Ruby Tuesday, Inc. Reports Third Quarter Fiscal 2007 Results, Plans and Earnings Outlook for Remainder of Fiscal 2007 and Fiscal 2008

Ruby Tuesday, Inc. (NYSE: RI) today 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.

Fiscal 2007 Guidance

The Company is targeting diluted earnings per share of $0.46 to $0.48 for its fourth quarter based on same-restaurant sales of down 2.0% to 2.5% at Company-owned restaurants, a decrease of approximately $0.03 to $0.04 per diluted share due to share-based compensation expense, and approximately $0.02 per diluted share for the accelerated depreciation associated with approximately 50 planned remodels. In addition, the Company will be lapping an approximate $0.04 impact from a 14th week in the fourth quarter of the prior year.

The Company is currently targeting diluted earnings per share of $1.59 to $1.61 for fiscal 2007 after deducting the lease-related charge of $0.06 per diluted share for SRG in the third quarter and the $0.02 charge for remodeling in the fourth quarter that was not included in previously issued guidance. Additional assumptions used to determine the targeted range include the following:

Down approximately 1.0% same-restaurant sales growth at Company-owned restaurants for the year;
Approximately 45 Company-owned openings for the year;
25 to 30 franchise openings for the year;
Continued investments in the areas of food and labor as previously disclosed;
$145-$150 million in capital expenditures for the year; and
Share-based compensation expense of $0.10 to $0.11 per diluted share.

Preliminary Fiscal 2008 Outlook

The Company is targeting diluted earnings per share growth for its fiscal 2008 of 7.0% to 15.0%. The targeted growth excludes the impact of the SRG charge in fiscal 2007 of $0.06 as well as the impact of any potential accelerated depreciation associated with its proposed restaurant remodeling plan in fiscal 2008. Based on the results of the fourth quarter fiscal year 2007 remodeling effort, we anticipate beginning an aggressive remodeling program in fiscal year 2008. Our projections for fiscal 2008 will be reduced by the impact of the potential accelerated depreciation, projected to be $0.10 to $0.12 per diluted share, if we move forward. The following are assumptions included in the above estimate:

0.0% to 2.0% same-restaurant sales growth at Company-owned restaurants;
Approximately 30 Company-owned openings for the year;
30 to 35 franchise openings for the year;
$150-$160 million in capital expenditures for the year including $50-$60 million for the above mentioned full remodels of 450-500 restaurants and partial remodels of 150-200 restaurants during the fiscal year if we move forward; and
Continued share repurchases.

Beall commented, 'We have very solid plans and strategies moving forward into fiscal 2008. These are not plans that have been thrown together quickly. They are the continuation of a set of focused strategies we have been building upon for over two years. In fiscal 2008, we will continue with more fresh, quality items on our menu; have increased focus on our team and guest experience through our gracious hospitality strategies; remodel at least half of company-owned restaurants starting with our largest markets; and continue executing on simple fresh American dining and high quality casual dining.'

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).



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