on the Company’s income statement) totaled $121,725,000 and $117,444,000 for the third quarter of fiscal 2007 and 2006, respectively. Fiscal 2007 sales at franchise restaurants were reduced due to the acquisition of the Orlando, Florida franchisee in the first quarter of fiscal 2007 and the South Florida franchisee at the beginning of the third quarter of fiscal 2007.

* Capital expenditures were $29.2 million for the quarter.

* The Company repurchased 3.9 million shares of its common stock during the third quarter at an average price of $28.70 per share. As of the end of the third quarter, 6.3 million shares remained authorized for repurchase under the Company’s ongoing share repurchase program.

* During the first quarter of fiscal year 2007, the Company adopted SFAS 123R on a modified prospective basis, which reduced fiscal third quarter diluted earnings per share by $0.02.

* The Company had 56.1 million shares of common stock outstanding at the end of the quarter.

Year-to-Date Highlights

* The Company opened thirty-eight new Ruby Tuesday restaurants, acquired twenty-eight restaurants from Florida franchisees, closed ten restaurants, and sold or leased seven restaurants to existing franchisees.

* Aside from the restaurants purchased from or sold to the Company, domestic and international franchisees opened twenty new Ruby Tuesday restaurants, while two were closed.

* Sales at domestic and international franchise Ruby Tuesday restaurants (which is the basis for determining royalty fees included in franchise income on the Company’s income statement) totaled $353,671,000 and $330,932,000 for fiscal 2007 and 2006, respectively. Fiscal 2007 sales at franchise restaurants were reduced due to the acquisition of the Orlando, Florida and South Florida franchisees.

* During the first quarter of fiscal year 2007, the Company adopted SFAS 123R on a modified prospective basis, which reduced fiscal year-to-date diluted earnings per share by $0.07.

* Year to date, including repurchases subsequent to the end of the third quarter of fiscal 2007, the Company has repurchased approximately 5.7 million shares (approximately 10% of shares outstanding at the end of the second fiscal quarter) of its common stock at an average price of $28.94 per share.

Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby Tuesday brand restaurants in 44 states, the District of Columbia, Puerto Rico, and 13 foreign countries. As of March 6, 2007, the Company owned and operated 678 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 196 and 52 restaurants, respectively. Ruby Tuesday, Inc. is traded on the New York Stock Exchange (Symbol: RI).