Ruby Tuesday Reports Third Quarter Results

Ruby Tuesday reported revenue of $317.5 million for its third fiscal quarter ended March 3, 2009, versus $351.2 million for the same period a year ago, with the decrease reflecting a 6.8% decline in same-restaurant sales and 50 fewer restaurants in operation than in the prior year. The Company also reported diluted earnings per share of $0.09 on net income of $4.8 million for the Company's third quarter. This compares to diluted earnings per share of $0.23 on net income of $11.7 million for the third quarter of the prior year. As part of the restructuring announced in December 2008, third quarter 2009 earnings include Closures and impairment expenses of $14.6 million pre-tax, which reduced diluted earnings per share by $0.17. During the quarter, the Company was successful in moderating its sales decline and controlling costs at both the restaurant and corporate levels. Operating results also benefited from the previously announced restaurant closings.

Sandy Beall, founder and CEO commented, 'The decisive actions that we have undertaken this fiscal year are beginning to gain traction. We are encouraged by our third quarter results, and we experienced excellent progress in several key areas:

- We paid down nearly $40 million of debt, bringing our year-to-date total to just over $80 million,

- Same restaurant sales trends improved,

- Debt to EBITDAR (earnings before interest, taxes, depreciation, amortization, and rent), one of our key bank ratios, declined and we were in compliance with our debt covenants, and

- We continue to operate our restaurants at high levels of guest satisfaction.

'While the near-term economic environment is expected to remain under pressure, we are doing everything we can to finish our fiscal year with strength and carry the momentum we gained in the third quarter over to our next fiscal year. Third quarter results began to benefit from many of the actions we have taken to reposition the brand, revitalize sales, and improve cash flow. Specifically, we have significantly increased the quality of our food, service, and the look and feel of our restaurants. We have evolved our marketing to a more entrepreneurial focus, and in the last two quarters we have identified cost reductions of $45-50 million annualized.'

Third Quarter Highlights

- Same-restaurant sales at Company-owned Ruby Tuesday restaurants decreased 6.8%, while same-restaurant sales at domestic franchise Ruby Tuesday restaurants were down 5.1%, as compared to declines of 12.7% and 12.0% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively, in the third quarter of the prior year.

- Total revenues were down 9.6% primarily reflecting the 6.8% decline in same-restaurant sales and a net decrease of 50 restaurants from the same quarter of the prior year largely because of the closure of 43 restaurants during the quarter. One Company-operated restaurant was opened during the quarter.

- Sales at domestic and international franchise Ruby Tuesday restaurants (which are the basis for determining royalty fees included in franchise income on the Company's operating statement) totaled $96,782,000 and $100,256,000 for the third quarter of fiscal 2009 and 2008, respectively.

- Closures and impairment expenses included lease reserves and restaurant-related impairments, and closing-related charges. These expenses were in line with our previous estimate and principally relate to the restructuring announced in December.

- Third quarter pretax income in fiscal 2009 benefited from a change in accounting estimate for gift cards of $1.9 million.

- The Company's effective tax rate was below the statutory rate because of the impact of tax credits.

- Capital expenditures were $2.9 million in the quarter compared with $25.0 million a year earlier as new unit expansion is on hold and maintenance capital spending requirements are relatively modest because of the recent reimaging.

- The Company was in compliance with its debt covenants as of the end of the third quarter: the leverage ratio was 3.91, versus a maximum requirement of 4.25 and represents a contractual step down from the 4.5 times EBITDAR that was allowed at the end of the second quarter, the fixed charge coverage ratio was 2.50, compared with a minimum threshold of 2.25, and net worth exceeded the minimum requirement by $19.2 million.

- The Company had 52.8 million shares outstanding at the end of the quarter.

Fiscal 2009 Guidance

- Restaurant openings/closings - The Company added one restaurant acquired from a franchisee in the fourth quarter. For the year, the Company projects it will close a net of approximately 48 restaurants. Franchisees are expected to open a net of four restaurants in the fourth quarter, three of which will be international. For the year, domestic franchisees are projected to open a net of four and international franchisees a net of 7 new restaurants.

- Same-restaurant sales are expected to decline 8% to 9% for the year, compared with prior guidance of a 9-10% decline, which assumes some further improvement during the fourth quarter.

- Other expenses - depreciation is projected to be in the $74-76 million range and Selling, general, and administrative expenses are targeted to be down 25-30% from a year earlier.

- Including the impact of our Closures and impairments and Goodwill charges in the second and third quarters that totaled $0.88 per share, the diluted loss per share for the year is projected to be in the range of $0.40-0.50, versus our prior guidance of a loss of $0.45-0.55.

- Capital expenditures for the year are expected to be in the $17.5-18.5 million range.

- Debt pay-down is projected to be in the range of $90-100 million for the year, compared with our prior guidance of $80-90 million.

In closing, Mr. Beall commented, 'This is as difficult an operating environment as I have ever seen. Nonetheless, I have never felt better about how we are operating our restaurants and our business. Our team members have responded to these times, maintaining their focus on serving our guests while simultaneously watching costs very closely and seizing opportunities to increase sales and we are encouraged by our sales and profit momentum in the second half of our fiscal year. We recognize the need to stay focused and not let up in order to restore shareholder value and be in a position to excel as the economy and consumer improves.'

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