UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 2, 1996
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 1-12454
RUBY TUESDAY, INC.
(Exact name of registrant as specified in charter)
GEORGIA 63-0475239
(State of incorporation or (I.R.S. Employer identifi-
organization) cation no.)
4721 Morrison Drive
P.O. Box 160266
Mobile, AL 36625
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (334)344-3000
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 X . No .
17,517,866
(Number of shares of $0.01 par value common stock outstanding
as of April 6, 1996)
Exhibit Index appears on page 1
INDEX
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF
MARCH 2, 1996 AND JUNE 3, 1995.................... 3
CONSOLIDATED STATEMENTS OF INCOME FOR
THE THIRTEEN AND THIRTY-NINE WEEKS ENDED
MARCH 2, 1996 AND MARCH 4, 1995.................. 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED
MARCH 2, 1996 AND MARCH 4, 1995.................. 5
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS....................................... 6-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS................................... 9-15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................. 15
ITEM 2. CHANGES IN SECURITIES.......................... 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................ NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................... NONE
ITEM 5. OTHER INFORMATION.............................. NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............... 15-16
SIGNATURES............................................. 16
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<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1
RUBY TUESDAY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<CAPTION>
MARCH 2, 1996 JUNE 3, 1995
<S> <C> <C>
(UNAUDITED) (AUDITED)
ASSETS
CURRENT ASSETS:
Cash and short-term investments.................. $ 5,457 $ 5,957
Receivables - trade and other.................... 3,452 2,475
Inventories...................................... 8,566 7,484
Prepaid expenses................................. 7,791 8,043
Deferred income tax benefits..................... 2,254 3,758
Refundable income taxes.......................... 6,897
Current assets of discontinued operations........ 52,481
Total current assets........................... 34,417 80,198
PROPERTY AND EQUIPMENT - at cost....................... 423,648 387,070
Less accumulated depreciation and amortization... (117,175) (117,068)
306,473 270,002
COSTS IN EXCESS OF NET ASSETS ACQUIRED................. 21,219 22,298
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS.......... 102,726
OTHER ASSETS........................................... 13,358 8,827
TOTAL ASSETS................................. $375,467 $484,051
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................. $ 25,254 $ 26,393
Short-term borrowings............................ 13,521 12,638
Accrued liabilities:
Taxes, other than income taxes................. 9,615 9,097
Payroll and related costs...................... 8,152 6,394
Insurance...................................... 6,492 6,396
Rent and other................................. 9,685 11,287
Current portion of notes and mortgages payable... 92 87
Current liabilities of discontinued operations... 52,686
Total current liabilities.................... 72,811 124,978
NOTES AND MORTGAGES PAYABLE............................ 74,035 32,003
DEFERRED INCOME TAXES.................................. 6,728 16,864
OTHER DEFERRED LIABILITIES............................. 30,050 18,672
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS..... 46,041
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value;(authorized 100,000
shares; issued 17,513 @ 3/2/96; 21,822 @ 6/03/95) 175 218
Capital in excess of par value................... 84,733
Retained earnings................................ 193,270 298,181
193,445 383,132
Less common stock held in treasury - at cost
(103 shares @ 3/02/96; 4,560 shares @ 06/03/95).. ( 1,602) (137,639)
191,843 245,493
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY..... $375,467 $484,051
The accompanying notes are an integral part of the consolidated financial statements
</TABLE>
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<TABLE>
RUBY TUESDAY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER-SHARE DATA)
(UNAUDITED)
<CAPTION>
13 Weeks Ended 39 Weeks Ended
MARCH 2,1996 MARCH 4, 1995 MARCH 2, 1996 MARCH 4, 1995
<S> <C> <C> <C> <C>
Revenues................. $163,957 $142,094 $461,922 $376,156
Operating costs and expenses:
Cost of merchandise.... 44,848 38,658 126,879 101,582
Payroll & related costs 53,872 46,351 155,765 121,617
Other, net............. 34,802 28,459 100,327 76,073
Selling, general and
administrative........ 9,440 8,829 30,301 28,617
Depreciation........... 8,845 7,046 25,642 18,919
Interest expense, net.. 1,993 458 3,515 290
Loss on impairment of
assets................ 25,881 25,881
Restructure costs...... 5,257 5,257
L&N conversion/closing
costs............... 19,727
184,938 129,801 473,567 366,825
Income (loss) from
continuing operations
before income taxes... (20,981) 12,293 (11,645) 9,331
Provision (benefit) for
income taxes......... (8,142) 4,425 (5,104) 2,586
Income (loss) from continuing
operations............. (12,839) 7,868 (6,541) 6,745
Income (loss) from
discontinued operations,
net of applicable income
taxes................. (12,114) 5,274 (2,222) 43,038
Net income (loss)........ $(24,953) $ 13,142 $ (8,763) $ 49,783
Earnings (loss) per common and
equivalent share:
Continuing Operations... $ (0.73) $ 0.44 $ (0.37) $ 0.37
Discontinued Operations. (0.68) 0.30 (0.13) 2.39
Earnings (loss) per
common and common
equivalent share..... $ (1.41) $ 0.74 $ (0.50) $ 2.76
Weighted average common
and common equivalent
shares............... 17,520 17,737 17,645 18,021
The accompanying notes are an integral part of the consolidated financial statements
</TABLE>
</PAGE>
<PAGE>
<TABLE>
RUBY TUESDAY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Thirty-Nine Weeks Ended
March 2,1996 March 4,1995
<S> <C> <C>
Operating Activities:
Income (loss) from continuing operations.......... $ (6,541) $ 6,745
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on impairment of assets.................... 25,881
Depreciation and amortization................... 25,642 18,919
Amortization of intangibles..................... 520 396
Other, net...................................... (391)
Deferred income taxes........................... (9,526) (2,649)
Loss on disposition of assets................... 3,034 630
Changes in operating assets and liabilities:
(Increase)/decrease in receivables............ (977) (1,508)
(Increase)/decrease in inventories............ (1,082) (687)
(Increase)/decrease in prepaid and other
assets...................................... 1,497 3,973
Increase/(decrease) in accounts payable,
accrued and other liabilities............... 10,898 10,821
Increase/(decrease) in income taxes payable... (5,548) 1,540
Cash provided by continuing operations............ 43,407 38,180
Cash provided (used) by discontinued operations... 10,030 (12,497)
Net cash provided by operating activities......... 53,437 25,683
Investing activities:
Purchases of property and equipment............... (94,075) (81,123)
Proceeds from disposal of assets.................. 2,828 126
Other, net........................................ (4,953) (1,219)
Discontinued operations investment activities, net (14,448) 82,471
Net cash provided (used) by investing activities.. (110,648) 255
Financing activities:
Proceeds from long-term debt...................... 42,102 15,664
Net change in short-term borrowings............... 883 (15,635)
Principal payments on long-term debt and capital
leases.......................................... (65) (14)
Proceeds from issuance of stock, including
treasury stock.................................. 3,267 9,109
Stock repurchases................................. (700) (44,608)
Dividends paid.................................... (9,385) (9,012)
Discontinued operations financing activities...... 20,609 15,209
Net cash provided (used) by financing activities.. 56,711 (29,287)
Decrease in cash and short-term investments....... (500) (3,349)
Cash and short-term investments:
Beginning of period............................. 5,957 4,420
End of period................................... $ 5,457 $ 1,071
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
</PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
statements should be read in conjunction with the restated consolidated
financial statements of Ruby Tuesday, Inc. (the "Company") included in the
definitive proxy statement filed with the Securities and Exchange
Commission ("SEC") on February 6, 1996, which contains restated
consolidated financial statements and notes thereto of the Company
reflecting the businesses spun off in the distribution (the
"Distribution") as discussed in Note B below as discontinued operations.
In connection with the Distribution, Ruby Tuesday, Inc. succeeded to all
the business, properties, assets, and liabilities of Morrison Restaurants
Inc. In addition, all of the Common Stock of the Company was combined to
effect a one for two reverse stock split. All previous financial
statements have been adjusted to reflect the stock split. The
accompanying unaudited consolidated financial statements reflect all
adjustments for normal recurring accruals. These adjustments are
necessary, in the opinion of management, for a fair presentation of the
financial position, the results of operations and the cash flows for the
interim periods presented. The results of operations for the interim
periods reported herein are not necessarily indicative of results to be
expected for the full year.
NOTE B - DISCONTINUED OPERATIONS
On March 7, 1996 the stockholders of Morrison Restaurants Inc.
("Morrison") approved the distribution of its family dining restaurant
business (Morrison Fresh Cooking, Inc. ("MFCI")) and its health care food
and nutrition services business (Morrison Health Care, Inc. ("MHCI")) to
its stockholders effective March 9, 1996. Morrison stockholders received
one share of MFCI for every four shares of Company stock then held and one
share of MHCI for every three shares of Company stock then held. In
accordance with Accounting Principles Board Opinion No. 30, the financial
results of these two businesses, together referred to as the Morrison
Group, are reported as discontinued operations. For accounting purposes,
the Distribution is reflected as if it occurred on March 2, 1996, the last
day of the third fiscal quarter.
As of the Distribution, the Company has no ownership interest in either
MFCI or MHCI, except for stock held in connection with employee benefit
plans. However, the Company has entered into certain agreements with both
MFCI and MHCI governing certain operating relationships among the Company,
MFCI and MHCI subsequent to the Distribution. The relationship among the
three new companies is discussed in the Morrison Restaurants Inc. Notice
of Special Meeting of Stockholders and Proxy Statement dated February 6,
1996 under the section "Relationship among RTI, MFCI, and MHCI after the
Distribution".
NOTE C - ASSET IMPAIRMENT/RESTRUCTURE CHARGES
On January 10, 1996 the Company announced that it would adopt Financial
Accounting Standard No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" in the third quarter
of fiscal 1996. At the same time, the Company also announced it would
recognize charges associated with the Distribution of MFCI and MHCI and
other costs associated with the closing of 16 restaurants that had not met
management's financial performance requirements.
The original announcement stated that a pre-tax charge of $25.4 million
would be recorded of which $3.9 million, the difference between fair value
and net realizable value of the impaired assets, results from the adoption
of FAS 121. Management revised its estimates during the quarter, however,
and recorded a pre-tax charge of $25.9 million (of which $3.9 million
remained the result of the adoption of FAS 121). This charge is comprised
of the following: impairment on 16 units approved for closure within one
year by the Board of Directors on January 10, 1996, ($10.0 million);
impairment on in-unit computer equipment ($0.8 million) and write-offs
resulting from management's decision to abandon an information technology
plan ($3.8 million) approved on that same date; and impairment on units
remaining open ($11.3 million).
Based upon management's review of negative cash flow and operating loss
units and other considerations, the Board approved the closing of ten Ruby
Tuesdays, four Mozzarella's and two Tia's restaurants. The expected loss
on disposal of the long-term assets of these units originally announced to
be $9.9 million (net of an assumed salvage value of $0.6 million) was
recorded at $10.0 million (net of an assumed salvage value of $0.9
million). The increase is the result of changes in the assumed discounted
cash flows (operating and salvage) to be received prior to unit closing.
Included in this amount is $0.6 million which represents the goodwill
associated with two Tia's units to be closed. During the quarter, seven
of these units were closed (five Ruby Tuesday's and two Mozzarella's).
Negative cash flow and operating loss units not recommended for closure
were reviewed for impairment. Management believed these units might have
been impaired based upon poor operating performance. Accordingly,
management estimated the undiscounted future cash flows to be generated by
these units and determined that certain of them would not likely generate
net cash flows in excess of carrying value. Management then estimated the
fair value of those units using discounted net cash flow as a measure of
fair value. Based upon third quarter operating and cash flow results, two
additional units were identified as impaired. Accordingly, a write-down
of $0.3 million was added to the $11.0 million previously announced.
Prior to the announcement of the Distribution on September 27, 1995 the
Company was undertaking an information technology project intended, among
other things, to update or replace certain accounting and human resource
systems for all of the Company. Upon announcement of the intended
Distribution, management initiated a project by project review of the
information technology plan. Upon completion of its review, management
decided to abandon certain projects in development, including the project
to update or replace certain accounting and human resource systems. In
connection therewith, the Company also plans to dispose of certain in-unit
computer equipment and replace that equipment with computers more
technologically advanced. At the January 10, 1996 board meeting such
actions were approved by the Board of Directors. Accordingly, during the
quarter ended March 2, 1996 the Company recorded a charge of $3.8 million
for the write-off of the information technology projects and $0.8 million
for the remaining carrying value of certain in-unit computer equipment.
In addition to the write-down of fixed assets on the 16 units to be
closed, the Company accrued charges of $3.4 million relating to the
settlement of the related lease obligations. Management estimates it can
negotiate lease settlements within 36 months on a majority of those units
which cannot be sublet. Management's original estimate ($3.5 million)
assumed none of the 16 units would be sublet and that all leases could be
settled within 36 months. Since the January 10, 1996 announcement, the
Company has concluded that it will not be able to resolve four leases for
the amounts originally estimated, and accordingly, an additional $0.5
million was added to the reserve. Also, the Company now believes that it
can sublease six of the units approved by the Board for closing. The
accrual recorded for the settlement of lease obligations was decreased by
$0.9 million as a result of this change in assumption. One of the units to
be closed is company-owned.
Other charges of $1.8 million were also recorded during the quarter.
These charges consisted primarily of estimated professional and other
fees incurred in accordance with the Distribution ($1.3 million);
severance pay for staff reductions expected during the quarter ($0.2
million) and miscellaneous other asset write-offs ($0.3 million).
NOTE D - SUBSEQUENT EVENTS
On March 6, 1996, the Company entered into a five-year credit facility
with various banks which allows the Company to borrow up to $100.0 million
under various interest rate options. The $100.0 million credit facility
is comprised of a $50.0 million five-year term note and a $50.0 million
five-year revolving credit facility. Commitment fees equal to 0.1875% per
annum are payable quarterly on the unused portion of the revolving credit
facility. The credit facility provides for certain restrictions on
incurring additional indebtedness and to certain funded debt, net worth,
and fixed charge coverage requirements.
In order to control interest costs on the term loan, the Company entered
into an interest rate swap agreement. The notional amount of this
agreement is equal to the $50.0 million term loan. The agreement
effectively limits the interest rate to 6.25% for the five year period
ended March 4, 2001. In conjunction with entering into the new swap
agreement, the Company settled the previous interest swap agreement at a
cost of approximately $0.4 million. Prior to the Distribution, each of
the Company, MFCI, and MHCI agreed to pay one-third of the cost of
settling the swap. Accordingly, the portion allocated to the Company,
$0.1 million, was included as part of the restructure costs recorded in
the third quarter of fiscal 1996.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
On September 26, 1995, the Board of Directors of the Company approved a
plan to distribute the Company's family dining and health care businesses
to stockholders to create three separate publicly-held corporations. The
Distribution was accomplished on March 9, 1996 following an affirmative
vote of a majority of the Company's stockholders on March 7, 1996. For
accounting purposes, the Distribution was reflected as if it had occurred
on March 2, 1996, the last day of the Company's third fiscal quarter.
The name of the Company was changed to "Ruby Tuesday, Inc." in connection
with the Distribution and its operations consist of
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<TABLE>
the casual dining restaurant business previously conducted by the Ruby Tuesday
Group. As a result of the Board's decision, all previously reported financial
statements of the Company have been restated to reflect the activities of MFCI and
MHCI as discontinued operations.
Results of Operations:
The following table sets forth selected restaurant operating data as a percentage
of revenues for the periods indicated. All information is derived from the
consolidated statements of the Company included herein.
<CAPTION>
13 Weeks Ended 39 Weeks Ended
MARCH 2, MARCH 4, MARCH 2, MARCH 4,
1996 1995 1996 1995
<S> > <C> <C> <C> <C>
Revenues.......................... 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of merchandise.......... 27.4 27.2 27.4 27.0
Payroll and related costs.... 32.8 32.6 33.7 32.3
Other, net................... 21.2 20.0 21.7 20.3
Selling, general and
administrative.......... 5.8 6.2 6.6 7.6
Depreciation................. 5.4 5.0 5.6 5.0
Interest expense, net........ 1.2 0.3 0.8 0.1
Loss on impairment of assets. 15.8 5.6
Restructure costs............ 3.2 1.1
L&N conversion/closing costs. 5.2
112.8 91.3 102.5 97.5
Income (loss) from continuing
operations before income
taxes........................ (12.8) 8.7 (2.5) 2.5
Provision (benefit) for
income taxes................ ( 5.0) 3.2 (1.1) 0.7
Income (loss) from continuing
operations................... ( 7.8) 5.5 (1.4) 1.8
Income (loss) from discontinued
operations, net of applicable
income taxes................. ( 7.4) 3.7 (0.5) 11.4
Net income (loss)............. (15.2)% 9.2% (1.9)% 13.2%
</TABLE>
</PAGE>
The Company reported net income (loss) from continuing operations of
$(12.8) million and $(6.5) million for the thirteen and thirty-nine week
periods ended March 2, 1996, compared with $7.9 million and $6.7 million
reported for the corresponding periods of the prior fiscal year. The
current year loss is the result of costs recorded in the third quarter of
fiscal 1996 related to the impairment of assets ($25.9 million) and
restructure costs ($5.3 million) associated with the distribution of MFCI
and MHCI. Net income (loss) from discontinued operations decreased $17.4
million to $(12.1) million for the thirteen weeks ended March 2, 1996
compared to the same period in the prior fiscal year. Net income (loss)
from discontinued operations for the thirty-nine weeks ended March 2, 1996
was $(2.2) million, a decrease of $45.3 million from the corresponding
period in the prior year. The decrease is also due to charges recorded
during the quarter related to asset impairment and restructure charges.
In addition, net income from discontinued operations for the thirty-nine
weeks ended March 4, 1995 reflects a $46.8 million gain ($25.8 million net
of tax) on MHCI's sale of certain of its business and industry contracts
and assets to Gardner Merchant Food Service, Inc.
In the fiscal 1995 period, the Company accrued approximately $19.7 million
for costs to be incurred as a result of the decision announced on June 27,
1994, to phase out the L&N concept. As of March 2, 1996, expenses
approximating that same amount related to operating losses, the write-offs
of inventories, intangibles and other assets, severance pay and other
expenses had been charged against the reserve.
The following table shows year-to-date restaurant openings during the
first three quarters as well as total restaurants open at the end of the
third quarter.
Year-to-date Year-to-date Total Open at End
Openings Closings of Third Quarter
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1996 1995 1996 1995 1996 1995
Continuing Operations:
Ruby Tuesday 38 47 11 4 302 266
Mozzarella's 5 17 3 0 46 45
Tia's 4 14 0 0 18 14
Discontinued Operations:
MFCI 7 13 23 4 158 175
MHCI 15 23 32 24 274 281
The Company estimates that approximately five additional Ruby Tuesday
units will be opened during the remainder of fiscal 1996.
Company Restaurant Sales:
Company revenues of continuing operations increased $21.9 million or 15.4%
to $164.0 million for the quarter and increased $85.8 million or 22.8% to
$461.9 million for the thirty-nine weeks ended March 2, 1996. These
increases are the result of a net addition of 41 units consisting of 36
Ruby Tuesdays, one Mozzarella's, and four Tia's as of March 2, 1996 offset
by declining same store sales.
Cost of Merchandise, Payroll and Related Costs and Other Operating Costs:
Cost of merchandise of continuing operations increased $6.2 million or
16.0% to $44.8 million for the quarter and $25.3 million or 24.9% to
$126.9 million for the thirty-nine weeks ended March 2, 1996. These costs
have increased slightly as a percentage of revenues from the comparable
periods in the prior year as a result of a more value-focused menu
featuring lower prices and increased portions.
Payroll and related costs increased $7.5 million or 16.2% for the quarter
and $34.1 million or 28.1% for the thirty-nine weeks ended March 2, 1996.
As a percentage of revenues, payroll and related costs increased 1.4%
during the thirty-nine weeks ended March 2, 1996. The increase is due to
additional staffing levels and service programs at Ruby Tuesdays designed
to improve guest service and the fixed nature of Mozzarella's management
and kitchen payroll coupled with decreasing same store sales. These
increases were offset by an improvement in the Company's workers'
compensation claims experience as well as a decrease in other fringe
benefits.
Other operating costs increased $6.3 million or 22.3% for the quarter and
$24.3 million or 31.9% for the thirty-nine weeks ended March 2, 1996.
Other operating costs have increased as a percentage of revenues primarily
due to an increase in insurance expense. Insurance expense increased due
to an increase in general liability rates.
Selling, general and administrative expenses have decreased as a
percentage of revenues for both the quarter and year-to-date periods. The
decrease resulted from the Company's objective of keeping general and
administrative expenses flat for the year.
Depreciation increased $1.8 million or 25.5% for the quarter and $6.7
million or 35.5% for the thirty-nine weeks ended March 2, 1996.
Depreciation has increased as a percentage of revenues due to the
Company's focus on expansion with freestanding restaurants.
Interest Expense (net of Interest Income):
Net interest expense increased to $2.0 million and $3.5 million for the
quarter and year-to-date periods ended March 2, 1996 from $0.5 million and
$0.3 million for the same periods of the prior year due to the addition of
$54.5 million in borrowings on the Company's revolving credit facility and
other bank lines of credit offset by the retirement of the Life of Georgia
note of $7.4 million during the thirteen weeks ended September 3, 1994.
Income Taxes
The effective income tax rate on continuing operations for the thirteen
and thirty-nine weeks ended March 2, 1996 was 38.8% and 43.8%, as compared
to 36.0% and 27.7% for the same period of the prior year. Excluding the
effects of L&N in the prior year and impairment and restructure costs in
the current year, the effective income tax rates for the thirty-nine weeks
ended March 2, 1996 and March 4, 1995 would have been 35.2% and 35.5%,
respectively.
Earnings per Share
Earnings per share are based on the weighted average number of shares
outstanding during each quarter and are adjusted for the assumed
conversion of shares issuable upon exercise of options, after the assumed
repurchase of common shares with the related proceeds and after the
adjustment for the one for two reverse stock split. The difference
between primary and fully diluted weighted average shares reflects the
maximum extent of potential dilution that conversions of shares could
create.
LIQUIDITY AND CAPITAL RESOURCES
Total assets at March 2, 1996 were $375.5 million, a $108.6 million
decrease from $484.1 million as of the prior fiscal year end. The decrease
is primarily the result of the distribution of the stock of MFCI and MHCI
to Company stockholders. Excluding the effects of distributing net assets
of discontinued operations, total assets would have increased $46.6
million. Net property and equipment of continuing operations increased
$36.5 million from June 3, 1995. The increase was primarily the net
result of capital expenditures of $94.1 million, depreciation expense
totaling $25.6 million, $5.9 million in retirements, and a $25.3 million
write-down of fixed assets due to impairment. The Company anticipates that
during the remainder of fiscal 1996, capital expansion will be financed
primarily by funds generated by operations with minimal incremental
financing from borrowings on lines of credit when necessary.
Total liabilities at March 2, 1996 were $183.6 million, a $55.0 million
decrease from $238.6 million as of the end of the prior fiscal year. The
decrease is the result of the Distribution discussed above. Long-term
borrowings of continuing operations increased $42.0 million from the end
of the prior fiscal year primarily as a result of additional borrowings on
the Company's revolving line of credit. At March 2, 1996 the Company had
$100.0 million in borrowings on this revolving line of credit (including
$27.1 million allocated to discontinued operations). The weighted average
interest rate on these borrowings including the effective cost of an
interest rate swap agreement during the quarter was 6.95%.
In addition, at March 2, 1996, the Company had committed lines of credit
amounting to $29.0 million (of which $15.5 million remained available at
March 2, 1996) and non-committed lines of credit amounting to $24.0
million with various banks at varying interest rates. These lines are
subject to periodic review by each bank and may be canceled by the Company
at any time.
Cash dividends paid during the third quarter of fiscal year 1996 amounted
to $3.2 million. Dividends paid per share were $0.092 for the third
quarter. The Company does not intend to pay dividends for the foreseeable
future. It is expected that the combined dividend level of MFCI and MHCI
will approximate that paid by the Company prior to the Distribution.
SUBSEQUENT EVENTS
On March 6, 1996, the Company entered into a five-year credit facility
with various banks which allows the Company to borrow up to $100.0 million
under various interest rate options. The $100.0 million credit facility
is comprised of a $50.0 million five-year term note and a $50.0 million
five-year revolving credit facility. Commitment fees equal to 0.1875% per
annum are payable quarterly on the unused portion of the revolving credit
facility. The credit facility provides for certain restrictions on
incurring additional indebtedness and to certain funded debt, net worth,
and fixed charge coverage requirements.
In order to control interest costs on the term loan, the Company entered
into an interest rate swap agreement. The notional amount of this
agreement is equal to the $50.0 million term loan. The agreement
effectively limits the interest rate to 6.25% for the five year period
ended March 4, 2001. In conjunction with entering into the new swap
agreement, the Company settled the previous interest swap agreement at a
cost of approximately $0.4 million. Prior to the Distribution, each of
the Company, MFCI, MHCI agreed to pay one-third of the cost of settling
the swap. Accordingly, the portion allocated to the Company, $0.1
million, was included as part of the restructure costs recorded in the
third quarter of fiscal 1996.
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
The Company is presently, and from time to time, subject to pending claims
and suits arising in the ordinary course of its business. In the opinion
of management, the ultimate resolution of these pending legal proceedings
will not have a material adverse effect on the Company's operations or
consolidated financial position.
ITEM 2.
CHANGES IN SECURITIES
As a result of the Distribution, the stockholders which formerly held
shares of Morrison Restaurants Inc. (a Delaware corporation) now hold
shares of Ruby Tuesday, Inc. (a Georgia corporation). Certain differences
exist between the rights of a stockholder of a Delaware corporation and a
stockholder of a Georgia corporation. The information required by this
item is contained in the Morrison Restaurants Inc. Notice of Special
Meeting of Stockholders and Proxy Statement dated February 6, 1996 under
the section "Comparison of Stockholder Rights."
EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following exhibits are filed as part of this report:
Exhibit
No.
11 Computation of Primary and Fully Diluted Earnings Per Share
27 Financial Data Schedule
REPORTS ON FORM 8-K
1. The Company filed a current report of Form 8-K on December 14, 1995
including the Independent Accountants' consent to the incorporation by
reference in certain registration statements under the Securities Act of
1933 of the restated consolidated financial statements included in the
preliminary proxy statement filed with the SEC.
2. The Company filed a Current Report on Form 8-K on February 8, 1996
which included the Independent Accountants' consent to the incorporation
by reference in certain registration statements under the Securities Act
of 1933 of the restated consolidated financial statements included in the
definitive proxy statement filed with the SEC on February 6, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RUBY TUESDAY , INC.
(Registrant)
4/15/96 /s/ J.Russell Mothershed
DATE J. RUSSELL MOTHERSHED
Senior Vice President, Finance
(Senior Vice President and
Principal Accounting Officer)
EXHIBIT INDEX
Exhibit
Number Description
11 Computation of Primary and Fully Diluted Earnings Per Share
27 Financial Data Schedule
4
<PAGE>
<TABLE>
ITEM 6.(a)
EXHIBIT 11: COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
MAR.2, 1996 MAR. 4,1995 MAR.2, 1996 MAR. 4, 1995
PRIMARY EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
<S> <C> <C> <C> <C>
Average common shares outstanding...... 17,302 17,088 17,286 17,346
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treasury stock method", at the
average market price)................ 218 649 359 675
TOTALS.............. 17,520 17,737 17,645 18,021
Net Income:
Continuing operations.................. $(12,839) $ 7,868 $ (6,541) $ 6,745
Discontinued operations................ (12,114) 5,274 (2,222) 43,038
$(24,953) $ 13,142 $ (8,763) $ 49,783
Primary earnings per common and
common equivalent share:
Continuing operations.................. $ (0.73) $ 0.44 $ (0.37) $ 0.37
Discontinued operations................ (0.68) 0.30 (0.13) 2.39
$ (1.41) $ 0.74 $ (0.50) $ 2.76
</TABLE>
</PAGE>
<PAGE>
<TABLE>
ITEM 6.(a) (continued)
EXHIBIT 11: COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
MAR.2, 1996 MAR. 4,1995 MAR.2, 1996 MAR. 4, 1995
FULLY DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
<S> <C> <C> <C> <C>
Average common shares outstanding...... 17,302 17,088 17,286 17,346
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treasury stock method", at the
higher of period-end or average
market price)........................ 369 686 310 707
TOTALS.............. 17,671 17,774 17,596 18,053
Net Income:
Continuing operations.................. $(12,839) $ 7,868 $ (6,541) $ 6,745
Discontinued operations................ (12,114) 5,274 (2,222) 43,038
$(24,953) $ 13,142 $ (8,763) $ 49,783
Fully diluted earnings per common and
common equivalent share:
Continuing operations.................. $ (0.73) $ 0.44 $ (0.37) $ 0.37
Discontinued operations................ (0.68) 0.30 (0.13) 2.39
$ (1.41) $ 0.74 $ (0.50) $ 2.76
</TABLE>
</PAGE>
19
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RUBY
TUESDAY, INC. FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED MARCH 2, 1996
AND ARE QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-01-1996
<PERIOD-END> MAR-02-1996
<CASH> 5,457
<SECURITIES> 0
<RECEIVABLES> 202
<ALLOWANCES> 0
<INVENTORY> 8,566
<CURRENT-ASSETS> 34,417
<PP&E> 423,648
<DEPRECIATION> 117,175
<TOTAL-ASSETS> 375,467
<CURRENT-LIABILITIES> 72,811
<BONDS> 74,035
0
0
<COMMON> 175
<OTHER-SE> 191,668
<TOTAL-LIABILITY-AND-EQUITY> 375,467
<SALES> 461,141
<TOTAL-REVENUES> 461,922
<CGS> 126,879
<TOTAL-COSTS> 312,035
<OTHER-EXPENSES> 31,138
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,515
<INCOME-PRETAX> (11,645)
<INCOME-TAX> (5,104)
<INCOME-CONTINUING> (6,541)
<DISCONTINUED> (2,222)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,763)
<EPS-PRIMARY> $(0.50)
<EPS-DILUTED> $(0.50)
</TABLE>
