-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OT6s/2IoMcYGEZsxClvx2jQ5n3yEGzEyuIghXqoP8Z6zeVP13lEao4oXKUWPh7oR /kjMzK8qG06WGjR7Stkgmg== 0000068270-96-000045.txt : 19961016 0000068270-96-000045.hdr.sgml : 19961016 ACCESSION NUMBER: 0000068270-96-000045 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960830 FILED AS OF DATE: 19961015 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RUBY TUESDAY INC CENTRAL INDEX KEY: 0000068270 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 630475239 STATE OF INCORPORATION: GA FISCAL YEAR END: 0605 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12454 FILM NUMBER: 96643764 BUSINESS ADDRESS: STREET 1: 4721 MORRISON DR STREET 2: P O BOX 160266 CITY: MOBILE STATE: AL ZIP: 36625 BUSINESS PHONE: 2053443000 FORMER COMPANY: FORMER CONFORMED NAME: MORRISON RESTAURANTS INC/ DATE OF NAME CHANGE: 19930923 FORMER COMPANY: FORMER CONFORMED NAME: MORRISON INC /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MORRISON CAFETERIAS CONSOLIDATED INC DATE OF NAME CHANGE: 19680605 10-Q 1 1ST QUARTER FISCAL '97 FORM 10-Q 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 AUGUST 31, 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 . 17,783,277 (Number of shares of $0.01 par value common stock outstanding as of October 11, 1996) Exhibit Index appears on page 13 INDEX PAGE NUMBER PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS AS OF AUGUST 31, 1996 AND JUNE 1, 1996....... 3 CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS ENDED AUGUST 31, 1996 AND SEPTEMBER 2, 1995............. 4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTEEN WEEKS ENDED AUGUST 31, 1996 AND SEPTEMBER 2, 1995.. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................. 6-7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................. 7-11 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS...................... 11 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....... 11-12 SIGNATURES..................................... 12 PART I - FINANCIAL INFORMATION ITEM 1 RUBY TUESDAY, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT PER-SHARE DATA) August 31, June 1, 1996 1996 (UNAUDITED) (AUDITED)
CURRENT ASSETS: Cash and short-term investments.................. $ 8,261 $ 7,139 Receivables - trade and other.................... 5,455 2,040 Inventories...................................... 9,027 8,681 Prepaid expenses................................. 10,989 12,410 Deferred income tax benefits..................... 3,906 2,988 Total current assets........................... 37,638 33,258 PROPERTY AND EQUIPMENT - at cost....................... 463,844 443,475 Less accumulated depreciation and amortization... (138,408) (129,937) 325,436 313,538 COSTS IN EXCESS OF NET ASSETS ACQUIRED................. 20,893 21,058 OTHER ASSETS........................................... 13,583 13,262 TOTAL ASSETS................................. $397,550 $381,116 LIABILITIES & SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable................................. $ 28,493 $ 26,386 Short-term borrowings............................ 3,470 6,001 Accrued liabilities: Taxes, other than income taxes................. 10,422 10,602 Payroll and related costs...................... 8,547 6,917 Insurance...................................... 9,397 7,478 Rent and other................................. 9,927 9,112 Current portion of notes and mortgages payable... 97 95 Total current liabilities.................... 70,353 66,591 NOTES AND MORTGAGES PAYABLE............................ 81,083 76,108 DEFERRED INCOME TAXES.................................. 9,566 8,232 OTHER DEFERRED LIABILITIES............................. 31,917 32,842 SHAREHOLDERS' EQUITY: Common stock, $0.01 par value;(authorized 50,000 shares; issued 17,757 @ 8/31/96; 17,598 @ 6/01/96) 178 176 Capital in excess of par value................... 3,861 1,762 Retained earnings................................ 203,842 198,354 207,881 200,292 Less common stock held by deferred compensation plan - at cost(146 shares @ 8/31/96; 134 shares @ 6/01/96)...................................... ( 3,250) (2,949) 204,631 197,343 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY..... $397,550 $381,116 The accompanying notes are an integral part of the consolidated financial statements
RUBY TUESDAY, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS EXCEPT PER-SHARE DATA) (UNAUDITED) Thirteen Weeks Ended August 31, September 2, 1996 1995
Revenues................................ $157,282 $145,964 Operating costs and expenses: Cost of merchandise................ 42,325 39,416 Payroll and related costs.......... 51,834 48,955 Other, net......................... 34,862 32,145 Selling, general and administrative 9,483 10,573 Depreciation....................... 9,127 8,044 Interest expense, net.............. 1,142 620 148,773 139,753 Income from continuing operations before income taxes..... 8,509 6,211 Provision for income taxes.............. 3,020 2,000 Income from continuing operations....... 5,489 4,211 Income from discontinued operations, net of applicable income taxes..... 5,245 Net income.............................. $ 5,489 $ 9,456 Earnings per common and equivalent share: Continuing operations................. $ 0.31 $ 0.24 Discontinued operations............... 0.00 0.29 Earnings per common and equivalent share.............................. $ 0.31 $ 0.53 Weighted average common and common equivalent shares.................. 17,942 17,775 The accompanying notes are an integral part of the consolidated financial statements
RUBY TUESDAY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Thirteen Weeks Ended August 31, September 2, 1996 1995 Operating Activities: Income from continuing operations................. $ 5,489 $ 4,211 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.................................... 9,127 8,044 Amortization of intangibles..................... 183 149 Deferred income taxes........................... 415 (285) Loss on disposition of assets................... 127 121 Changes in operating assets and liabilities: Increase in receivables...................... (3,415) (914) Increase in inventories...................... (346) (654) (Increase)/decrease in prepaid and other assets...................................... 743 (665) Increase in accounts payable, accrued and other liabilities............... 5,366 1,838 Increase in income taxes payable.............. 708 2,533 Cash provided by continuing operations............ 18,397 14,378 Cash provided by discontinued operations.......... 13,282 Net cash provided by operating activities....... 18,397 27,660 Investing Activities: Purchases of property and equipment............... (21,232) (41,611) Proceeds from disposal of assets.................. 33 387 Other, net........................................ (321) (2,016) Discontinued operations investing activities, net. (6,523) Net cash used by investing activities........... (21,520) (49,763) Financing Activities: Proceeds from long-term debt...................... 5,000 14,765 Net change in short-term borrowings............... (2,531) 1,054 Principal payments on long-term debt and capital leases.......................................... (23) Proceeds from issuance of stock, including treasury stock.................................. 2,100 754 Stock repurchases................................. (301) (148) Dividends paid.................................... (3,021) Discontinued operations financing activities, net. 9,187 Net cash provided by financing activities....... 4,245 22,591 Increase in cash and short-term investments....... 1,122 488 Cash and short-term investments: Beginning of year............................... 7,139 5,957 End of quarter.................................. $ 8,261 $ 6,445 The accompanying notes are an integral part of the consolidated financial statements.
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 June 1, 1996. 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 shareholders 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. As of the distribution date, the Company has no ownership interest in either MFCI or MHCI, except for stock held in connection with employee benefit plans. 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. NOTE C - ASSET IMPAIRMENT/RESTRUCTURE CHARGES In the third quarter of fiscal 1996 the Board of Directors of the Company approved the closing of ten Ruby Tuesdays, four Mozzarella's and two Tia's restaurants based upon management's review of negative cash flow and operating loss units and other considerations. A charge of $13.4 million was recorded at that time, consisting of a $10.0 million loss on impairment of assets (net of an assumed salvage value of $0.9 million), and $3.4 million for the settlement of the related lease obligations. As of August 31, 1996, ten of these units have been closed (seven Ruby Tuesdays and three Mozzarella's). Two additional Ruby Tuesday restaurants closed shortly after the end of the quarter. Management is currently negotiating closing dates with landlords on the remaining four units and expects to develop a plan to complete the closings during second quarter. Management can normally negotiate lease settlements within 36 months of the closing date on any unit which cannot be sublet. During the quarter, the Company paid approximately $0.8 million in related lease obligations and settlement costs relating to those units identified for closure. As of August 31, 1996, $2.2 million of the lease settlement reserve remains. At August 31, 1996, the remaining recorded salvage value is $0.6 million. NOTE D - SUBSEQUENT EVENTS In March 1996, the Company entered into a five-year credit facility with various banks which included a $50.0 million five-year term note. At that same time, the Company entered into an interest rate swap agreement in order to control interest costs on that loan. The agreement effectively limited the interest rate to 6.25% for the period ended August 31, 2001. Based on current projections of long term interest rates, the Company elected to unwind its interest rate swap agreement because it felt its net effective floating interest rate for the five-year period would be less than the 6.25% fixed rate associated with the swap agreement. The Company terminated the interest rate swap agreement on September 10, 1996 and received approximately $1.7 million in cash. The gain on the interest rate swap agreement will be amortized to interest expense over the previously remaining life of the swap agreement. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General: The Company reported net income from continuing operations of $5.5 million for the thirteen weeks ended August 31, 1996 compared to $4.2 million for the corresponding period of the prior year. In the third quarter of fiscal 1996 the Board of Directors of the Company approved the closing of ten Ruby Tuesdays, four Mozzarella's and two Tia's restaurants based upon management's review of negative cash flow and operating loss units and other considerations. A charge of $13.4 million was recorded at that time, consisting of a $10.0 million loss on impairment of assets (net of an assumed salvage value of $0.9 million), and $3.4 million for the settlement of the related lease obligations. As of August 31, 1996, ten of these units have been closed (seven Ruby Tuesdays and three Mozzarella's). Two additional Ruby Tuesday restaurants closed shortly after the end of the quarter. Management is currently negotiating closing dates with landlords on the remaining four units and expects to develop a plan to complete the closings during second quarter. Management can normally negotiate lease settlements within 36 months of the closing date on any unit which cannot be sublet. During the quarter, the Company paid approximately $0.8 million in related lease obligations and settlement costs relating to those units identified for closure. As of August 31, 1996, $2.2 million of the lease settlement reserve remains. At August 31, 1996, the remaining recorded salvage value is $0.6 million. 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. Thirteen Weeks Ended August 31, September 2, 1996 1995 Revenues................................ 100.0% 100.0% Operating costs and expenses: Cost of merchandise................ 26.9 27.0 Payroll and related costs.......... 33.0 33.5 Other, net......................... 22.2 22.0 Selling, general and administrative 6.0 7.3 Depreciation....................... 5.8 5.5 Interest expense, net.............. 0.7 0.4 94.6 95.7 Income from continuing operations before income taxes..... 5.4 4.3 Provision for income taxes.............. 1.9 1.4 Income from continuing operations......................... 3.5 2.9 Income from discontinued operations, net of applicable income taxes..... 3.6 Net income.............................. 3.5% 6.5% The following table shows year-to-date restaurant openings, closings, and total restaurants as of the end of the first quarter. Year-to-date Year-to-date Total Open at End Openings Closings of First Quarter Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 1997 1996 1997 1996 1997 1996 Ruby Tuesday 7 11 1 3 307 283 Mozzarella's 1 3 0 0 47 47 Tia's 0 2 0 0 18 16 The Company estimates that approximately 25 additional Ruby Tuesdays, two Mozzarella's, and four Tia's units will be opened during the remainder of fiscal 1997. Company Restaurant Sales: Company revenues from continuing operations increased $11.3 million or 7.8% to $157.3 million for the quarter ended August 31, 1996. These increases are the result of a net addition of 26 units consisting of 24 Ruby Tuesdays and two Tia's as of August 31, 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 $2.9 million or 7.4% to $42.3 million for the quarter ended August 31, 1996. However, these costs have remained relatively constant as a percentage of revenues. Payroll and related costs increased $2.9 million or 5.9% for the quarter ended August 31, 1996 as compared to the same quarter of the prior year. Payroll and related expenses decreased to 33.0% of revenues for the thirteen weeks ended August 31, 1996 compared to 33.5% for the thirteen weeks ended September 2, 1995. The decrease is primarily attributable to management labor reductions made in an effort to more accurately match the number of managers needed for each unit to unit volume levels. Other operating costs for the first quarter of fiscal 1997 increased $2.7 million or 8.5% compared to the first quarter of fiscal 1996; however, these costs remained relatively consistent as a percentage of revenues. Selling, general and administrative expenses have decreased in total ($1.1 million) and as a percentage of revenues (6.0% compared to 7.3% for the first quarters of fiscal 1997 and 1996, respectively). Advertising expense in the first quarter of fiscal 1996 was higher due to several promotional projects that were underway at that time. In addition, management training expense was down due to the decrease in the number of managers discussed above. Depreciation expense increased $1.1 million or 13.5% for the quarter due to the net addition of 26 restaurants, a continued focus on expansion with freestanding units which are typically owned as opposed to mall or strip units which are leased, offset by the depreciation savings resulting from the asset write-off associated with the impairment charge of $25.9 million recognized in the third quarter of fiscal 1996 as a result of the adoption of FAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". Interest Expense (net of Interest Income): Net interest expense increased to $1.1 million for the quarter period ended August 31, 1996 from $0.6 million for the same period of the prior year due to the net addition of $24.1 million in borrowings on the Company's revolving credit facility and other bank lines of credit. Income Taxes The effective income tax rate on continuing operations for the thirteen weeks ended August 31, 1996 was 35.5% compared to 32.2% for the same period of the prior year. The effective rate increased due to a decrease in the Targeted Jobs Tax Credit. 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. 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 August 31, 1996 were $397.6 million, a $16.5 million increase from $381.1 million as of the prior fiscal year end. Net property and equipment increased $11.9 million from June 1, 1996. The increase was primarily the net result of capital expenditures of $21.2 million, offset by a reduction in depreciation expense totaling $9.1 million and $0.2 million in retirements. 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 August 31, 1996 were $192.9 million, a $9.1 million increase from $183.8 million as of the end of the prior fiscal year. At August 31, 1996 the Company had $80.0 million in borrowings outstanding under its five-year credit facility. Long-term borrowings of continuing operations increased $5.0 million from the end of the prior fiscal year primarily as a result of additional borrowings under this agreement. The weighted average interest rate on these borrowings including the effective cost of an interest rate swap agreement during the quarter was 6.10%. In addition, at August 31, 1996, the Company had committed lines of credit amounting to $25.0 million (of which $21.5 million remained available at August 31, 1996) and non-committed lines of credit amounting to $10.0 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. SUBSEQUENT EVENTS In March 1996, the Company entered into a five-year credit facility with various banks which included a $50.0 million five-year term note. At that same time, the Company entered into an interest rate swap agreement in order to control interest costs on that loan. The agreement effectively limited the interest rate to 6.25% for the period ended August 31, 2001. Based on current projections of long term interest rates, the Company elected to unwind its interest rate swap agreement because it felt its net effective floating interest rate for the five-year period would be less than the 6.25% fixed rate associated with the swap agreement. The Company terminated the interest rate swap agreement on September 10, 1996 and received approximately $1.7 million in cash. The gain on the interest rate swap agreement will be amortized to interest expense over the previously remaining life of the swap agreement. SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION The foregoing sections contain various "forward-looking" statements which represent the Company's expectations or beliefs concerning future events, including the following: statements regarding unit growth, 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 of the country in which the Company operates restaurants; consumers' acceptance of the Company's development concepts; and laws and regulations affecting labor and employee benefit costs. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is, from time to time, party to ordinary, routine litigation incidental to its business. In the opinion of management, the ultimate resolution of all pending legal proceedings will not have a material adverse effect on the Company's business, financial position, results of operations or liquidity. 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 Primary and Fully Diluted Earnings Per Share 27 Financial Data Schedule REPORTS ON FORM 8-K None 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) 10/10/96 /s/ J. RUSSELL MOTHERSHED DATE J. RUSSELL MOTHERSHED Senior Vice President and Chief Financial Officer EXHIBIT INDEX Exhibit Number Description 11 Computation of Primary and Fully Diluted Earnings Per Share 27 Financial Data Schedule 13 EX-11 2 ITEM 6.(a) EXHIBIT 11: COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS EXCEPT PER-SHARE DATA) Thirteen Weeks Ended Aug. 31,1996 Sept. 2,1995 PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Average common shares outstanding..... 17,672 17,271 Average additional common shares issuable on exercise of dilutive stock options (computed by use of the "treasury stock method" at the average market price)............... 270 504 TOTALS............. 17,942 17,775 Net Income: Continuing operations................. $5,489 $4,211 Discontinued operations............... 5,245 $5,489 $9,456 Primary earnings per common and common equivalent share............. Continuing operations................. $0.31 $0.24 Discontinued operations............... 0.29 $0.31 $0.53 FULLY DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Average common shares outstanding..... 17,672 17,271 Average additional common shares issuable on exercise of dilutive stock options (computed by use of the "treasury stock method" at the higher of perioed end or average market price)....................... 270 505 TOTALS............. 17,942 17,776 Net Income: Continuing operations................. $5,489 $4,211 Discontinued operations............... 5,245 $5,489 $9,456 Primary earnings per common and common equivalent share............. Continuing operations................. $0.31 $0.24 Discontinued operations............... 0.29 $0.31 $0.53 EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RUBY 0TUESDAY, INC. FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED AUGUST 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAY-31-1997 AUG-31-1996 8,261 0 5,455 0 9,027 37,638 463,844 138,408 397,550 70,353 81,083 0 0 178 204,453 397,550 157,044 157,282 42,325 105,306 0 0 1,142 8,509 3,020 5,489 0 0 0 5,489 $0.31 $0.31
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