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 FEBRUARY 28, 1998
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 .
16,482,321 (not adjusted for stock split to be affective as a stock dividend
payable on May 8, 1998 to shareholders of record as of the close of business on
April 17, 1998)
(Number of shares of $0.01 par value common stock outstanding as of April 4,
1998)
Exhibit Index appears on page 15
INDEX PAGE
NUMBER
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF
FEBRUARY 28, 1998 AND MAY 31, 1997.................... 3
CONSOLIDATED STATEMENTS OF INCOME FOR
THE THIRTEEN AND THIRTY-NINE WEEKS ENDED
FEBRUARY 28, 1998 AND MARCH 1, 1997................... 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED
FEBRUARY 28, 1998 AND MARCH 1, 1997................... 5
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS............................................ 6-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS................................. 7-13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK................................... N/A
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................. 13
ITEM 2. CHANGES IN SECURITIES......................... NONE
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.............. 13-14
SIGNATURES............................................ 14
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1
RUBY TUESDAY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<CAPTION>
Feb. 28, May 31,
1998 1997
(UNAUDITED) (AUDITED)
<S> <C> <C>
Assets
Current assets:
Cash and short-term investments.................. $ 10,115 $ 7,608
Accounts and notes receivable.................... 9,310 4,621
Inventories...................................... 9,789 9,650
Prepaid expenses................................. 7,512 7,950
Deferred income tax benefits..................... 2,190 4,388
Assets held for disposal......................... 28,909 1,275
Total current assets........................... 67,825 35,492
Property and equipment - at cost....................... 476,980 512,404
Less accumulated depreciation and amortization... (168,170) (165,640)
308,810 346,764
Costs in excess of net assets acquired................. 19,894 20,396
Other assets........................................... 23,117 16,219
Total assets................................. $419,646 $418,871
Liabilities & shareholders' equity
Current liabilities:
Accounts payable................................. $ 34,840 $ 28,828
Short-term borrowings............................ 12,335 534
Accrued liabilities:
Taxes, other than income taxes................. 10,433 11,425
Payroll and related costs...................... 9,995 8,982
Insurance...................................... 9,807 8,800
Rent and other................................. 10,949 10,393
Current portion of long-term debt................ 107 102
Total current liabilities.................... 88,466 69,064
Long-term debt......................................... 78,440 78,006
Deferred income taxes.................................. 10,830 13,552
Other deferred liabilities............................. 37,238 34,609
Shareholders' equity:
Common stock, $0.01 par value;(authorized 100,000
shares; issued 16,255 @ 2/28/98; 17,720 @ 5/31/97) 163 177
Capital in excess of par value................... 3,326 2,729
Retained earnings................................ 204,205 223,399
207,694 226,305
Less cost of Company stock held by Deferred
Compensation Plan............................... (3,022) (2,665)
204,672 223,640
Total liabilities & shareholders' equity..... $419,646 $418,871
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<TABLE>
RUBY TUESDAY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER-SHARE DATA)
(UNAUDITED)
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Feb. 28, 1998 March 1, 1997 Feb. 28, 1998 March 1, 1997
<S> <C> <C> <C> <C>
Revenues:
Restaurant sales................... $180,802 $172,597 $524,841 $486,146
Franchise revenues................. 800 8 1,143 59
181,602 172,605 525,984 486,205
Operating costs and expenses:
Cost of merchandise................ 49,580 46,464 143,719 131,729
Payroll and related costs.......... 57,393 54,985 169,215 158,045
Other, net......................... 36,033 36,349 109,592 105,407
Selling, general and administrative 13,703 11,424 39,125 32,162
Depreciation and amortization...... 9,758 9,693 30,083 28,378
Interest expense, net.............. 948 919 2,876 3,088
167,415 159,834 494,610 458,809
Income before income taxes........... 14,187 12,771 31,374 27,396
Provision for income taxes........... 5,026 4,536 11,112 9,726
Net income........................... $ 9,161 $ 8,235 $ 20,262 $ 17,670
Earnings per common share:
Basic.............................. $ 0.28 $ 0.23 $ 0.61 $ 0.50
Diluted............................ $ 0.27 $ 0.23 $ 0.58 $ 0.49
Weighted average common shares:
Basic............................. 32,582 35,337 33,406 35,231
Diluted........................... 33,885 35,696 34,731 35,762
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<TABLE>
RUBY TUESDAY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Thirty-Nine Weeks Ended
Feb. 28, March 1,
1998 1997
<S> <C> <C>
Operating activities:
Net income........................................ $ 20,262 $ 17,670
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 30,083 28,378
Amortization of intangibles..................... 534 550
Deferred income taxes........................... 312 963
Loss on disposition of assets................... 811 800
Changes in operating assets and liabilities:
Increase in receivables...................... (4,444) (1,939)
Increase in inventories...................... (853) (394)
(Increase)/decrease in prepaid and other
assets...................................... (1,086) 1,697
Increase in accounts payable,
accrued and other liabilities............... 9,248 11,270
Increase in income taxes payable............. 1,120 4,888
Net cash provided by operating activities....... 55,987 63,883
Investing activities:
Purchases of property and equipment............... (44,053) (58,702)
Proceeds from disposal of assets.................. 580 78
Proceeds from sale of restaurant properties
to franchisees.................................. 12,769
Proceeds from sale of home office building........ 5,266
Other, net........................................ (1,052) (2,517)
Net cash used by investing activities........... (26,490) (61,141)
Financing activities:
Proceeds from long-term debt...................... 500
Net change in short-term borrowings............... 11,801 2,479
Principal payments on long-term debt.............. (61) (5,071)
Proceeds from issuance of stock, including
treasury stock.................................. 4,953 2,868
Change in RTI stock held by Deferred
Compensation Plan............................... (357) 344
Stock repurchases................................. (42,352) (1,285)
Dividends paid.................................... (1,474)
Net cash used by financing activities........... (26,990) (665)
Increase in cash and short-term investments....... 2,507 2,077
Cash and short-term investments:
Beginning of year............................... 7,608 7,139
End of quarter.................................. $ 10,115 $ 9,216
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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 notes to the
consolidated financial statements included in Ruby Tuesday, Inc.'s annual
report for the fiscal year ended May 31, 1997. 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 - EARNINGS PER SHARE
During the third quarter of fiscal year 1998, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 128,
"Earnings per Share," which changes the method used to calculate earnings
per share. Under the new requirements for calculating basic earnings per
share, the dilutive effect of stock options is excluded. The adoption of
FAS 128 resulted in an increase to previously calculated earnings per
share amounts for the thirty-nine weeks ended March 1, 1997 of $0.01 per
share for basic earnings per share (which replaced primary earnings per
share) and the unaudited consolidated statement of income for such period
has been restated accordingly. Previously reported basic earnings per
share for the thirteen weeks ended March 1, 1997 and fully-diluted
earnings per share (now called diluted earnings per share) did not
change.
NOTE C - SUBSEQUENT EVENTS
On April 6, 1998, the Company entered into a series of agreements with
two entities (one limited liability company and one limited partnership).
These agreements provided, among other things, for the sale of 17
Company-owned units in Colorado (ten units) and Arizona (seven units) to
the entities. The 17 units will be operated as Ruby Tuesday restaurants
under separate franchising agreements. The Company was paid an aggregate
purchase price of $29.4 million, of which approximately $22.0 million was
paid in cash. The remaining approximate $7.4 million was in the form of
8.0% interest bearing notes. The sale of these units resulted in a
minimal pre-tax gain. Revenue for the thirty-nine weeks ended February
28, 1998 from the sixteen units opened as of that date totaled $16.9
million, with operating profits of $0.3 million for the same period. The
seventeenth unit opened as a franchise unit on April 7, 1998, and was not
previously operated by the Company.
The Company has also entered into a development agreement with each of
these two entities whereby they will open 10 (Colorado) or 16 (Arizona)
franchised restaurants in their respective areas over the next 5 to 9
years. For these development rights, fees totaling approximately $0.3
million were paid to the Company upon completion of certain financing
agreements (approximately $0.2 million of which were received prior to
February 28, 1998).
At its meeting held on April 6, 1998, the Board of Directors declared a
two-for-one split of the Company's common stock to be affected as a stock
dividend. One additional share of common stock will be issued for each
share of common stock held by stockholders of record as of the close of
business on April 17, 1998. The additional shares will be distributed on
May 8, 1998. The financial statements and related footnotes have been
adjusted to reflect the stock split for all periods presented.
At the same meeting, the Board of Directors approved an increase of its
share repurchase program by authorizing the repurchase of an additional
4.0 million shares to be used for general corporate purposes.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General:
The Company generates revenues from two primary sources: restaurant sales
(food and beverage sales) and franchise revenues consisting of franchise
restaurant royalties (based upon a percent of each franchise restaurant's
monthly gross sales) and development and franchise fees (which typically
total $45,000 for each Ruby Tuesday's domestic restaurant opened).
The information herein has been adjusted to give effect to the two-for-
one stock split to be affected in the form of a stock dividend payable on
May 8, 1998 to shareholders of record on April 17, 1998.
The Company reported net income of $9.2 million for the thirteen weeks
ended February 28, 1998 compared to $8.2 million for the corresponding
period of the prior year. Basic earnings per share for the third quarter
was $0.28, a 21.7% increase compared to basic earnings per share for the
third quarter of fiscal 1997. Contributing to the increase was a 4.0%
increase in same-store sales for the Ruby Tuesday concept. The Company
also reported net income of $20.3 million for the thirty-nine weeks ended
February 28, 1998 compared to $17.7 million for the corresponding period
of the prior year. Basic earnings per share for the year-to-date period
was $0.61, a 22.0% increase compared to basic earnings per share for the
same period of fiscal 1997. As of February 28, 1998, the Company owned
and operated 388 restaurants, including 320 Ruby Tuesdays, 47
Mozzarella's, and 21 Tia's Tex-Mex restaurants. Franchised operations
included 32 domestic units and five international units.
Results of Operations:
The following table sets forth selected restaurant operating data as a
percentage of revenues, except where otherwise noted, for the periods
indicated. All information is derived from the unaudited consolidated
financial statements of the Company included herein.
Thirty-Nine Weeks Ended
February 28, March 1,
1998 1997
Revenues:
Restaurant sales................... 99.8% 100.0%
Franchise revenues................. 0.2 0.0
Total operating revenues......... 100.0% 100.0%
Operating costs and expenses:
Cost of merchandise (1)............ 27.4 27.1
Payroll and related costs (1)...... 32.2 32.5
Other, net (1)..................... 20.9 21.7
Depreciation and amortization (1).. 5.7 5.8
Selling, general and administrative 7.4 6.6
Interest expense, net.............. 0.5 0.6
94.0 94.4
Income before income taxes.............. 5.9 5.6
Provision for income taxes.............. 2.0 2.0
Net income.............................. 3.9% 3.6%
(1) As a percentage of restaurant sales.
The following table shows year-to-date restaurant openings, closings, and
total restaurants as of 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
1998 1997 1998 1997 1998 1997
Ruby Tuesday 25 23 30 5 320 319
Mozzarella's 1 2 2 0 47 48
Tia's 1 2 0 1 21 19
The Company estimates that approximately 15 additional Company-owned Ruby
Tuesdays will be opened during the remainder of fiscal 1998. In
addition, the Company anticipates the opening of one international
franchise unit during the remainder of the fiscal year.
Revenues:
Restaurant sales increased $8.2 million or 4.8% to $180.8 million for the
quarter ended February 28, 1998 compared to the same quarter of the prior
year. Restaurant revenues increased $38.7 million or 8.0% to $524.8
million for the thirty-nine weeks ended February 28, 1998. These
increases are the result of positive same-store sales for the Ruby
Tuesday concept plus a net addition of 30 units over the previous year
prior to the sale of 29 units to franchise partners which occurred during
the quarter ended November 29, 1997.
Franchise revenues of $0.8 million and $1.1 million were reported for the
thirteen and thirty-nine week periods ending February 28, 1998,
respectively. Amounts reported for the corresponding periods of the
prior year were negligible. Franchise revenues are predominately comprised
of domestic and international royalty fees which totaled $0.7 million and
$1.0 million, respectively, for the thirteen and thirty-nine week periods
noted above.
Cost of Merchandise, Payroll and Related Costs and Other Operating Costs:
Cost of merchandise increased $3.1 million or 6.7% to $49.6 million for
the quarter ended February 28, 1998 compared to the same quarter of the
prior year and $12.0 million or 9.1% to $143.7 million for the thirty-
nine weeks ended February 28, 1998 compared to the same period of the
prior year. As a percentage of restaurant sales, the cost of merchandise
increased from 27.1% to 27.4%. This increase is primarily attributable
to a change in the menu mix. The Ruby Tuesday concept had strong sales
of shrimp, a high cost, high gross margin food item, due to the "Overboard
for Shrimp" promotion.
Payroll and related costs increased $2.4 million (4.4%) and $11.1 million
(7.1%) for the thirteen and thirty-nine weeks ended February 28, 1998,
respectively, as compared to the same periods of the prior year. However,
these expenses decreased as a percentage of restaurant sales for both
periods. The decrease is primarily attributable to higher average unit
volumes and savings in hourly labor payroll which resulted from revisions
of labor norms intended to achieve regional consistency.
While other operating costs decreased $0.3 million (0.9%) and increased
$4.2 million (4.0%) for the thirteen and thirty-nine weeks ended February
28, 1998, respectively, as compared to the same periods of the prior
year, these costs decreased as a percentage of restaurant sales. This
decrease is attributable to a continued focus on controlling supplies
expense and a reduction in rent expense during the quarter due to the
November, 1997 sale of the 29 Florida units which averaged a higher
occupancy rate than other units.
Selling, general and administrative expenses increased $2.3 million
(19.9%) and $7.0 million (21.6%) for the thirteen and thirty-nine weeks
ended February 28, 1998, respectively, as compared to the same periods of
the prior year. General and administrative costs increased due to higher
rent expense for the Mobile office building which was sold and leased
back in second quarter and start-up costs related to the Company's
franchising program. Advertising expense in the first three quarters of
fiscal 1998 was higher due the "Neighborhood Introduction Program," a
couponing promotion which began in the third quarter of fiscal 1997.
Depreciation and amortization expense increased $0.1 million or 0.7% for
the third quarter of fiscal 1998 and $1.7 million or 6.0% for the thirty-
nine weeks ended February 28, 1998. However, as a percentage of revenues,
depreciation and amortization decreased. This is due to the fact that
depreciation and amortization are fixed costs which did not increase as a
percent of total revenues concurrent with the average unit volume increases.
Interest Expense (net of Interest Income):
Net interest expense remained flat for the thirteen weeks and decreased
slightly ($0.2 million) for the thirty-nine weeks ended February 28, 1998
compared to the same periods in the prior year.
Income Taxes:
The effective income tax rate was 35.4% for the both the thirteen and
thirty-nine weeks ended February 28, 1998 compared to 35.5% for the same
periods of the prior year.
Earnings per Share:
Earnings per share are based on the weighted average number of shares
outstanding during each period. The computation of diluted earnings per
share includes the dilutive effect of stock options. Such stock options
have the effect of increasing diluted weighted average shares outstanding
by 1,303,000 and 359,000 for the thirteen weeks ended February 28, 1998
and March 1, 1997, respectively, and 1,325,000 and 531,000 for the
thirty-nine weeks ended February 28, 1998 and March 1, 1997, respectively.
The difference between basic and diluted weighted average shares reflects
the maximum extent of potential dilution that the exercise of stock options
could create. On April 6, 1998 the Board of Directors approved a two-for-
one stock split of the Company's common stock to be affected as a stock
dividend payable on May 8, 1998 to shareholders of record as of the close
of business on April 17, 1998. The earnings per share information herein
has been adjusted to give effect to the stock split.
LIQUIDITY AND CAPITAL RESOURCES
Total assets at February 28, 1998 were $419.6 million, a $0.7 million
increase from $418.9 million as of the prior fiscal year end. The
significant changes noted since the end of the prior fiscal year are
discussed below and in many cases are the result of either the Company's
franchising efforts which through the third quarter of fiscal 1998
included the sale of the 29 Florida units or the sale of the home office
building.
Accounts and Notes Receivable increased $4.7 million from May 31, 1997
primarily due to the expansion of domestic franchising during the current
year. Accounts receivable from franchisees includes reimbursements due
for amounts paid by the Company on behalf of the franchisees, as well as
royalties, support fees, and marketing fees. A significant portion
of the amounts due the Company at February 28, 1998 has subsequently been
collected.
Assets held for disposal increased $27.6 million from May 31, 1997
predominantly due to reclassification of the assets of Colorado and
Arizona units from property and equipment pending their sale to
franchisees which occurred on April 6, 1998.
Net property and equipment decreased $38.0 million from May 31, 1997.
The decrease resulted primarily from the sale of 29 Company-owned units
in Florida ($15.7 million net book value), the sale of the home office
building ($4.1 million net book value), and the reclassification of the
Colorado and Arizona units. In addition, there was $1.0 million in other
retirements and $30.1 million in depreciation expense which was offset by
$44.1 million in capital expenditures. The Company anticipates that
during the remainder of fiscal 1998, capital expansion will be financed
primarily from operating cash flows and cash flows generated by the sale of
the Arizona and Colorado units.
Other assets has increased $6.4 million since the end of the prior fiscal
year. The majority of the increase resulted from the receipt of 10.0%
interest-bearing notes in connection with the Florida sale, net of a $1.2
million bad debt allowance established concurrently.
Total liabilities at February 28, 1998 were $215.0 million, a $19.8
million increase from $195.2 million as of the end of the prior fiscal
year. At February 28, 1998, the Company had $77.5 million in borrowings
outstanding under its five-year credit facility and $12.3 million
outstanding under committed lines of credit. Total debt increased $12.2
million from the end of the prior fiscal year primarily as a result of
additional borrowings to finance construction of new units and stock
repurchases during the first three quarters of fiscal 1998. The weighted
average interest rate on these borrowings and lines of credit was 6.03%
during the third quarter.
On January 13, 1998, the Company entered into two interest rate swap
agreements to control its future interest costs. The first swap
agreement which has a notional amount of $25.0 million effectively limits
the interest rate to 5.78% per annum for a three to five year period
beginning on January 13, 1998. The term of the first swap agreement will
be determined by the lender which has a call option at the end of the
third year. The second swap, which also has a notional amount of $25.0
million, effectively limits the interest rate to 6.03% for a three year
period also beginning January 13, 1998.
At February 28, 1998, the Company had committed lines of credit amounting
to $20.0 million ($7.7 million which remained available at February 28,
1998) and non-committed lines of credit amounting to $20.0 million with
several 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.
KNOWN EVENTS, UNCERTAINTIES AND TRENDS
Financial Strategy and Stock Repurchase Plan
The Company employs a financial strategy which utilizes a prudent amount
of debt to minimize the weighted average cost of capital while allowing
the Company to maintain financial flexibility and the equivalent of an
investment-grade (BBB) bond rating. This financial strategy sets a target
debt-to-capital ratio of 60%, including operating leases. The strategy
also provides for repurchasing Company stock whenever cash flow exceeds
funding requirements while maintaining the target capital structure.
Pursuant to this strategy, the Company purchased 0.9 million shares during
the quarter. On April 6, 1998, the Board of Directors authorized the
repurchase of an additional 4.0 million shares for general corporate
purposes. After these repurchases and the additional authorization,
approximately 4.5 million shares remain available for repurchase under the
Company's stock repurchase programs.
Franchise Partner Program
The Company, as part of its overall business strategy, will continue its
efforts in establishing franchise units outside its core growth markets.
The sale of 29 Company-owned Ruby Tuesday units in Florida in the second
quarter and the sale on April 6, 1998 of 17 units in Colorado and Arizona
(16 of which were open on that date) to two new franchise partners was
done in conjunction with this overall strategy. In the future the Company
anticipates growth in its franchise program through both the construction
of new units as well as additional sales of Company-owned units.
Cash Dividend
During fiscal 1997, the Board of Directors approved a dividend policy as
a means of returning excess capital to its shareholders. This policy
calls for payment of semi-annual dividends of approximately $3.0 million
annually. Dividends totaling approximately $1.5 million were paid during
the third quarter of fiscal 1998.
Year 2000 Issue
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Software failures due
to processing errors potentially arising from calculations using the year
2000 date are a known risk. The Company is addressing this risk to the
availability and integrity of financial systems and the reliability of
operational systems through a combination of actions including the
implementation of a new financial and human resource software package
that is Year 2000 compliant and a coordinated review of the Year 2000
readiness of key suppliers, financial institutions and others with which
it does business. The Company projects that fiscal 1998 spending on the
implementation of the new software package will be approximately $1.8
million (of which $1.2 has been spent as of February 28, 1998). The cost
expected to be incurred in fiscal 1999 is not expected to exceed $1.6
million.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
The foregoing section contains various "forward-looking statements" which
represent the Company's expectations or beliefs concerning future events,
including the following: statements regarding unit growth (both Company-
owned and franchised), future capital expenditures and future borrowings.
The Company cautions that a number of important factors could,
individually or in the aggregate, cause actual results to differ
materially from those included in the forward-looking statements
including, without limitation, the following: consumer spending trends
and habits; mall-traffic trends; increased competition in the casual
dining restaurant market; weather conditions in the regions in which the
Company operates restaurants; consumers' acceptance of the Company's
development concepts; laws and regulations affecting labor and employee
benefit costs; the Company's ability to attract qualified managers and
franchisees; and changes in the availability of capital.
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
The Company is currently, and from time to time, subject to pending
claims and lawsuits arising in the ordinary course of its business. In
addition, the Company, as successor to Morrison Restaurants Inc.,
("Morrison") is a party to a case (Morrison Restaurants Inc. v. United
States of America, et al.), originally filed by Morrison in 1994 to claim
a refund of taxes paid in the amount of approximately $3,000 and
abatement of taxes assessed by the Internal Revenue Service ("IRS")
against Morrison on account of the employer's share of FICA taxes on
unreported tips allegedly received by employees. The IRS filed a
counterclaim for approximately $7,000 in additional taxes. The case was
decided by the U.S. District Court in favor of the Company in February
1996 on summary judgment. The IRS appealed the District Court's decision
and, on August 12, 1997, the U.S. Court of Appeals for the Eleventh
Circuit reversed the award of summary judgment and remanded the case to
the District Court for proceedings consistent with the Court's opinion.
In its reversal, the Eleventh Circuit upheld the IRS' enforcement policy
with respect to the employer's share of FICA taxes on allegedly
unreported tips. The Company subsequently petitioned the U.S. Court of
Appeals for a review of the matter by the full Court. Such petition was
denied. There are five additional lawsuits on this issue filed by other
restaurant companies pending in other U.S. federal courts. Although the
amount in dispute is not material, it is possible that the IRS will
attempt to assess taxes in additional units of the Company (as well as
other restaurant companies). In such event, the Company believes that a
business tax credit would be available to the Company to offset, over a
period of years, a majority of any additional taxes determined to be due.
Moreover, the Company is a participant in an IRS enforcement program
which would reduce the risk of additional assessments by the IRS in
return for a restaurant employer's proactive role in encouraging employee
tip reporting. In light of the proactive role of the Company, the
protection against additional assessment afforded by the agreement should
be available to the Company. In the opinion of management, the ultimate
resolution of all pending legal proceedings will not have a material
adverse effect on the Company's operations or financial position.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following exhibits are filed as part of this report:
Exhibit
No.
11 Computation of Basic and Diluted Earnings Per Share
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule as of and for the Three and
Nine Month Periods Ended March 1, 1997
REPORTS ON FORM 8-K
On January 29, 1998, the Company filed a report on Form 8-K with the
Securities and Exchange Commission reporting a change in its fiscal year
from the first Saturday following May 30 to the first Sunday following
May 30.
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)
4/14/98 /s/ J. RUSSELL MOTHERSHED
DATE J. RUSSELL MOTHERSHED
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Description
11 Computation of Basic and Diluted Earnings Per Share
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule as of and for the Three and
Nine Month Periods Ending March 1, 1997
ITEM 6.(a)
EXHIBIT 11: COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
FEB. 28, 1998 MARCH 1,1997 FEB. 28, 1998 MARCH 1,1997
BASIC EARNINGS PER SHARE
<S> <C> <C> <C> <C>
Average common shares outstanding...... 32,582 35,337 33,406 35,231
Net Income............................. $ 9,161 $ 8,235 $ 20,262 $ 17,670
Basic earnings per share............... $ 0.28 $ 0.23 $ 0.61 $ 0.50
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
FEB. 28, 1998 MARCH 1,1997 FEB. 28, 1998 MARCH 1,1997
DILUTED EARNINGS PER SHARE
<S> <C> <C> <C> <C>
Average common shares outstanding...... 32,582 35,337 33,406 35,231
Equivalent shares outstanding.......... 1,303 359 1,325 531
TOTALS.............. 33,885 35,696 34,731 35,762
Net Income............................. $ 9,161 $ 8,235 $ 20,262 $ 17,670
Diluted earnings per share............. $ 0.27 $ 0.23 $ 0.58 $ 0.49
</TABLE>
<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 FEBRUARY
28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-06-1998 JUN-06-1998
<PERIOD-END> FEB-28-1998 FEB-28-1998
<CASH> 10,115 10,115
<SECURITIES> 0 0
<RECEIVABLES> 9,310 9,310
<ALLOWANCES> 0 0
<INVENTORY> 9,789 9,789
<CURRENT-ASSETS> 67,825 67,825
<PP&E> 476,980 476,980
<DEPRECIATION> 168,170 168,170
<TOTAL-ASSETS> 419,646 419,646
<CURRENT-LIABILITIES> 88,466 88,466
<BONDS> 78,440 78,440
0 0
0 0
<COMMON> 325 325
<OTHER-SE> 204,347 204,347
<TOTAL-LIABILITY-AND-EQUITY> 419,646 419,646
<SALES> 180,802 524,841
<TOTAL-REVENUES> 181,602 525,984
<CGS> 49,580 143,719
<TOTAL-COSTS> 103,184 308,890
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 948 2,876
<INCOME-PRETAX> 14,187 31,374
<INCOME-TAX> 5,026 11,112
<INCOME-CONTINUING> 9,161 20,262
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 9,161 20,262
<EPS-PRIMARY> $0.28 $0.61
<EPS-DILUTED> $0.27 $0.58
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUBY TUESDAY, INC. AS OF AND FOR THE THIRTEEN AND
THIRTY-NINE WEEK PERIODS ENDED MARCH 1, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCES TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> MAY-31-1997 MAY-31-1997
<PERIOD-END> MAR-01-1997 MAR-01-1997
<CASH> 9,216 9,216
<SECURITIES> 0 0
<RECEIVABLES> 3,979 3,979
<ALLOWANCES> 0 0
<INVENTORY> 9,075 9,075
<CURRENT-ASSETS> 36,640 36,640
<PP&E> 497,077 497,077
<DEPRECIATION> 155,955 155,955
<TOTAL-ASSETS> 414,146 414,146
<CURRENT-LIABILITIES> 78,005 78,005
<BONDS> 71,032 71,032
0 0
0 0
<COMMON> 355 355
<OTHER-SE> 216,585 216,585
<TOTAL-LIABILITY-AND-EQUITY> 414,146 414,146
<SALES> 172,597 486,146
<TOTAL-REVENUES> 172,605 486,205
<CGS> 46,464 131,729
<TOTAL-COSTS> 101,027 291,830
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 919 3,088
<INCOME-PRETAX> 12,771 27,396
<INCOME-TAX> 4,536 9,726
<INCOME-CONTINUING> 8,235 17,670
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 8,235 17,670
<EPS-PRIMARY> $0.23 $0.50
<EPS-DILUTED> $0.23 $0.49
</TABLE>
