-----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, MzZlV7y9u/Mmgp4BiUQsuD4DkuC84DPSn6r5bLGwxw5k8guh+/ToKpl3f5liqs7F 6EDn8RrXie3R4pHRJEp1Pw== 0000068270-01-000012.txt : 20010420 0000068270-01-000012.hdr.sgml : 20010420 ACCESSION NUMBER: 0000068270-01-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010304 FILED AS OF DATE: 20010418 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: 0604 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12454 FILM NUMBER: 1605460 BUSINESS ADDRESS: STREET 1: 150 W CHURCH ST CITY: MARYVILLE STATE: TN ZIP: 37801 BUSINESS PHONE: 2053443000 MAIL ADDRESS: STREET 1: 150 W CHURCH ST CITY: MARYVILLE STATE: TN ZIP: 37801 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 0001.txt THIRD QUARTER FISCAL 2001 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 4, 2001 ----------------------- 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.) 150 West Church Avenue Maryville, TN 37801 - -------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (865) 379-5700 -------------- 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 . - -------------------------------------------------------------------------------- 64,128,836 - -------------------------------------------------------------------------------- (Number of shares of $0.01 par value common stock outstanding as of April 13, 2001) Exhibit Index appears on page 16 INDEX PAGE NUMBER PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 4, 2001 (UNAUDITED) AND JUNE 4, 2000.....3 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED MARCH 4, 2001 AND MARCH 5, 2000....4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THIRTY-NINE WEEKS ENDED MARCH 4, 2001 AND MARCH 5, 2000..........5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).........................6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................7-12 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 AND USE OF PROCEEDS......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...............14 SIGNATURES.............................................15 ---------- PART I - FINANCIAL INFORMATION ITEM 1 RUBY TUESDAY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT PER-SHARE DATA)
MARCH 4, JUNE 4, 2001 2000 -------------------------------- (UNAUDITED) (NOTE A) Assets Current assets: Cash and short-term investments.................. $ 11,354 $ 10,154 Accounts and notes receivable.................... 6,625 6,880 Inventories...................................... 8,341 9,378 Income tax receivable............................ 4,528 - Prepaid rent..................................... 2,371 3,392 Other prepaid expenses........................... 3,855 5,282 Deferred income taxes ........................... 3,265 312 Assets held for disposal......................... 3,853 59,057 ----------- ----------- Total current assets........................... 44,192 94,455 ----------- ----------- Property and equipment - at cost....................... 481,029 451,474 Less accumulated depreciation and amortization... (185,726) (169,609) ----------- ----------- 295,303 281,865 Costs in excess of assets acquired, net................ 7,941 8,229 Notes receivable, net.................................. 54,278 23,126 Deferred income taxes.................................. - 5,355 Other assets........................................... 29,659 26,182 ---------- ----------- Total assets................................. $431,373 $439,212 ========== =========== Liabilities & shareholders' equity Current liabilities: Accounts payable................................. $ 31,061 $ 35,346 Short-term borrowings............................ - 3,400 Accrued liabilities: Taxes, other than income taxes................. 8,868 10,831 Payroll and related costs...................... 14,635 17,809 Insurance...................................... 4,455 4,071 Rent and other................................. 17,052 16,983 Income tax payable............................. - 222 Current portion of long-term debt................ 140 63,134 ---------- ----------- Total current liabilities.................... 76,211 151,796 ---------- ----------- Long-term debt, net of current portion................. 15,527 636 Deferred income taxes.................................. 2,446 - Deferred escalating minimum rent....................... 8,577 11,416 Other deferred liabilities............................. 48,140 45,540 Shareholders' equity: Common stock, $0.01 par value;(authorized 100,000 shares; issued 63,815 @ 3/4/01; 61,719 @ 6/4/00) 638 617 Capital in excess of par value................... 23,430 4,597 Retained earnings................................ 257,013 225,219 ---------- ----------- 281,081 230,433 Deferred compensation liability payable in Company stock................................... 4,032 3,507 Company stock held by deferred compensation plan. (4,032) (3,507) Accumulated other comprehensive income........... (609) (609) ---------- ----------- Total liabilities & shareholders' equity..... $431,373 $439,212 ========== =========== The accompanying notes are an integral part of the condensed consolidated financial statements.
RUBY TUESDAY, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS EXCEPT PER-SHARE DATA) (UNAUDITED)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED MARCH 4, MARCH 5, MARCH 4, MARCH 5, 2001 2000 2001 2000 ---------------------- ------------------------ Revenues: Restaurant sales and operating revenues $187,920 $207,160 $584,007 $592,744 Franchise revenues..................... 3,560 2,062 9,185 5,542 -------- -------- -------- -------- 191,480 209,222 593,192 598,286 Operating costs and expenses: Cost of merchandise.................... 51,606 56,177 159,367 161,558 Payroll and related costs.............. 58,118 64,715 186,561 188,677 Other restaurant operating costs....... 33,189 41,978 113,367 122,612 Depreciation and amortization.......... 7,500 10,553 26,439 31,245 Selling, general and administrative.... 14,118 13,779 43,753 41,943 Interest (income)/expense, net......... (1,460) 603 (1,886) 1,522 -------- -------- -------- -------- 163,071 187,805 527,601 547,557 -------- -------- -------- -------- Income before income taxes............... 28,409 21,417 65,591 50,729 Provision for income taxes............... 10,172 7,687 23,483 18,267 -------- -------- --------- -------- Net income............................... $ 18,237 $ 13,730 $ 42,108 $ 32,462 ======== ======== ======== ======== Earnings per share: Basic.................................. $ 0.29 $ 0.21 $ 0.67 $ 0.51 ======== ======== ======== ======== Diluted................................ $ 0.28 $ 0.21 $ 0.65 $ 0.50 ======== ======== ======== ======== Weighted average shares: Basic................................. 63,385 62,100 62,528 62,802 ======== ======== ======== ======== Diluted............................... 65,518 63,898 64,753 64,876 ======== ======== ======== ======== Cash dividends declared per share....... $ 0.02 $ 0.02 $ 0.05 $ 0.05 ======== ======== ======== ======== The accompanying notes are an integral part of the condensed consolidated financial statements.
RUBY TUESDAY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) THIRTY-NINE WEEKS ENDED MARCH 4, MARCH 5, 2001 2000 ------------------------- Operating activities: Net income........................................ $ 42,108 $ 32,462 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................... 26,439 31,245 Amortization of intangibles..................... 467 520 Deferred income taxes........................... 3,864 (2,185) (Gain) loss on impairment and disposition of assets.... ................................ (1,056) 1,796 Other........................................... 155 118 Changes in operating assets and liabilities: Receivables.................................. (4,580) (458) Inventories.................................. (795) (116) Prepaid and other assets..................... 3,407 1,313 Accounts payable, accrued and other liabilities............... (8,473) 8,359 Income tax payable........................... (4,750) 7,115 ------------ --------- Net cash provided by operating activities....... 56,786 80,169 ------------ ---------- Investing activities: Purchases of property and equipment............... (46,987) (61,176) Proceeds from disposal of assets.................. 29,945 2,786 Proceeds from sale of restaurant properties to franchisees.................................. 7,352 9,992 Other, net........................................ (2,778) (2,559) ------------ ----------- Net cash used by investing activities........... (12,468) (50,957) ------------ ----------- Financing activities: Proceeds from long-term debt...................... 24,000 9,000 Net change in short-term borrowings............... (3,398) (8,720) Principal payments on long-term debt.............. (72,105) (91) Proceeds from issuance of stock, including treasury stock.................................. 30,902 8,932 Stock repurchases, net of changes in the Deferred Compensation Plan...................... (19,694) (37,217) Dividends paid.................................... (2,823) (2,811) ------------ ---------- Net cash used by financing activities........... (43,118) (30,907) ------------ ----------- Increase (decrease) in cash and short-term investments.......................... 1,200 (1,695) Cash and short-term investments: Beginning of year............................... 10,154 9,117 ------------ ----------- End of quarter.................................. $ 11,354 $ 7,422 ============ =========== The accompanying notes are an integral part of the condensed consolidated financial statements. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the thirteen and thirty-nine week periods ended March 4, 2001 are not necessarily indicative of results that may be expected for the year ending June 5, 2001 (see Note E). The balance sheet at June 4, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Ruby Tuesday, Inc.'s Annual Report on Form 10-K for the fiscal year ended June 4, 2000. NOTE B - EARNINGS PER SHARE Basic 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 basic weighted average shares outstanding by approximately 2.1 million and 1.8 million for the thirteen weeks ended March 4, 2001 and March 5, 2000, respectively, and approximately 2.2 million and 2.1 million for the thirty-nine weeks ended March 4, 2001 and March 5, 2000, respectively. NOTE C - COMPREHENSIVE INCOME Comprehensive income for the thirteen and thirty-nine week periods ending March 4, 2001 was $18.2 million and $42.1 million, respectively, which was the same as net income. Comprehensive income for the thirteen and thirty-nine week periods ending March 5, 2000 was $13.7 million and $32.5 million, respectively, which was the same as net income. NOTE D - OTHER DEFERRED LIABILITIES Other deferred liabilities at March 4, 2001 and June 4, 2000 included $14.2 million and $13.4 million, respectively, for the liability due to participants in the Company's Deferred Compensation Plan. NOTE E - SUBSEQUENT EVENTS On March 5, 2001, the Company acquired all of the member interests of RT Southwest Franchise, LLC, formerly a franchise partner with nine units in Arizona. On April 9, 2001, the Company's board of directors approved a change in fiscal year-end from the first Sunday following May 30 to the first Tuesday following May 30. The change will be effective in fiscal year 2001. Financial results for the two additional calendar days in Fiscal 2001, Monday and Tuesday June 4 and 5, 2001, will be included in the fourth quarter and are not expected to have a material impact on the statements of income or cash flows. 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 royalties (based upon a percentage of each franchise restaurant's monthly gross sales) and development and franchise fees (which typically total $45,000 for each Ruby Tuesday domestic restaurant opened). The Company reported net income of $18.2 million for the thirteen weeks ended March 4, 2001 compared to $13.7 million for the corresponding period of the prior year. Diluted earnings per share for the third quarter was $0.28, a 33.3% increase over the diluted earnings per share of $0.21 for the third quarter of Fiscal 2000. Contributing to the increase was a 6.5% increase in same store sales for Company-owned Ruby Tuesday restaurants and a reduction, as a percentage of revenues, of operating costs and expenses as discussed below. The Company also reported net income of $42.1 million for the thirty-nine weeks ended March 4, 2001 compared to $32.5 million for the corresponding period of the prior year. Diluted earnings per share for the year-to-date period was $0.65, a 30.0% increase over the same period of fiscal year 2000. As of March 4, 2001, the Company owned and operated 356 Ruby Tuesday restaurants located in 26 states. Franchised operations included 157 domestic and ten international Ruby Tuesday restaurants. 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 condensed consolidated financial statements of the Company included herein. Thirty-nine weeks ended March 4, March 5, 2001 2000 ------------------------------- Revenues: Restaurant sales and operating revenues 98.5% 99.1% Franchise revenues..................... 1.5 0.9 ------------- ------------ Total revenues....................... 100.0 100.0 Operating costs and expenses: Cost of merchandise (1)................ 27.3 27.3 Payroll and related costs (1).......... 31.9 31.8 Other restaurant operating costs (1)... 19.4 20.7 Depreciation and amortization (1)...... 4.5 5.3 Selling, general and administrative.... 7.4 7.0 Interest (income) expense, net......... (0.3) 0.3 ------------- ------------ Income before income taxes.................. 11.1 8.5 Provision for income taxes.................. 4.0 3.1 ------------- ------------ Net income.................................. 7.1% 5.4% ============= ============= (1) As a percentage of restaurant sales and operating revenues. The following table shows year-to-date Company-owned restaurant openings and closings, and total Company-owned 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 2001 2000 2001 2000 2001 2000 ------ ------ ------ ------ ------ ------ Ruby Tuesday 34 33 14* 8** 356 360 American Cafe/Tia's Tex-Mex 3 3 69*** 3 0 68 The following table shows year-to-date Ruby Tuesday franchised restaurant openings and closings, and total Ruby Tuesday franchised 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 2001 2000 2001 2000 2001 2000 ------ ----- ------ ----- ------ ------ Domestic 23* 25** 3 2 157 101 International 1 2 0 2 10 7 * Includes 6 units sold to franchisees ** Includes 7 units sold to franchisees *** Includes 38 American Cafe, 3 L&N and 28 Tia's Tex-Mex units sold to Specialty Restaurant Group, LLC ("SRG") The Company estimates that approximately 20 to 22 additional Company-owned Ruby Tuesday restaurants will be opened or acquired during the remainder of Fiscal 2001, including the units acquired on March 5, 2001 from a franchise partner (see Note E). The Company expects franchisees to open approximately six to eight Ruby Tuesday restaurants during the remainder of Fiscal 2001. Revenues: - -------------------------------------------------------------------------------- Company restaurant sales decreased $19.2 million (9.3%) to $187.9 million for the thirteen weeks ended March 4, 2001 compared to the same period of the prior year. Restaurant sales decreased $8.7 million (1.5%) for the thirty-nine weeks ended March 4, 2001. This decrease is attributable to the November 20, 2000 sale of the American Cafe and Tia's Tex-Mex concepts to SRG. The Ruby Tuesday concept revenues increased $9.0 million (5.0%) and $21.7 million (4.2%) for the thirteen and thirty-nine weeks, respectively, despite the sale of 42 units in Fiscal 2000 and six units in Fiscal 2001. The increase in the thirteen weeks ended March 4, 2001 as compared to the same period in the prior year is attributable to a 6.5% increase in same store sales and new units that are performing at higher average unit volumes than the prior year. The increase for the thirty-nine weeks ended March 4, 2001 as compared to the prior year is also attributable to positive same store sales and higher average unit volumes. Franchise revenues totaled $3.6 million for the thirteen weeks ended March 4, 2001 compared to $2.1 million for the same period in the prior year. For the thirty-nine week period ended March 4, 2001, franchise revenues were $9.2 million compared to $5.5 million for the same period in the prior year. Franchise revenues are predominately comprised of domestic and international royalties which totaled $7.9 million and $4.4 million for the thirty-nine week periods ending March 4, 2001 and March 5, 2000, respectively. Operating Profits: - -------------------------------------------------------------------------------- Pre-tax income for the thirteen weeks ended March 4, 2001, was $28.4 million, an increase of $7.0 million (32.6%) over the corresponding period of the prior year. For the thirty-nine week period ended on that same date, pre-tax income was $65.6 million, a $14.9 million (29.3%) increase over the corresponding period of the prior year. The increase in pre-tax income is the result of positive same store sales for the Ruby Tuesday concept and a reduction, as a percentage of revenue, of other restaurant operating costs, depreciation and amortization, and net interest expense as discussed below. Cost of merchandise decreased $4.6 million (8.1%) to $51.6 million for the thirteen weeks ended March 4, 2001 compared to the same period of the prior year and $2.2 million (1.4%) for the thirty-nine weeks ended March 4, 2001 compared to the same period of the prior year. However, as a percentage of Company restaurant sales, the cost of merchandise remained constant at 27.3% for the thirty-nine weeks ended March 4, 2001. Payroll and related costs decreased $6.6 million (10.2%) and $2.1 million (1.1%) for the thirteen and thirty-nine weeks ended March 4, 2001, as compared to the same periods of the prior year. However, as a percentage of Company restaurant sales, these expenses increased 10 basis points to 31.9% for the thirty-nine week period ended March 4, 2001, which is attributable to higher bonuses from enhanced performance and the Company's focus on increasing unit level staffing. Other restaurant operating costs decreased $8.8 million (20.9%) and $9.2 million (7.5%) for the thirteen and thirty-nine weeks ended March 4, 2001, as compared to the same periods of the prior year. As a percentage of Company restaurant sales, these costs decreased 130 basis points for the thirty-nine week period ended March 4, 2001, from 20.7% to 19.4%. The decrease is attributable to the effects of a 5.5% increase in year to date average unit volumes, the second quarter sale of the American Cafe and Tia's Tex-Mex concepts whose operating costs were higher than the Ruby Tuesday concept, an asset impairment recorded in the prior year on five underperforming Ruby Tuesday units in the state of Texas, and lower occupancy costs from the refranchising of 42 units in the prior year that had higher than system average occupancy costs. Depreciation and amortization expense decreased $3.1 million (28.9%) and $4.8 million (15.4%) for the thirteen and thirty-nine weeks ended March 4, 2001, as compared to the same periods of the prior year. As a percentage of Company restaurant sales, depreciation and amortization for the thirty-nine weeks decreased 80 basis points to 4.5%. The decrease resulted from the second quarter sale of the American Cafe and Tia's Tex-Mex concepts whose depreciation and amortization as a percentage of restaurant sales were higher than the Ruby Tuesday concept, increased use of the synthetic leasing program for the Ruby Tuesday concept, increased average unit volumes, and various information technology assets becoming fully depreciated in Fiscal 2000. Selling, general and administrative expenses increased $0.3 million (2.5%) and $1.8 million (4.3%) for the thirteen and thirty-nine weeks ended March 4, 2001, as compared to the same periods of the prior year. As a percentage of total operating revenues, these expenses increased 40 basis points to 7.4% for the thirty-nine week period ended March 4, 2001. The increase is attributable to increased use of the neighborhood introduction program ("NIP"). In accordance with EITF 00-14, "Accounting for Certain Sales Incentives," the Company will reclassify the costs of the NIP program against restaurant sales beginning with the first quarter of Fiscal 2002. Such reclassifications will not impact net income. Net interest income increased $2.1 million and $3.4 million for the thirteen and thirty-nine weeks ended March 4, 2001, as compared to the same periods of the prior year. The increase is due to higher interest income associated with notes receivable from franchisees and SRG, coupled with lower outstanding balances of debt. Income Taxes: - -------------------------------------------------------------------------------- The effective income tax rate was 35.8% for the thirteen weeks ended March 4, 2001 compared to 35.9% for the same period of the prior year. The effective income tax rate was 35.8% for the thirty-nine weeks ended March 4, 2001 compared to 36.0% for the same period of the prior year. The decrease in the effective income tax rate is principally due to reduced state taxes. LIQUIDITY AND CAPITAL RESOURCES - -------------------------------------------------------------------------------- The following table presents a summary of the Company's cash flows from operating investing and financing activities for the periods indicated (in thousands). Thirty-Nine Thirty-Nine Weeks Ended Weeks Ended March 4, 2001 March 5, 2000 ------------- ------------- Net cash provided by operating activities $ 56,786 $ 80,169 Net cash used by investing activities (12,468) (50,957) Net cash used by financing activities (43,118) (30,907) -------- -------- Net increase (decrease) in cash and short- term investments $ 1,200 $ (1,695) ======== ======== Cash provided by operating activities was $56.8 million for the thirty-nine weeks ended March 4, 2001, a decrease of $23.4 million from the $80.2 million reported for the same period in the prior year. Cash provided by operating activities as compared to the prior year reflected an increase in net income of $9.6 million. Offsetting this, however, were increases in cash used for operating activities such as increases in accounts and notes receivable, and decreases in accounts payable (which includes accrued and other liabilities) and income taxes payable. Fiscal 2001 increases in accounts and notes receivable exceeded those of Fiscal 2000 by $4.1 million due to the growth of franchising and increases in vendor rebates receivable. Payments in Fiscal 2001 for accounts payable and accrued liabilities used $16.8 million more cash than Fiscal 2000. This was due to a reduction in payables which resulted from the sale of 69 units to SRG, lower spending for synthetic lease expenditures in Fiscal 2000 resulting in an increase in accounts payable at the end of the quarter, and the timing of operational cash payments. Fiscal 2001 income taxes payable decreased by $11.9 million as compared to the prior year primarily due to higher deductions from employee exercises of stock options. Net cash used in investing activities was $38.5 million less than Fiscal 2000 due to increased proceeds from the sale of assets ($27.2 million) primarily due to the sale of units to SRG and $14.2 million less spending for capital expenditures which is attributable to an increased use of the synthetic lease program, offset by lower proceeds from the sale of restaurant properties to franchisees. Net cash used in Fiscal 2001 financing activities was $12.2 million more than Fiscal 2000 due to the net paydown of debt ($51.5 million) which was primarily due to the funds received from the sale of American Cafe and Tia's Tex-Mex units to SRG ($30.0 million) and the reduction in stock repurchases ($17.5 million) referred to below. Partially offsetting this use of cash was an increase over the prior year in proceeds from issuance of stock ($22.0 million) due to increased stock option exercises by employees and a reduction of $17.5 million from the prior year level of stock repurchases. During the thirty-nine weeks ended March 4, 2001, $19.7 million of the Company's common stock was reacquired and dividends of $2.8 million were paid to shareholders. The Company requires capital principally for new restaurants, equipment replacement, and remodeling of existing units. Capital expenditures for the thirty-nine weeks ended March 4, 2001 were $47.0 million and expenditures for construction of new units under the Company's synthetic lease program were $49.9 million. Capital expenditures for the remainder of Fiscal 2001 are projected to be approximately $24.0 to $29.0 million. The Company intends to fund fourth quarter's capital expenditures with cash from operating activities. Expenditures for units to be leased by the Company under synthetic lease agreements are projected to be approximately $23.0 to $24.0 million for the remainder of Fiscal 2001. On October 11, 2000 the Company entered into a new five-year credit facility with its bank group. The new facility was initially an $87.5 million Senior Revolving Credit Facility with a $10.0 million Swing Line and a $15.0 million Letter of Credit sub-facility. On November 14, 2000, the Senior Revolving Credit Facility was increased to $100.0 million. Borrowings under the Revolving Credit Facility bear interest at LIBOR plus the Applicable Margin (which ranges from 0.875% to 1.75% and is based on Adjusted Funded Debt to EBITDAR). Commitment fees ranging from 0.15% to 0.375% are payable quarterly on the unused portion of the Revolving Credit Facility. As of March 4, 2001, the Company's synthetic lease agreements provide for a total of $185.0 million funding for the purpose of leasing new free-standing restaurants and the Maryville Restaurant Support Services Center. As of March 4, 2001, $40.1 million was available for expenditures in accordance with these agreements. The Company currently leases 85 units (58 of which are open at March 4, 2001 and 27 are under construction) and the Maryville, Tennessee Restaurant Support Services Center under synthetic operating lease agreements. At March 4, 2001, the Company had committed lines of credit with two banks at varying interest rates amounting to $12.5 million, with no borrowings outstanding. These lines are subject to periodic review by each bank and may be canceled by the Company at any time. To control future interest costs relating to borrowings under the above-mentioned $100.0 million credit facility and the Company's master synthetic lease agreements, the Company has entered into five interest rate swap agreements with notional amounts aggregating $125.0 million. The swap agreements effectively fix the interest rate on an equivalent amount of the Company's debt (including floating-rate lease obligations) to rates ranging from 5.95% to 6.73% for periods up to December 7, 2003. One of the five swaps, with a notional amount of $25.0 million, is callable by the bank as of the date of this filing. The Company has not received notification that the swap will be called. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS Nos. 137 and 138, establishes accounting and reporting standards for derivative instruments and hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. This statement is effective for the Company beginning in the first quarter of Fiscal 2002. Adoption of this new accounting standard is not expected to significantly impact net income. 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. The strategy provides for repurchasing Company stock whenever cash flow exceeds funding requirements while maintaining the target capital structure. Pursuant to this strategy, the Company has repurchased 1.7 million shares during the thirty-nine weeks ended March 4, 2001. The total number of remaining shares authorized to be repurchased as of March 4, 2001 is 8.4 million. To the extent not funded with cash from operating activities, additional repurchases will be funded by borrowings on the credit facilities and/or cash received in conjunction with the sale of restaurant 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 $0.0225 per share. The payment of a dividend in any particular future period and actual amount thereof remain, however, at the discretion of the Board of Directors and no assurance can be given that dividends will be paid in the future as currently anticipated. Dividends totaling approximately $2.8 million were paid to shareholders during the current fiscal year. 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: future financial performance and unit growth (both Company-owned and franchised), future capital expenditures, future borrowings and repayment of debt, and payment of dividends. 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 Company-owned and franchised restaurants are operated; consumers' acceptance of the Company's development prototypes; laws and regulations affecting labor and employee benefit costs; costs and availability of food and beverage inventory; the Company's ability to attract qualified managers and franchisees; changes in the availability of capital; and general economic conditions. 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, on August 12, 1997, 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 on November 26, 1997. The District Court issued an order consistent with the opinion of the Eleventh Circuit on December 11, 1997. While the issue is not yet finally resolved, the case has been inactive since that time. There have been six additional lawsuits on this issue, three of which are still pending, filed by other restaurant companies in other U.S. federal courts including (1) Fior d Italia v. United States ("Fior") (September, 1998, District Court in Northern California) holding in favor of the taxpayer, (affirmed by the Ninth Circuit in February, 2001); (2) The Bubble Room v. United States (October 1998, United States Court of Appeals for the Federal Circuit) unfavorable to the taxpayer; and (3) Quietwater Entertainment, Inc. v. United States (June, 1999, United States District Court for the Northern District of Florida, Pensacola Division) in favor of the taxpayer notwithstanding and distinguishing the controlling law in the Eleventh Circuit in Morrison. It is anticipated that the IRS will seek review by the United States Supreme Court of the Ninth Circuit decision in Fior. 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 eliminate 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, financial position or cash flows. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------------- EXHIBITS The following exhibits are filed as part of this report: Exhibit No. None REPORTS ON FORM 8-K On December 5, 2000, the Company filed a report on Form 8-K reporting the sale of all of its American Cafe (including L&N Seafood) and Tia's Tex-Mex restaurants to Specialty Restaurant Group, LLC. This report contained unaudited pro forma condensed consolidated financial information. 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) 04/18/2001 By: /s/ J. RUSSELL MOTHERSHED - ----------- --------------------------- DATE J. RUSSELL MOTHERSHED Senior Vice President and Chief Financial Officer EXHIBIT INDEX - -------------------------------------------------------------------------------- Exhibit Number Description - ------- ----------------------------------------------------------------------- None -----END PRIVACY-ENHANCED MESSAGE-----