Ruth’s Hospitality Group, Inc. Reports First Quarter 2019 Financial Results

– First Quarter GAAP EPS of $0.47 –

– Announces Acquisition of Three Franchised Restaurants and Territory
Development Rights –

– Declares $0.13 Per Share Quarterly Dividend –

WINTER PARK, Fla.–(BUSINESS WIRE)–Ruth’s Hospitality Group, Inc. (the “Company”) (NASDAQ:RUTH) today
reported unaudited financial results for its first quarter ended March
31, 2019.

Highlights for the first quarter of 2019 were as follows:

  • Restaurant sales in the first quarter of 2019 increased 2.4% to $113.0
    million compared to $110.4 million in the first quarter of 2018.
    Average unit weekly sales were $111.4 thousand in the first quarter of
    2019, an increase of 1.1% compared to $110.3 thousand in the first
    quarter of 2018.
  • Net income in the first quarter of 2019 was $13.9 million, or $0.47
    per diluted share, compared to net income of $13.6 million, or $0.45
    per diluted share, in the first quarter of 2018.

– Net income in the first quarter of 2019 included $39 thousand in
acquisition-related expenses associated with the acquisition of the
three restaurants from our Philadelphia and Long Island franchisee, and
a $0.5 million income tax benefit related to the impact of discrete
income tax items. Net income in the first quarter of 2018 included $0.5
million in acquisition-related expenses associated with the acquisition
of our Hawaiian franchisee, and a $0.4 million income tax benefit
related to the impact of discrete income tax items.

– Excluding these adjustments, as well as the results from discontinued
operations, non-GAAP diluted earnings per common share were $0.45 in the
first quarter of 2019, compared to $0.45 in the first quarter of 2018.
The Company believes that non-GAAP diluted earnings per common share
provides a useful alternative measure of financial performance to
improve comparability of diluted earnings per common share between
periods. Investors are advised to see the attached Reconciliation of
non-GAAP Financial Measure table for additional information.

  • During the first quarter of 2019, the Company returned $6.5 million
    through dividends, share repurchases and debt repayments.
  • One new franchised Ruth’s Chris Steak House restaurant opened in the
    first quarter in China.

Cheryl Henry, President and Chief Executive Officer of Ruth’s
Hospitality Group, Inc., stated, “I’m pleased with our first quarter
results, which included comparable restaurant sales growth, consistent
margins year-over-year, and GAAP EPS of $0.47 despite weather
challenges.”

Henry added, “I’m excited to announce the acquisition of three
franchised restaurants and development territory from longtime franchise
partner Marsha Brown. This acquisition includes two restaurants in the
Philadelphia, PA area and one on Long Island, NY. Additionally, we
purchased the development rights to these areas which will contribute to
our long-term growth strategy by unlocking valuable territory. I am
thrilled to welcome these restaurants and our new team members to the
Ruth’s Chris corporate family.”

Review of First Quarter 2019 Operating Results

Total revenues in the first quarter of 2019 were $119.7 million, an
increase of 2.8% compared to $116.5 million in the first quarter of 2018.

Company-owned Sales

  • Comparable restaurant sales at Company-owned restaurants increased
    1.8% compared to the first quarter of 2018, which consisted of flat
    traffic, as measured by entrees, and an average check increase of
    1.8%. Comparable restaurant sales and traffic were positively affected
    by approximately 200 basis points due to the shift of the New Year’s
    Eve holiday into the first quarter of 2019 from the fourth quarter of
    2017, and negatively impacted by approximately 90 basis points due to
    the shift of Easter into the second quarter of 2019 from the first
    quarter of 2018.
  • 78 Company-owned Ruth’s Chris Steak House restaurants were open at the
    end of the first quarter of 2019, compared to 77 Ruth’s Chris Steak
    House restaurants at the end of the first quarter of 2018. Total
    operating weeks for the first quarter of 2019 increased to 1,014 from
    1,001 in the first quarter of 2018.

Franchise Income

  • Franchise income in the first quarter of 2019 was $4.6 million, an
    increase of 3.2% compared to $4.4 million in the first quarter of
    2018. The increase in franchise income was driven primarily by a 3.1%
    increase in comparable franchise restaurant sales.
  • 76 franchisee-owned restaurants were open at the end of the first
    quarter of 2019 compared to 74 at the end of the first quarter of 2018.

Operating Expenses

  • Food and beverage costs, as a percentage of restaurant sales,
    decreased 30 basis points to 28.2% as compared to the first quarter of
    2018, primarily driven by a 3.7% decrease in total beef costs, as well
    as an increase in average check of 1.8%.
  • Restaurant operating expenses, as a percentage of restaurant sales,
    increased 60 basis points to 47.4% as compared to the first quarter of
    2018. The increase in restaurant operating expenses as a percentage of
    restaurant sales was primarily due to higher labor costs.
  • Marketing and advertising costs, as a percentage of total revenues,
    remained steady at 3.0% as compared to the first quarter of 2018.
  • General and administrative expenses, as a percentage of total
    revenues, decreased 40 basis points to 7.3% as compared to the first
    quarter of 2018. The decrease as a percentage of total revenues, was
    primarily driven by $0.5 million in acquisition related expenses
    included in the first quarter of 2018.
  • Income tax expense was $2.5 million in the first quarter of 2019
    compared to $2.4 million in the first quarter of 2018.

Development Update

The Company currently has four signed leases for new Company-owned
restaurants; one in Columbus, OH, one in Washington DC, one in
Somerville, MA and one in Oklahoma City, OK. The Columbus, Washington DC
and Somerville restaurants are expected to open in the second half of
2019, while the Oklahoma City restaurant is expected to open in 2020.

Franchise partners opened a new restaurant in Chongqing, China in the
first quarter. Our franchise partners are currently expected to open a
new restaurant in St. George, UT, now in the first half of 2020.

Share Repurchase and Debt

During the first quarter, the Company repurchased approximately 26
thousand shares for $0.6 million, at a $22.03 average price per share.
The Company has approximately $31.5 million remaining under its share
repurchase authorization.

The Company repaid $2 million in debt under its senior credit facility
during the quarter. At the end of the first quarter, the Company had
$39.0 million in debt outstanding under its senior credit facility, with
an additional $46.8 million of availability.

Quarterly Cash Dividend

Subsequent to the end of the quarter, the Company’s Board of Directors
approved the payment of a quarterly cash dividend to shareholders of
$0.13 per share. The dividend will be paid on June 6, 2019 to
shareholders of record as of the close of business on May 23, 2019 and
represents an 18% increase from the quarterly cash dividend paid in June
of 2018.

Franchisee Acquisition

On May 1, 2019, the Company entered into an asset purchase agreement to
acquire the two franchised Ruth’s Chris Steak House restaurants in the
Philadelphia area, one restaurant in Garden City, NY as well as
development rights for these territories for approximately $19 million
in cash. The purchase price for the restaurants is subject to
adjustments for certain deposits, credits, inventory and prepaid
amounts. The Company expects the transaction to close in the third
quarter.

Financial Outlook

Based on current information and the aforementioned franchise
acquisition, Ruth’s Hospitality Group, Inc. is revising its full year
2019 outlook based on a 52-week year ending December 29, 2019, as
follows:

  • Food and beverage costs of 28.0% to 30.0% of restaurant sales
  • Restaurant operating expenses of 48.0% to 50.0% of restaurant sales
  • Marketing and advertising costs of 3.4% to 3.6% of total revenue
  • General and administrative expenses of $35 million to $36 million,
    exclusive of integration costs related to the franchise acquisition
  • Effective tax rate of 17% to 19%, excluding discrete income tax items
  • Capital expenditures of $54 million to $56 million, inclusive of the
    $19 million related to the franchise acquisition, resulting in
    depreciation expense of $20.0 million to $22.0 million
  • Fully diluted shares outstanding of 29.9 million to 30.3 million
    (exclusive of any future share repurchases under the Company’s share
    repurchase program)

The foregoing statements are not guarantees of future performance, and
therefore, undue reliance should not be placed upon them. We refer you
to the “Cautionary Note Regarding Forward-Looking Statements” section in
this earnings press release and to our recent filings with the
Securities and Exchange Commission for more detailed discussions of the
risks that could impact our financial outlook and our future operating
results and financial condition.

Conference Call

The Company will host a conference call to discuss first quarter 2019
financial results today at 8:30 AM Eastern Time. Hosting the call will
be Cheryl Henry, President and Chief Executive Officer, and Arne G.
Haak, Executive Vice President and Chief Financial Officer.

The conference call can be accessed live over the phone by dialing
323-794-2423. A replay will be available one hour after the call and can
be accessed by dialing 412-317-6671; the password is 3508625. The replay
will be available until Friday, May 10, 2019. The call will also be
webcast live from the Company’s website at www.rhgi.com
under the Investor Relations section.

About Ruth’s Hospitality Group, Inc.

Ruth’s Hospitality Group, Inc., headquartered in Winter Park, Florida,
is the largest fine dining steakhouse company in the U.S. as measured by
the total number of Company-owned and franchisee-owned restaurants, with
over 150 Ruth’s Chris Steak House locations worldwide specializing in
USDA Prime grade steaks served in Ruth’s Chris’ signature fashion –
“sizzling.”

For information about our restaurants, to make reservations, or to
purchase gift cards, please visit www.RuthsChris.com.
For more information about Ruth’s Hospitality Group, Inc., please visit www.rhgi.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” that reflect,
when made, the Company’s expectations or beliefs concerning future
events that involve risks and uncertainties. Forward-looking statements
frequently are identified by the words “believe,” “anticipate,”
“expect,” “estimate,” “intend,” “project,” “targeting,” “will be,” “will
continue,” “will likely result,” or other similar words and phrases.
Similarly, statements herein that describe the Company’s objectives,
plans or goals, including with respect to new restaurant openings and
acquisitions, capital expenditures, strategy, financial outlook, our
effective tax rate and the impact of healthcare inflation, recent
accounting pronouncements and tax reform legislation, also are
forward-looking statements. Actual results could differ materially from
those projected, implied or anticipated by the Company’s forward-looking
statements. Some of the factors that could cause actual results to
differ include: reductions in the availability of, or increases in the
cost of, USDA Prime grade beef, fish and other food items; changes in
economic conditions and general trends; the loss of key management
personnel; the effect of market volatility on the Company’s stock price;
health concerns about beef or other food products; the effect of
competition in the restaurant industry; changes in consumer preferences
or discretionary spending; labor shortages or increases in labor costs;
the impact of federal, state or local government regulations relating to
income taxes, unclaimed property, Company employees, the sale or
preparation of food, the sale of alcoholic beverages and the opening of
new restaurants; harmful actions taken by the Company’s franchisees; a
material failure, interruption or security breach of the Company’s
information technology network; the Company’s indemnification
obligations in connection with its sale of the Mitchell’s Restaurants;
the Company’s ability to protect its name and logo and other proprietary
information; an impairment in the financial statement carrying value of
our goodwill, other intangible assets or property; the impact of
litigation; the restrictions imposed by the Company’s credit agreement;
and changes in, or the discontinuation of, the Company’s quarterly cash
dividend payments or share repurchase program. For a discussion of these
and other risks and uncertainties that could cause actual results to
differ from those contained in the forward-looking statements, see “Risk
Factors” in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 30, 2018, which is available on the SEC’s website at www.sec.gov.
All forward-looking statements are qualified in their entirety by this
cautionary statement, and the Company undertakes no obligation to revise
or update this presentation to reflect events or circumstances after the
date hereof. You should not assume that material events subsequent to
the date of this presentation have not occurred.

Unless the context otherwise indicates, all references in this report to
the “Company,” “Ruth’s,” “we,” “us”, “our” or similar words are to
Ruth’s Hospitality Group, Inc. and its subsidiaries. Ruth’s Hospitality
Group, Inc. is a Delaware corporation formerly known as Ruth’s Chris
Steak House, Inc., and was founded in 1965.

         
RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income – Preliminary and
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 (loss) 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 net income per common share:
Basic 29,275,501 29,689,870
Diluted 29,903,511 30,384,180
Dividends declared per common share $ 0.13 $ 0.11
 
 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE

We prepare our financial statements in accordance with U.S.
generally accepted accounting principles (GAAP). Within our press
release, we
make reference to non-GAAP diluted earnings per
common share. This non-GAAP measurement was calculated by
excluding certain items and
results from discontinued
operations and certain discrete income tax items. We exclude the
impact of the results from discontinued
operations, the
impact of acquisition related costs and the impact of certain
discrete income tax items because these items are not reflective
of
the ongoing operations of our business. This non-GAAP measurement
has been included as supplemental information. We believe that this
measure
represents a useful internal measure of performance. Accordingly,
where this non-GAAP measure is provided, it is done so that
investors
have the same financial data that management uses in evaluating
performance with the belief that it will assist the investment
community
in assessing our underlying performance on a quarter-over-quarter
basis. However, because this measure is not determined in
accordance
with GAAP, such a measure is susceptible to varying calculations
and not all companies calculate the measure in the same manner.
As
a result, the aforementioned measure as presented may not be
directly comparable to a similarly titled measure presented by
other
companies. This non-GAAP financial measure is presented
as supplemental information and not as an alternative to diluted
earnings per share
as calculated in accordance with GAAP.

 
     
Reconciliation of Non-GAAP Financial Measure – Unaudited
(Amounts in thousands, except share data)
   
 
13 Weeks Ended
March 31, April 1,
2019 2018
GAAP Net income $ 13,911 $ 13,646
GAAP Income tax expense 2,529 2,384
GAAP (Income) loss from discontinued operations 0 (10)
GAAP Income from continuing operations before income tax expense 16,440 16,020
Adjustments:
Franchisee acquisition costs 39 452
Adjusted net income from continuing operations before income taxes 16,479 16,472
Adjusted income tax expense (1) (2,538) (2,492)
Impact of excluding certain discrete income tax items (483) (358)
Non-GAAP net income $ 13,458 $ 13,622
   
GAAP diluted earnings per common share $ 0.47 $ 0.45
   
Non-GAAP diluted earnings per common share $ 0.45 $ 0.45
 
Weighted-average number of common shares outstanding – diluted 29,903,511 30,384,180
 

(1) Adjusted income tax is calculated by multiplying the Non-GAAP
adjustments by our marginal federal and state income tax rates and
adding
or subtracting the result to/from our GAAP income tax
expense.

Contacts

Investor Relations
Fitzhugh
Taylor (203) 682-8261
ftaylor@icrinc.com

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