Ruby Tuesday (NYSE: RT – News) announced that the company will incur restructuring charges in its second and third fiscal quarters of 2009 related to impairment and lease charges. The second quarter restructuring expense will include a non-cash impairment charge associated with the third quarter closure of approximately 40 locations and approximately 30 additional locations anticipated to close over the next several years, as well as a non-cash impairment charge related to approximately 35-40 surplus properties which are marketed for sale. The third quarter restructuring expense will include costs associated with lease terminations and future lease obligations related to the 40 third quarter closures. Any lease charges related to additional closures will be recorded in the quarter that the locations are actually closed.
The pre-tax restructuring charges are anticipated to include approximately $30-$40 million of non-cash asset impairments to be recognized in the second quarter of fiscal 2009 as well as a projected $10-$15 million for the lease-related costs to be recognized in the third quarter of fiscal 2009. The aggregate pre-tax restructuring charges are estimated to be in the range of $40-$55 million and subsequent to our third quarter, will favorably impact our future operating results.
In addition, during the second quarter, the company concluded its goodwill was impaired. Due to the poor overall economic conditions, declines in fair value, declining sales at company-owned restaurants, and a challenging environment for the restaurant industry, the company will record a pre-tax, non-cash charge in the second quarter of approximately $19 million.
The company expects to continue to remain in compliance with its bank covenants as of the second fiscal quarter.
Management will provide more detailed information in conjunction with its second quarter conference call to be held on January 7, 2009.