Ruth’s Hospitality Group, Inc. Reports Full Year and Fourth Quarter 2012 Financial Results

Ruth’s Chris Steak House comparable sales increase 5.4% for 11th straight quarterly gain

Mitchell’s Fish Market comparable sales increase 3.4%

WINTER PARK, Fla.--()--Ruth’s Hospitality Group, Inc. (NASDAQ: RUTH) today reported unaudited financial results for its fourth quarter and full year ended December 30, 2012.

Highlights for the 14-week fourth quarter of 2012 compared to the 13-week fourth quarter of 2011 were as follows:

Net income was $3.6 million or $0.10 per diluted share in the fourth quarter of 2012 compared to net income applicable to preferred and common shareholders of $1.9 million or $0.04 per diluted share in the fourth quarter of 2011.

  • Expenses in the fourth quarter of 2012 included a $683 thousand gain on the settlement of unclaimed property liabilities and a $4.96 million net charge related to the future relocation of one restaurant, the non-cash impairment of assets at two other units, and the disposal of property and equipment. Expenses in the fourth quarter of 2011 included a $3.0 million non-cash charge for the impairment of an intangible asset and a $0.4 million non-cash loss on the disposal of property and equipment related to restaurant renovations.
  • Excluding these non-cash charges and income from discontinued operations, non-GAAP diluted earnings per common share was $0.18 compared to $0.09 in the prior year period. The Company believes that non-GAAP earnings per diluted share, which excludes non-recurring and non-operating items from both periods, provides a useful alternative measure of financial performance. Investors are advised to see the attached Reconciliation of Non-GAAP Financial Measures table for additional information.
  • The Company’s fourth quarter of 2012 consisted of 14 weeks compared to 13 weeks in the fourth quarter of 2011. The Company estimates that the extra week increased earnings by approximately $0.02 per share.

“We are extremely pleased with the continued strength of our business during the fourth quarter,” stated Michael P. O'Donnell, Chairman, President and Chief Executive Officer of Ruth's Hospitality Group, Inc. “Our same store sales increase of 5.4% at Ruth Chris Steak House marked the 11th consecutive quarter of improvement and represents over 20% growth over the last three years. We’re also pleased with the continued progress at Mitchell’s Fish Market that resulted in a third straight quarter of same store sales growth. Together, our top-line growth drove strong earnings during the quarter.”

“2012 was a year of significant accomplishments that not only resulted in strong results for the year, but will also provide benefits going forward,” added O’Donnell. “These results reflect the hard work and tireless dedication of our teammates and valued franchise partners. In addition to the consistent sales growth and improved earnings, we successfully refinanced our credit facility and retired our entire class of preferred shares. Furthermore, we have seen our new unit pipeline grow stronger and gain momentum with increased openings during the year, and we are on pace for further new unit growth in the year ahead. As we enter 2013, we believe that we are better positioned for improved earnings and cash flow, while maintaining the balance sheet flexibility to continue to invest in our business and create long-term value for our shareholders.”

Development Update

One franchised Ruth’s Chris Steak House opened during the fourth quarter in Niagara Falls, Canada and one company-owned Ruth’s Chris Steak House restaurant opened in Cincinnati, OH. In total, six new Ruth’s Chris Steak Houses opened during 2012, including four franchised restaurants and one restaurant operating under a management agreement.

Subsequent to the quarter end a new restaurant opened at the Harrah’s Las Vegas Casino and Hotel under a licensing agreement. The Company continues to work towards developing new Ruth’s Chris Steak Houses. The Company’s current development plans for 2013 include opening a new company-owned restaurant in Denver, CO and relocating its Houston, TX restaurant. The Company also expects its franchise partners to open an additional four to five restaurants in 2013.

Additionally, the Company recently announced that it has signed an agreement for the development of four new franchised Ruth's Chris Steak House restaurants to be opened in mainland China over the next three years. The new restaurants are planned for Shanghai and Beijing and will be the first Ruth’s Chris Steak House restaurants in mainland China.

Review of Fourth Quarter 2012 Operating Results

Total revenues in the fourth quarter rose 15.5% to $115.1 million compared to $99.6 million in the prior year. The Company estimates that approximately $9 million of the increase in revenues in the fourth quarter can be attributed to the 14th week.

  • Food and beverage costs, as a percentage of restaurant sales, decreased 40 basis points in the fourth quarter to 31.2% despite a 5.1% increase in beef prices. This was due to an increase in alcohol mix, pricing increases, and lower costs on other commodities.
  • Restaurant operating expenses, as a percentage of restaurant sales, decreased 310 basis points in the fourth quarter to 47.8% due to lower benefits costs, favorable utilities costs and the effect of higher sales on fixed costs.
  • Marketing and advertising costs in the fourth quarter increased 10 basis points to 4.2% due to a timing shift in advertising from the second quarter to the third and fourth quarters of 2012.
  • General and administrative expenses increased to $9.2 million in the quarter due to the extra week, increases in performance based compensation and contract labor, the filling of open positions, and an increase in stock-based compensation.

At the end of the fourth quarter of 2012, the Company had $45 million in debt outstanding under its senior credit facility, a decrease of $24 million from the $69 million in debt outstanding at the end of the third quarter of 2012.

Ruth’s Chris Steak House Sales

  • 64 company-owned Ruth’s Chris Steak House restaurants were open at the end of the fourth quarter of 2012 compared to 63 at the end of the prior year fourth quarter. Total operating weeks for the quarter increased to 893 from 819, including 64 additional weeks as a result of the 14th week.
  • Average weekly sales for Ruth’s Chris Steak House were $101.0 thousand in the fourth quarter of 2012, an increase of 7.0% compared to $94.4 thousand in the fourth quarter of 2011.
  • On a comparable 13-week basis, the 5.4% increase in company-owned comparable restaurant sales at Ruth’s Chris Steak House consisted of a traffic increase of 1.7% along with an average check increase of 3.6%.

Mitchell’s Fish Market Sales

  • 19 company-owned Mitchell’s Fish Market restaurants were open at the end of the fourth quarter of 2012 and 2011. Total operating weeks for the quarter increased to 266, including 19 additional weeks as a result of the 14th week. Total operating weeks exclude discontinued operations.
  • Average weekly sales at Mitchell’s Fish Market were $67.4 thousand in the fourth quarter of 2012, an increase of 5.2% compared to $64.0 thousand in the fourth quarter of 2011.
  • On a comparable 13-week basis, the 3.4% increase in comparable restaurant sales at Mitchell’s Fish Market consisted of a traffic increase of 5.4% and an average check decrease of 1.9%.

Franchise Income

  • 72 franchise-owned Ruth’s Chris Steak House restaurants were open at the end of the fourth quarter of 2012 compared to 68 at the end of the prior year fourth quarter.
  • Franchise income increased 7.9% to $3.9 million in the fourth quarter of 2012 from $3.6 million in the prior year period, driven by a 3.4% increase in comparable franchise restaurant sales, the 14th week during the quarter, and new franchised unit development during the last 12 months.

Review of Full Year 2012 Operating Results

For the full year 2012, the Company reported a net loss applicable to preferred and common shareholders of $20.0 million or ($0.58) per diluted share compared to a net income applicable to preferred and common shareholders of $16.7 million or $0.39 per diluted share in 2011.

  • In addition to the non-cash charges incurred in the fourth quarter, the Company’s expenses in 2012 included a one-time pre-tax expense of $0.9 million related to legal fees and the write-off of financing costs previously deferred in conjunction with the refinancing of the Company’s credit facility which enabled us to repurchase our preferred shares. 2012 also included a one-time $35.8 million reduction of net income available to preferred and common shareholders, reflecting the excess of redemption value over the carrying value in conjunction with the retirement of the Company’s preferred shares in March.
  • Expenses in 2011 included a one-time tax benefit of $4.0 million, a $3.0 million non-cash charge for the impairment of an intangible asset and a $0.4 million non-cash loss on the disposal of property and equipment related to restaurant renovations.
  • Excluding these non-cash charges and income from discontinued operations, non-GAAP diluted earnings per common share was $0.55 during the 53 weeks of 2012 compared to $0.32 during the 52 weeks of the prior year. Investors are advised to see the attached Reconciliation of Non-GAAP Financial Measures table for additional information.

Total revenues in 2012 rose 7.9% to $398.6 million compared to $369.6 million in the prior year. The increase in revenues was due to additional company and franchise restaurants, year-over-year increases in comparable store sales, and the additional week in fiscal year 2012.

  • Food and beverage costs, as a percentage of restaurant sales, increased 80 basis points to 31.8% compared to 2011 and were driven by beef costs which were up 13% year-over-year.
  • Restaurant operating expenses, as a percentage of restaurant sales, decreased 130 basis points for the full year to 50.5% due to cost management and the effect of higher sales on fixed costs.
  • Marketing and advertising costs, as a percentage of total revenues, decreased 40 basis points to 2.8% for the year due to leverage from higher sales.
  • General and administrative expenses, as a percentage of total revenues, increased 90 basis points to 7.1% for the year due to the extra week, increases in contract labor, the filling of open positions, and an increase in stock-based compensation.

Ruth’s Chris Steak House Sales

  • For the full-year, average unit volume at company-owned Ruth’s Chris Steak House restaurants was $4.8 million. On a 52-week basis, comparable restaurant sales increased 5.2%.

Mitchell’s Fish Market Sales

  • For the full-year, average unit volume at Mitchell’s Fish Market restaurants was $3.7 million. On a 52-week basis, comparable restaurant sales increased 2.5%.

Franchise Income

  • Franchise income for the full year increased 11.0% to $13.8 million in 2012 driven by an increase in comparable franchise restaurant sales, the 53rd week of the year, and new franchised unit development during the year. Comparable restaurant sales increased 4.6%.

Financial Outlook

The following statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks that could impact future operating results and financial conditions.

Based on current information, Ruth's Hospitality Group, Inc. is introducing its full year 2013 outlook:

  • Cost of goods sold of 32.5% to 33.5% of restaurant sales
  • Restaurant operating expenses of 50.0% to 51.0% of restaurant sales
  • Marketing and advertising of 3.0% to 3.5% of total revenues
  • General and administrative expenses of $27 million to $28 million
  • Effective tax rate of 28% to 32%
  • Capital expenditures of $14 to $16 million
  • Basic shares outstanding of 34.3 million to 35.0 million
  • Fully-diluted shares outstanding of 35.3 million to 36.0 million

Conference Call

The Company will host a conference call to discuss fourth quarter 2012 financial results today at 8:30 AM Eastern Time. Hosting the call will be Mike O’Donnell, Chairman, President and Chief Executive Officer, and Arne Haak, Executive Vice President and Chief Financial Officer.

The conference call can be accessed live over the phone by dialing 719-457-2697. A replay will be available one hour after the call and can be accessed by dialing 858-384-5517; the password is 7634985. The replay will be available until February 22, 2013. 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. (NASDAQ: RUTH) is a leading restaurant company focused exclusively on the upscale dining segment. The Company owns the Ruth’s Chris Steak House, Mitchell’s Fish Market, Mitchell’s Steakhouse and Cameron’s Steakhouse concepts. With more than 150 company and franchisee-owned restaurants worldwide, Ruth’s Hospitality Group, Inc. was founded in 1965 and is headquartered in Winter Park, Fla.

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)
             
14/13 Weeks Ended 53/52 Weeks Ended
December 30, December 25, December 30, December 25,
2012 2011 2012 2011
 
Revenues:
Restaurant sales $ 110,502 $ 95,409 $ 380,968 $ 353,606
Franchise income 3,881 3,598 13,836 12,464
Other operating income   696     634     3,785     3,503  
 
Total revenues 115,079 99,641 398,589 369,573
 
Costs and expenses:
Food and beverage costs 34,484 30,179 121,030 109,577
Restaurant operating expenses 52,788 48,560 192,417 183,294
Marketing and advertising 4,847 4,106 11,220 11,806
General and administrative costs 9,217 5,789 28,299 22,803
Depreciation and amortization expenses 3,632 3,884 14,556 14,859
Pre-opening costs 274 0 540 192
Loss on impairment and asset disposals, net 4,955 3,478 4,955 3,478
Restructuring benefit 0 0 0 (502 )
Gain on the settlement of unclaimed property liabilities (683 ) 0 (683 ) 0
       
Total costs and expenses 109,514 95,996 372,334 345,507
 
Operating income 5,565 3,645 26,255 24,066
 
Other income (expense):
Interest expense, net (605 ) (604 ) (2,365 ) (2,892 )
Debt issuance costs written-off 0 0 (807 ) 0
Other   99     (8 )   6     (486 )
 
Income from continuing operations before income tax expense 5,059 3,033 23,089 20,688
Income tax expense   1,391     451     6,659     1,597  
 
Income from continuing operations 3,668 2,582 16,430 19,091

Loss (income) from discontinued operations, net of income tax

benefit (expense)

  18     (33 )   51     (458 )
 
Net income $ 3,650 $ 2,615 $ 16,379 $ 19,549
 
Preferred stock dividends 0 623 514 2,493
Accretion of preferred stock redemption value 0 88 73 353
 

Excess of redemption value over carrying value of preferred

shares redeemed

  0     0     35,776     0  
Net income (loss) applicable to preferred and common shareholders $ 3,650   $ 1,904     (19,984 ) $ 16,703  
Basic earnings (loss) per common share:
Continuing operations $ 0.11 $ 0.04 $ (0.58 ) $ 0.38
Discontinued operations   0     0     0     0.01  
Basic earnings (loss) per share $ 0.11   $ 0.04   $ (0.58 ) $ 0.39  
 
Diluted earnings (loss) per common share:
Continuing operations $ 0.10 $ 0.04 $ (0.58 ) $ 0.38
Discontinued operations   0     0     0     0.01  
Diluted earnings (loss) per share $ 0.10   $ 0.04   $ (0.58 ) $ 0.39  
 
Shares used in computing net income (loss) per common share:
Basic 34,398,789 34,149,429 34,313,636 34,093,104
Diluted 35,314,347 43,324,815 34,313,636 43,252,101

 
RUTH'S HOSPITALITY GROUP, INC AND SUBSIDIARIES
Selected Balance Sheet Data - Unaudited
(dollar amounts in thousands)
             
December 30, December 25,
2012 2011
Cash and cash equivalents $ 7,909 $ 3,925
Total assets 231,357 240,220
Long-term debt 45,000 22,000
Total shareholders' equity 82,388 99,640

   
 
Non-GAAP Measure
 
We prepare our financial statements in accordance with generally accepted accounting principles (GAAP). Within our press release, we make reference to non-GAAP diluted earnings per common share. This non-GAAP measurement was calculated by excluding certain non-recurring items and income (loss) on discontinued operations. This non-GAAP measurement has been included as supplemental information. We believe that this measure represents a useful internal measure of performance. Accordingly, where this non-GAAP measure is provided, it is done so that investors have the same financial data that management uses in evaluating performance with the belief that it will assist the investment community in assessing our underlying performance on a quarter-over-quarter basis. However, because this measure is not determined in accordance with accounting principles generally accepted in the United States, such a measure is susceptible to varying calculations and not all companies calculate the measure in the same manner. As a result, the aforementioned measure as presented may not be directly comparable to a similarly titled measure presented by other companies. This non-GAAP measure is presented as supplemental information and not as alternatives to any GAAP measurements.
 
 
Reconciliation of Non-GAAP Financial Measure - Unaudited
(amounts in thousands, except share data)
             
14/13 Weeks Ended 53/52 Weeks Ended
December 30, December 25, December 30, December 25,
2012 2011 2012 2011
GAAP net income (loss) applicable to preferred and common shareholders $ 3,650 $ 1,904 $ (19,984 ) $ 16,703
Net of tax impact of excluding certain non-recurring items - see Note 2,583 2,210 3,332 (2,191 )
Net of tax impact of excluding loss (income) on discontinued operations 18 (34 ) 51 (459 )

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 $ 6,251 $ 4,080   $ 19,175   $ 14,053  
       
Non-GAAP diluted earnings per share $ 0.18 $ 0.09   $ 0.55   $ 0.32  
 
Shares:
Weighted average number of common shares outstanding - basic 34,398,789 34,149,429 34,313,636 34,093,104
Dilutive shares 915,558 554,696 854,791 538,307
Dilutive convertible preferred stock   -   8,620,690     -     8,620,690  
Weighted-average number of common shares outstanding - diluted   35,314,347   43,324,815     35,168,427     43,252,101  
 
Note: Excludes after tax impacts of loss on impairment and asset disposals, restructuring benefit, gain on the settlement of unclaimed property liabilities, and non-recurring income tax adjustments.
 

Contacts

ICR
Media
Alecia Pulman, 203-682-8224
apulman@icrinc.com
or
Investor Relations
Fitzhugh Taylor, 203-682-8261
ftaylor@icrinc.com

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Contacts

ICR
Media
Alecia Pulman, 203-682-8224
apulman@icrinc.com
or
Investor Relations
Fitzhugh Taylor, 203-682-8261
ftaylor@icrinc.com