ruth-10q_20190331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                      

Commission File Number 000-51485

 

Ruth’s Hospitality Group, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

72-1060618

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

1030 W. Canton Avenue, Suite 100,

Winter Park, FL

32789

(Address of principal executive offices)

(Zip code)

(407) 333-7440

Registrant’s telephone number, including area code

None

Former name, former address and former fiscal year, if changed since last report

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

 

Large accelerated filer

Accelerated Filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     No  

 

 

 

 

 


Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

RUTH

Nasdaq

 

The number of shares outstanding of the registrant’s common stock as of April 30, 2019 was 30,479,801, which includes 1,097,867 shares of unvested restricted stock.

 

 

 

 

 


TABLE OF CONTENTS

 

 

 

 

Page

Part I — Financial Information

 

3

 

 

 

 

Item 1

Financial Statements:

 

3

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2019 and December 30, 2018

 

3

 

 

 

 

 

Condensed Consolidated Statements of Income for the Thirteen Week Periods ended March 31, 2019 and April 1, 2018

 

4

 

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the Thirteen Week Periods ended March 31, 2019 and April 1, 2018

 

5

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Thirteen Week Periods ended March 31, 2019 and April 1, 2018

 

6

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

 

 

 

 

Item 3

Quantitative and Qualitative Disclosures about Market Risk

 

21

 

 

 

 

Item 4

Controls and Procedures

 

22

 

 

 

Part II — Other Information

 

23

 

 

 

 

Item 1

Legal Proceedings

 

23

 

 

 

 

Item 1A

Risk Factors

 

23

 

 

 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

23

 

 

 

 

Item 3

Defaults Upon Senior Securities

 

23

 

 

 

 

Item 4

Mine Safety Disclosures

 

23

 

 

 

 

Item 5

Other Information

 

23

 

 

 

 

Item 6

Exhibits

 

23

 

 

 

 

Signatures

 

25

 

2


PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets—Unaudited

(Amounts in thousands, except share and per share data)

 

 

 

March 31,

 

 

December 30,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,116

 

 

$

5,062

 

Accounts receivable, less allowance for doubtful accounts 2019 - $111; 2018 - $322

 

 

12,211

 

 

 

19,476

 

Inventory

 

 

8,476

 

 

 

9,296

 

Prepaid expenses and other

 

 

3,068

 

 

 

2,528

 

Total current assets

 

 

26,871

 

 

 

36,362

 

Property and equipment, net of accumulated depreciation 2019 - $164,607; 2018 -

   $160,153

 

 

125,637

 

 

 

125,991

 

Right of use assets, net of accumulated amortization: operating leases 2019 - $3,905; 2018 - $0

 

 

166,189

 

 

 

 

Goodwill

 

 

36,522

 

 

 

36,522

 

Franchise rights, net of accumulated amortization 2019 - $2,779; 2018 - $2,299

 

 

44,438

 

 

 

44,919

 

Other intangibles, net of accumulated amortization 2019 - $1,343; 2018 - $1,395

 

 

4,070

 

 

 

4,862

 

Deferred income taxes

 

 

5,671

 

 

 

5,353

 

Other assets

 

 

625

 

 

 

604

 

Total assets

 

$

410,023

 

 

$

254,613

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

9,129

 

 

 

10,273

 

Accrued payroll

 

 

12,590

 

 

 

19,475

 

Accrued expenses

 

 

6,493

 

 

 

10,535

 

Deferred revenue

 

 

42,506

 

 

 

48,370

 

Current operating lease liabilities

 

 

14,421

 

 

 

 

Other current liabilities

 

 

5,921

 

 

 

6,619

 

Total current liabilities

 

 

91,060

 

 

 

95,272

 

Long-term debt

 

 

39,000

 

 

 

41,000

 

Operating lease liabilities

 

 

178,412

 

 

 

 

Deferred rent

 

 

 

 

 

23,692

 

Unearned franchise fees

 

 

2,855

 

 

 

2,680

 

Other liabilities

 

 

47

 

 

 

1,837

 

Total liabilities

 

 

311,374

 

 

 

164,481

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder's equity:

 

 

 

 

 

 

 

 

Common stock, par value $.01 per share; 100,000,000 shares authorized, 29,376,062

   shares issued and outstanding at March 31, 2019, 29,268,776 shares issued and

   outstanding at December 30, 2018

 

 

294

 

 

 

293

 

Additional paid-in capital

 

 

61,652

 

 

 

61,819

 

Retained earnings

 

 

36,703

 

 

 

28,020

 

Treasury stock, at cost; 71,950 shares at March 31, 2019 and December 30, 2018

 

 

 

 

 

 

Total shareholders' equity

 

 

98,649

 

 

 

90,132

 

Total liabilities and shareholders' equity

 

$

410,023

 

 

$

254,613

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income—Unaudited

(Amounts in thousands, except share and per share data)

 

 

 

13 Weeks Ended

 

 

 

 

March 31,

 

 

April 1,

 

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Restaurant sales

 

$

112,986

 

 

$

110,364

 

 

Franchise income

 

 

4,558

 

 

 

4,417

 

 

Other operating income

 

 

2,197

 

 

 

1,745

 

 

Total revenues

 

 

119,741

 

 

 

116,526

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Food and beverage costs

 

 

31,848

 

 

 

31,405

 

 

Restaurant operating expenses

 

 

53,603

 

 

 

51,679

 

 

Marketing and advertising

 

 

3,629

 

 

 

3,477

 

 

General and administrative costs

 

 

8,751

 

 

 

8,976

 

 

Depreciation and amortization expenses

 

 

4,969

 

 

 

4,461

 

 

Pre-opening costs

 

 

98

 

 

 

140

 

 

Total costs and expenses

 

 

102,898

 

 

 

100,138

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

16,843

 

 

 

16,388

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(405

)

 

 

(380

)

 

Other

 

 

2

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income tax expense

 

 

16,440

 

 

 

16,020

 

 

Income tax expense

 

 

2,529

 

 

 

2,384

 

 

Income from continuing operations

 

 

13,911

 

 

 

13,636

 

 

Income from discontinued operations, net of income taxes

 

 

 

 

 

10

 

 

Net income

 

$

13,911

 

 

$

13,646

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.48

 

 

$

0.46

 

 

Discontinued operations

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.48

 

 

$

0.46

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.47

 

 

$

0.45

 

 

Discontinued operations

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.47

 

 

$

0.45

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

 

29,275,501

 

 

 

29,689,870

 

 

Diluted

 

 

29,903,511

 

 

 

30,384,180

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.13

 

 

$

0.11

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

4


RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity—Unaudited  

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Retained Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

(Accumulated

 

 

Treasury Stock

 

 

Shareholders'

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit)

 

 

Shares

 

 

Value

 

 

Equity

 

Balance at December 30, 2018

 

 

29,269

 

 

$

293

 

 

$

61,819

 

 

$

28,020

 

 

 

72

 

 

$

 

 

$

90,132

 

Net income

 

 

 

 

 

 

 

 

 

 

 

13,911

 

 

 

 

 

 

 

 

 

13,911

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

(3,967

)

 

 

 

 

 

 

 

 

(3,967

)

Repurchase of common stock

 

 

(26

)

 

 

 

 

 

(568

)

 

 

 

 

 

 

 

 

 

 

 

(568

)

Shares issued under stock compensation plan net of shares withheld for tax effects

 

 

133

 

 

 

1

 

 

 

(1,632

)

 

 

 

 

 

 

 

 

 

 

 

(1,631

)

Stock-based compensation

 

 

 

 

 

 

 

 

2,033

 

 

 

 

 

 

 

 

 

 

 

 

2,033

 

Cumulative effect of a change in accounting principle (Note 2)

 

 

 

 

 

 

 

 

 

 

 

(1,261

)

 

 

 

 

 

 

 

 

(1,261

)

Balance at March 31, 2019

 

 

29,376

 

 

$

294

 

 

$

61,652

 

 

$

36,703

 

 

 

72

 

 

$

 

 

$

98,649

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

 

29,646

 

 

$

296

 

 

$

77,017

 

 

$

2,191

 

 

 

72

 

 

$

 

 

$

79,504

 

Net income

 

 

 

 

 

 

 

 

 

 

 

13,646

 

 

 

 

 

 

 

 

 

13,646

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

(3,390

)

 

 

 

 

 

 

 

 

(3,390

)

Shares issued under stock compensation plan net of shares withheld for tax effects

 

 

146

 

 

 

2

 

 

 

(1,689

)

 

 

 

 

 

 

 

 

 

 

 

(1,687

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,841

 

 

 

 

 

 

 

 

 

 

 

 

1,841

 

Cumulative effect of a change in accounting principle

 

 

 

 

 

 

 

 

 

 

 

(2,324

)

 

 

 

 

 

 

 

 

(2,324

)

Balance at April 1, 2018

 

 

29,792

 

 

$

298

 

 

$

77,169

 

 

$

10,122

 

 

 

72

 

 

$

 

 

$

87,589

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows—Unaudited

(Amounts in thousands)

 

 

 

13 Weeks Ended

 

 

 

March 31,

 

 

April 1,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

13,911

 

 

$

13,646

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,969

 

 

 

4,461

 

Deferred income taxes

 

 

95

 

 

 

(150

)

Non-cash interest expense

 

 

21

 

 

 

21

 

Amortization of below market lease

 

 

 

 

 

20

 

Stock-based compensation expense

 

 

2,033

 

 

 

1,841

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

8,077

 

 

 

8,500

 

Inventories

 

 

820

 

 

 

320

 

Prepaid expenses and other

 

 

(540

)

 

 

204

 

Other assets

 

 

(42

)

 

 

 

Accounts payable and accrued expenses

 

 

(13,511

)

 

 

(8,771

)

Deferred revenue

 

 

(5,864

)

 

 

(6,055

)

Deferred rent

 

 

 

 

 

355

 

Lease liabilities

 

 

(171

)

 

 

 

Other liabilities

 

 

2,281

 

 

 

1,307

 

Net cash provided by operating activities

 

 

12,079

 

 

 

15,699

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(5,860

)

 

 

(5,505

)

Net cash used in investing activities

 

 

(5,860

)

 

 

(5,505

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Principal borrowings on long-term debt

 

 

7,000

 

 

 

2,000

 

Principal repayments on long-term debt

 

 

(9,000

)

 

 

(9,000

)

Repurchase of common stock

 

 

(568

)

 

 

 

Cash dividend payments

 

 

(3,967

)

 

 

(3,390

)

Tax payments from the vesting of restricted stock and option exercises

 

 

(1,630

)

 

 

(1,696

)

Proceeds from the exercise of stock options

 

 

 

 

 

9

 

Net cash used in financing activities

 

 

(8,165

)

 

 

(12,077

)

Net decrease in cash and cash equivalents

 

 

(1,946

)

 

 

(1,883

)

Cash and cash equivalents at beginning of period

 

 

5,062

 

 

 

4,051

 

Cash and cash equivalents at end of period

 

$

3,116

 

 

$

2,168

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest, net of capitalized interest

 

$

427

 

 

$

375

 

Income taxes

 

$

31

 

 

$

971

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Accrued acquisition of property and equipment

 

$

667

 

 

$

1,278

 

 

See accompanying notes to condensed consolidated financial statements.

 

6


RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—Unaudited

(1) The Company and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Ruth’s Hospitality Group, Inc. and its subsidiaries (collectively, the Company) as of March 31, 2019 and December 30, 2018 and for the thirteen week periods ended March 31, 2019 and April 1, 2018 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The condensed consolidated financial statements include the financial statements of Ruth’s Hospitality Group, Inc. and its wholly owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Ruth’s Hospitality Group, Inc. is a restaurant company focused on the upscale dining segment. Ruth’s Hospitality Group, Inc. operates Company-owned Ruth’s Chris Steak House restaurants and sells franchise rights to Ruth’s Chris Steak House franchisees giving the franchisees the exclusive right to operate similar restaurants in a particular area designated in the franchise agreement. As of March 31, 2019, there were 157 Ruth’s Chris Steak House restaurants, including 78 Company-owned restaurants, three restaurants operating under contractual agreements and 76 franchisee-owned restaurants, including 21 international franchisee-owned restaurants in Aruba, Canada, China, Hong Kong, Indonesia, Japan, Mexico, Singapore and Taiwan. All Company-owned restaurants are located in the United States.  A new franchisee-owned Ruth’s Chris Steak House restaurant was opened in Chongqing, China in February 2019.  

The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. The interim results of operations for the periods ended March 31, 2019 and April 1, 2018 are not necessarily indicative of the results that may be achieved for the full year. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the SEC’s rules and regulations. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2018.

The Company operates on a 52- or 53-week fiscal year ending on the last Sunday in December. The fiscal quarters ended March 31, 2019 and April 1, 2018 each contained thirteen weeks and are referred to herein as the first quarter of fiscal year 2019 and the first quarter of fiscal year 2018, respectively. Fiscal years 2019 and 2018 are both 52-week years.

Estimates

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reporting of revenue and expenses during the periods to prepare these condensed consolidated financial statements in conformity with GAAP. Significant items subject to such estimates and assumptions include the carrying amounts of property and equipment, goodwill, franchise rights, and obligations related to gift cards, incentive compensation, workers’ compensation and medical insurance. Actual results could differ from those estimates.

Recent Adopted Accounting Standard

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), which requires a lessee to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset.  The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases.  The Company adopted this new lease standard on December 31, 2018.  See Note 2 for further information about our transition to this new lease standard.

7


(2) Leases

Effective December 31, 2018, the Company adopted Topic 842 using the modified retrospective method for all leases in effect at the date of adoption.  This new lease standard requires a lessee to recognize on the balance sheet a liability for future lease obligations and a corresponding right-of-use (ROU) asset.  The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases.  The Company chose the effective date as its initial date of adoption.  Consequently, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.  

The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carry forward prior conclusions regarding lease identification, lease classification and initial indirect costs for existing leases.  The Company did not elect the hindsight practical expedient.

In addition to the recognition of a liability for future lease obligations and a corresponding ROU asset, upon adoption, the Company:

 

-

Derecognized existing deferred rent and tenant allowance balances totaling $25.4 million.

 

-

Derecognized existing assets related to below market leases of $758 thousand.

 

-

Derecognized existing deferred gains on previous sale-leaseback transactions of $1.8 million.  The deferred gain associated with this change in accounting was recognized through opening retained earnings as of December 31, 2018.

 

-

Recognized a retained earnings adjustment of $3.5 million related to the write-off of the ROU asset from a previously impaired Ruth’s Chris Steak House restaurant.

 

-

Recognized $413 thousand of additional deferred income taxes from the previously mentioned adoption related equity adjustments.

The Company did not experience material changes to either the consolidated statements of income or the consolidated statements of cash flows due to the adoption of Topic 842.  The following table summarizes the impacts of adopting Topic 842 on the Company’s condensed consolidated balance sheet as of December 31, 2018 (in thousands):

 

8


 

 

December 30,

 

 

Adjustments Due

 

 

 

 

 

 

 

2018

 

 

to the Adoption

 

 

December 31,

 

 

 

As Reported

 

 

of ASC 842

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,062

 

 

$

 

 

$

5,062

 

Accounts receivable, less allowance for doubtful accounts

 

 

19,476

 

 

 

812

 

 

 

20,288

 

Inventory

 

 

9,296

 

 

 

 

 

 

9,296

 

Prepaid expenses and other

 

 

2,528

 

 

 

(2,108

)

 

 

420

 

Total current assets

 

 

36,362

 

 

 

(1,296

)

 

 

35,066

 

Property and equipment, net of accumulated depreciation

 

 

125,991

 

 

 

 

 

 

125,991

 

Right of use assets, net of accumulated amortization: operating leases

 

 

 

 

 

166,040

 

 

 

166,040

 

Goodwill

 

 

36,522

 

 

 

 

 

 

36,522

 

Franchise rights, net of accumulated amortization

 

 

44,919

 

 

 

 

 

 

44,919

 

Other intangibles, net of accumulated amortization

 

 

4,862

 

 

 

(758

)

 

 

4,104

 

Deferred income taxes

 

 

5,353

 

 

 

413

 

 

 

5,766

 

Other assets

 

 

604

 

 

 

 

 

 

604

 

Total assets

 

$

254,613

 

 

$

164,399

 

 

$

419,012

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,273

 

 

$

 

 

$

10,273

 

Accrued payroll

 

 

19,475

 

 

 

 

 

 

19,475

 

Accrued expenses

 

 

10,535

 

 

 

 

 

 

10,535

 

Deferred revenue

 

 

48,370

 

 

 

 

 

 

48,370

 

Current operating lease liabilities

 

 

 

 

 

14,599

 

 

 

14,599

 

Other current liabilities

 

 

6,619

 

 

 

(1,698

)

 

 

4,921

 

Total current liabilities

 

 

95,272

 

 

 

12,901

 

 

 

108,173

 

Long-term debt

 

 

41,000

 

 

 

 

 

 

41,000

 

Operating lease liabilities

 

 

 

 

 

178,256

 

 

 

178,256

 

Deferred rent

 

 

23,692

 

 

 

(23,692

)

 

 

 

Unearned franchise fees

 

 

2,680

 

 

 

 

 

 

2,680

 

Other liabilities

 

 

1,837

 

 

 

(1,805

)

 

 

32

 

Total liabilities

 

 

164,481

 

 

 

165,660

 

 

 

330,141

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder's equity:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, par value $.01 per share; 100,000,000 shares authorized, 29,268,776 shares issued and outstanding at December 30, 2018

 

 

293

 

 

 

 

 

 

293

 

Additional paid-in capital

 

 

61,819

 

 

 

 

 

 

61,819

 

Retained earnings

 

 

28,020

 

 

 

(1,261

)

 

 

26,759

 

Treasury stock, at cost; 71,950 shares at December 30, 2018

 

 

 

 

 

 

 

 

 

Total shareholders' equity

 

 

90,132

 

 

 

(1,261

)

 

 

88,871

 

Total liabilities and shareholders' equity

 

$

254,613

 

 

$

164,399

 

 

$

419,012

 

9


The Company leases restaurant facilities and equipment.  The Company determines whether an arrangement is or contains a lease at contract inception.  The Company’s leases are all classified as operating leases, which are included as ROU assets and operating lease liabilities in the Company’s condensed consolidated balance sheet.  Operating lease  liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date.  ROU assets are measured based on the operating lease liabilities adjusted for lease incentives, initial indirect costs and impairments of operating lease assets.  Minimum lease payments include only the fixed lease components of the agreements, as well as any variable rate payments that depend on an index, which are measured initially using the index at the lease commencement dates.  To determine the present value of future minimum lease payments, the Company estimates incremental secured borrowing rates based on the information available at the lease commencement dates, or the transition date at adoption.  The expected lease terms include options to extend when it is reasonably certain the Company will exercise the options up to a total term of 20 years.  For financial reporting purposes, minimum rent payments are expensed on a straight-line basis over the lives of the leases.  Additionally, incentives received from landlords used to fund leasehold improvements reduce the ROU assets related to those leases and are amortized as reductions to rent expense over the lives of the leases.  Variable lease payments that do not depend on a rate or index, payments associated with non-lease components and short-term rentals (leases with terms less than 12 months) are expensed as incurred.

At March 31, 2019, all of the Company-owned Ruth’s Chris Steak House restaurants operated in leased premises, with the exception of the restaurant in Ft. Lauderdale, FL, which is an owned property, and the restaurants in Anaheim, CA, Lake Mary, FL Princeton, NJ and South Barrington, IL, which operate on leased land.  The leases generally provide for minimum annual rental payments with scheduled minimum rent payments increases during the terms of the leases.  Certain leases also provide for rent deferral during the initial term, lease incentives in the form of tenant allowances to fund leasehold improvements, and/or contingent rent provisions based on the sales at the underlying restaurants.  Most of the Company’s restaurant leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for 5 years or more.  The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.  The weighted average term and discount rate for operating leases is 12.5 years and 5.1%, respectively.

The components of lease expense are as follows (in thousands):

 

 

 

 

13 Weeks Ended

 

 

 

Classification

 

March 31, 2019

 

Operating lease cost

 

Restaurant operating expenses and General and adminstrative costs

 

$

6,380

 

Variable lease cost

 

Restaurant operating expenses and General and adminstrative costs

 

 

2,757

 

Total lease cost

 

 

 

$

9,137

 

 

As of March 31, 2019, maturities of lease liabilities are summarized as follows (in thousands):

 

 

Operating Leases

 

2019, excluding the quarter ended March 31, 2019

$

19,655

 

2020

 

24,886

 

2021

 

23,259

 

2022

 

22,112

 

2023

 

19,183

 

Thereafter

 

159,124

 

Total future minimum rental commitments

$

268,219

 

As previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2018, and under the previous lease accounting prior to the adoption of ASC 842, future minimum annual rental commitments for operating leases as of December 30, 2018 were as follows (in thousands):

 

Operating Leases

 

2019

$

25,767

 

2020

 

24,177

 

2021

 

22,520

 

2022

 

21,388

 

2023

 

18,858

 

Thereafter

 

154,661

 

Total future minimum rental commitments

$

267,371

 

10


 

Supplemental cash flow information related to leases for the first quarter of 2019 was as follows (in thousands):

 

 

13 Weeks Ended

 

 

 

March 31, 2019

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

Operating cash flows from operating leases

 

$

6,524

 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

 

Operating leases

 

$

4,055

 

(3) Revenue

In the following tables, the Company’s revenue is disaggregated by major component for each category on the consolidated statements of income (in thousands).