Ruth's Chris Steak House, Inc. Reports Third Quarter Financial Results

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Nov 14,2005
Ruth's Chris Steak House, Inc. Reports Third Quarter Financial Results

ORLANDO, Fla.--(BUSINESS WIRE)--Nov. 14, 2005--Ruth's Chris Steak House, Inc. (Nasdaq: RUTH) today reported results for its third quarter ended September 25, 2005. Highlights for the third quarter were as follows:

    --  Total revenue increased 10.1% to $46.5 million from $42.2
        million a year ago.

    --  GAAP earnings increased to $0.4 million, or $0.02 per diluted
        share, from a loss of ($4.6) million, or ($0.39) per diluted
        share in the third quarter of 2004.

    --  Pro forma net income increased to $2.6 million, or $0.11 per
        diluted share, compared to $2.1 million, or $0.09 per diluted
        share last year. (See the fifth paragraph below for a
        description of pro forma adjustments and reasons for
        inclusion. Also see reconciliation of pro forma net income to
        GAAP net income in the financial tables that follow.)

    --  Comparable restaurant sales increased 10.7% at company-owned
        restaurants (excluding the New Orleans and Metairie, Louisiana
        locations which were damaged during Hurricane Katrina) and
        3.0% at franchised restaurants.

    --  Operating income, which included $1.2 million in hurricane and
        relocation costs in this year's third quarter, was flat to
        last year at $3.3 million. Excluding the aforementioned costs,
        operating income increased 37.7% to $4.5 million quarter over
        quarter.

    --  Food and beverage costs as a percentage of restaurant sales
        were 200 basis points lower compared to last year, primarily
        driven by lower meat, dairy and produce costs.

    --  Restaurant operating costs as a percentage of sales were 90
        basis points higher compared to the prior year period due to
        increased management staffing related to new restaurant
        openings and training, employee benefit costs, and utility
        costs.

    --  One company-owned and one franchised restaurant opened during
        the third quarter of 2005 in Roseville, California and
        Atlantic City, New Jersey respectively.

Total revenue, which includes company-owned restaurant sales and franchise income, increased 10.1% to $46.5 million in the third quarter compared to $42.2 million in the year-ago period. Company-owned restaurant sales for the quarter grew 9.5% to $43.9 million from $40.1 million last year, primarily as a result of strong comparable restaurant sales and the opening of one new restaurant location. Company-owned restaurant sales were negatively impacted by the loss of 71 hurricane-related closure days in the third quarter of 2005, versus 82 hurricane-related closure days in the year ago period.

Company-owned comparable restaurant sales increased 10.7%, excluding the company's New Orleans and Metairie, Louisiana locations damaged by Hurricane Katrina. Approximately 40% of this increase was attributable to increased entree volume, with the remainder due to higher per entree spending. The per entree spending was driven by a shift in meal period and mix, as well as a 3% price increase taken in August 2005. Third quarter 2005 comparable growth was also partially offset by 13 lost operating days versus 82 lost operating days in last year's third quarter.

Franchise income increased 20.6% to $2.5 million versus $2.1 million in the prior year period due to a 3% increase in comparable restaurant sales and three additional franchisee-owned restaurants in operation versus last year.

Craig Miller, President and CEO of Ruth's Chris Steak House stated, "Despite the unprecedented challenges we faced in the third quarter as a result of Hurricane Katrina, we were very pleased with our core operating performance and the underlying fundamentals of our business. Our robust comparable sales growth was especially noteworthy, in light of the formidable 10.9% year-ago comparison and a somewhat uncertain consumer spending environment. Fortunately, we were able to react to our circumstances quickly, manage costs, and drive significant profitability at the operating line."

GAAP net income was $0.4 million in the third quarter of 2005, or $0.02 per diluted share, compared to a net loss of ($4.6) million, or ($0.39) per diluted share in the third quarter of 2004. Pro forma diluted net income for the period, a measure that management believes provides shareholders with better comparability, increased 27.5% to $2.6 million, or $0.11 per diluted share, versus $2.1 million, or $0.09 per diluted share. Pro forma net income calculations reflect the Company's post IPO capitalization structure and, as such, give effect to the redemption that occurred upon the IPO of all of the Company's senior and junior preferred stock and accretion of preferred dividends for the periods presented. Pro forma net income also excludes hurricane costs, discontinued operations, adjusts interest expense to reflect the post IPO capital structure as if it had been in place for the full period and applies the company's annual effective income tax rate. These pro forma calculations provide meaningful supplemental information of the Company's operating results on a basis comparable with that of future periods. A comparison of the computation of GAAP net income per share to pro forma net income per share is included in the attached financial tables.

Mr. Miller concluded, "The performance of our newest restaurants continue to meet or exceed our internal performance measures and further demonstrate the attractiveness and portability of our brand. To that point, we are fully confident in our ability to execute on our growth plan for the remainder of the year and 2006, and continue to provide our guests with the world class dining experience they have come to expect from Ruth's Chris Steak House."

Fourth Quarter 2005 & Full Year 2006 Guidance

For the fourth quarter of 2005, the Company expects to add two new company-owned restaurants in Boston, MA and Sacramento, CA, and one franchised restaurant in Charlotte, NC. Boston, MA and Charlotte, NC have already opened. Based on the Company's performance to date and management's current outlook, the Company anticipates fourth quarter comparable restaurant sales to increase approximately 4.5% to 5.5%. The Company anticipates fully diluted earnings per share for the fourth quarter of between $0.17 to $0.19, excluding additional hurricane and relocation costs and the write-off of deferred debt issuance costs related to the new credit facility completed in fiscal October.

As reported previously, four company-owned restaurants in southern Florida were temporarily closed due to Hurricane Wilma. The restaurants sustained only minimal damage and all have reopened with a combined loss of 21 operating days. The Company's franchise location in Cancun, Mexico still remains closed as a result of Hurricane Wilma.

For the full year 2006, the Company expects comparable restaurant sales to increase approximately 3% to 4%. The Company anticipates opening 11-15 new restaurants in 2006, including 6-8 company-owned and 5-7 franchised locations. With consideration given for restaurants closed as a result of Hurricane Katrina and the relocation of the Company's corporate office, management anticipates fully diluted earnings per share for 2006 of $0.80 to $0.85, excluding the impact of the adoption of Statement of Financial Accounting Standards No. 123R Share Based Compensation (SFAS No. 123R). The impact of SFAS No. 123R for 2006 is expected to be $0.02 to $0.03 per diluted share.

Conference Call

The Company will host a conference call to discuss third quarter 2005 financial results today at 5:30 PM Eastern Time. Hosting the call will be Craig S. Miller, President and Chief Executive Officer, and Thomas J. Pennison Jr., Chief Financial Officer.

The conference call can be accessed live over the phone by dialing 1-800-289-0572, or for international callers by dialing 1-913-981-5543. A replay will be available one hour after the call and can be accessed by dialing 1-888-203-1112 or 1-719-457-0820 for international callers; the password is 3830724. The replay will be available until November 21, 2005. The call will be webcast live from the Company's website at www.ruthschris.com under the investor relations section.

About the Company

Founded in New Orleans by Ruth Fertel in 1965, Ruth's Chris Steak House, Inc. is one of the largest upscale steak house companies in the U.S., as measured by the total number of company-owned and franchise-owned restaurants, with 90 locations worldwide. Ruth's Chris specializes in USDA Prime grade steaks served in Ruth's Chris signature fashion - "sizzling." Information about Ruth's Chris is available at www.ruthschris.com.

Forward-Looking Statements

Some of the statements in this release that are not historical facts and relate to future results and events, including, without limitation, statements regarding our ability to reopen restaurants that have closed and open new restaurants, are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon our current beliefs and expectations and involve risks and uncertainties. Actual results may vary materially from those contained in forward-looking statements based on a number of factors including, without limitation, the impact of weather including the effects of Hurricanes Katrina and Wilma, and the risks identified as "risk factors" in our registration statement on Form S-1 (File No. 333-124285), as amended, and the other factors identified from time to time in our filings with the Securities and Exchange Commission, all of which are available at www.sec.gov. Investors should take these risks into account when making investment decisions. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update any forward-looking statements.

            RUTH'S CHRIS STEAK HOUSE, INC AND SUBSIDIARIES
         Condensed Consolidated Income Statements - Unaudited
    (dollar amounts in thousands, except share and per share data)

                          13 Weeks Ending          39 Weeks Ending
                       Sept. 26,   Sept. 25,    Sept. 26,   Sept. 25,
                           2004        2005         2004        2005
                      ----------  ----------   ----------  ----------
Revenues:
 Restaurant sales    $    40,058      43,862  $   132,449     147,639
 Franchise income          2,080       2,509        6,851       7,790
 Other operating
  income                      76         104          293         366
                      ----------  ----------   ----------  ----------

   Total revenues         42,214      46,475      139,593     155,795

Costs and expenses:
 Food and beverage
  costs                   13,313      13,678       45,682      45,838
 Restaurant
  operating expenses      19,427      21,677       60,708      68,039
 Marketing and
  advertising              1,607         586        5,153       5,254
 General and
  administrative
  costs                    2,813       3,726        7,945      10,448
 Depreciation and
  amortization
  expenses                 1,571       1,612        4,830       4,829
 Hurricane and
  relocation costs             -       1,191            -       1,191
 Pre-opening costs           192         665          223         905
                      ----------  ----------   ----------  ----------

   Operating income        3,291       3,340       15,052      19,291

Other income
 (expense):
 Interest expense,
  net                     (2,168)     (1,437)      (7,978)     (7,205)
 Accrued dividends
  and accretion on
  mandatorily redeemable
  senior preferred
  stock                   (1,194)       (305)      (3,582)     (1,891)
 Other                        46          59          185         139
                      ----------  ----------   ----------  ----------

   Income (loss)
    from continuing
    operations before
    income tax expense       (25)      1,657        3,677      10,334

Income tax expense            (3)        741          381       3,307
                      ----------  ----------   ----------  ----------

Income (loss) from
 continuing operations       (22)        916        3,296       7,027

Discontinued
 operations, net of
 income tax benefit        3,282        (313)       3,685         426
                      ----------  ----------   ----------  ----------

Net income (loss)    $    (3,304)      1,229  $      (389)      6,601
                      ----------  ----------   ----------  ----------
Less dividends
 earned on junior
 preferred stock and
 warrant expense           1,317         861        3,951       3,706
                      ----------  ----------   ----------  ----------
Net income (loss)
 available to common
 shareholders        $    (4,621)        368  $    (4,340)      2,895
                      ----------  ----------   ----------  ----------

Basic earnings
 (loss) per share:
 Continuing
  operations         $     (0.11)          -  $     (0.06)       0.20
 Discontinued
  operations               (0.28)       0.02        (0.31)      (0.03)
                      ----------  ----------   ----------  ----------
 Basic earnings
  (loss) per share   $     (0.39)       0.02  $     (0.37)       0.17
                      ----------  ----------   ----------  ----------

Diluted earnings
 (loss) per share:
 Continuing
  operations         $     (0.11)          -  $     (0.06)       0.20
 Discontinued
  operations               (0.28)       0.02        (0.31)      (0.03)
                      ----------  ----------   ----------  ----------
 Diluted earnings
  (loss) per share   $     (0.39)       0.02  $     (0.37)       0.17
                      ----------  ----------   ----------  ----------

Shares used in
 computing net
 income (loss) per
 common share:
 Basic                11,746,868  22,730,834   11,746,868  16,268,775
                      ----------  ----------   ----------  ----------
 Diluted              11,746,868  23,338,454   11,746,868  16,876,395
                      ----------  ----------   ----------  ----------
            RUTH'S CHRIS STEAK HOUSE, INC. AND SUBSIDIARIES
                 Condensed Consolidated Balance Sheets
           (dollar amounts in thousands, except share data)


                                                 Dec. 26,   Sept. 25,
                                                    2004        2005
                                                --------- -----------
                    Assets                                 (unaudited)
Current assets:
 Cash and cash equivalents                      $   3,906      12,616
 Accounts receivable, less allowance
  for doubtful accounts 2004 - $275;
  2005 - $328 (unaudited)                           5,030      11,786
 Inventory                                          3,665       3,400
 Prepaid expenses and other                         2,179       2,308
 Deferred income taxes                                771         817
                                                ---------   ---------

   Total current assets                            15,551      30,927

Property and equipment, net                        52,739      58,131
Goodwill                                           30,533      30,533
Deferred income taxes                               9,278       8,563
Assets held for sale                                2,100           -
Other assets                                        3,281       2,168
                                                ---------   ---------

   Total assets                                 $ 113,482     130,322
                                                ---------   ---------

Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
 Current maturities of long-term debt           $       -           -
 Accounts payable and accrued expenses             18,577      31,096
 Deferred revenue                                  14,692      11,901
 Other current liabilities                            452         534
                                                ---------   ---------

   Total current liabilities                       33,721      43,531

Long-term debt                                     80,931      38,500
Mandatorily redeemable senior preferred stock
 (liquidation preference of $39,986 at
 December 26, 2004 and $0 at September 25,
 2005 (unaudited))                                 39,857           -
Deferred rent                                       9,767      11,490
Other liabilities                                     719         266
                                                ---------   ---------

   Total liabilities                              164,995      93,787

Commitments and contingencies (Note 6)
Shareholders' equity (deficit):

Junior preferred stock, par value $.01 per
 share; 92,000 shares authorized, 72,537
 shares issued and outstanding at
 December 26, 2004 and no shares authorized,
 issued and outstanding at September 25,
 2005 (unaudited)                                  72,537           -

Common stock, par value $.01 per share;
 100,000,000 shares authorized, 11,543,889
 shares issued and outstanding at December 26,
 2004, 23,015,788 shares issued and
 outstanding at September 25, 2005 (unaudited)        115         230
Additional paid-in capital                          5,548     163,169
Accumulated deficit                              (129,713)   (126,864)
                                                ---------   ---------

   Total shareholders' equity (deficit)           (51,513)     36,535
                                                ---------   ---------

   Total liabilities and shareholders' equity
    (deficit)                                   $ 113,482     130,322
                                                ---------   ---------
            RUTH'S CHRIS STEAK HOUSE, INC AND SUBSIDIARIES
      Proforma Net Income and Proforma Diluted Earnings Per Share
    (dollar amounts in thousands, except share and per share data)


                          13 Weeks Ending          39 Weeks Ending
                       Sept. 26,   Sept. 25,    Sept. 26,   Sept. 25,
                           2004        2005         2004        2005
                      ----------  ----------   ----------  ----------
Net income (loss)
 available to common
 shareholders, as
 reported            $    (4,621)        368  $    (4,340)      2,895
Dividends earned on
 junior preferred
 stock and warrant
 expense                   1,317         861        3,951       3,706
Discontinued
 operations, net of
 income tax benefit        3,282        (313)       3,685         426
Income tax expense            (3)        741          381       3,307
                      ----------  ----------   ----------  ----------
Income (loss) from
 continuing operations
 before income tax
 expense, as
 reported            $       (25)      1,657  $     3,677      10,334
Accrued dividends
 and accretion on
 mandatorily redeemable
 senior preferred
 stock, as reported        1,194         305        3,582       1,891
Hurricane and
 relocation costs,
 as reported                   -       1,191            -       1,191
Interest Expense, as
 reported                  2,168       1,437        7,978       7,205
Proforma interest
 expense assuming
 initial public
 offering occurred
 on the first day of
 period                   (1,027)       (707)      (3,159)     (2,121)
                      ----------  ----------   ----------  ----------
   Proforma
    Adjustments            2,335       2,226        8,401       8,166
Proforma Income from
 continuing operations
 before income tax
 expense                   2,310       3,883       12,078      18,500
Proforma Income tax
 expense (using
 annualized effective
 tax rate)                   239       1,243        1,252       5,920
                      ----------  ----------   ----------  ----------
Proforma Net Income  $     2,070       2,640  $    10,826      12,580
                      ----------  ----------   ----------  ----------


Proforma Diluted
 earnings per share
 from Continuing
 Operations          $      0.09        0.11  $      0.64        0.75
                      ----------  ----------   ----------  ----------
Share base used in
 Proforma Diluted
 per share
 calculation          23,338,454  23,338,454   16,876,395  16,876,395
                      ----------  ----------   ----------  ----------

    CONTACT: Integrated Corporate Relations
             Investor Relations:
             Tom Ryan or Don Duffy, 203-682-8200

    SOURCE: Ruth's Chris Steak House, Inc.

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