Note 16. Supplemental Condensed Consolidating Financial Statements

As discussed in Note 7 to the Consolidated Financial Statements, the Senior Notes are a liability of Ruby Tuesday, Inc. (the "Parent") and are guaranteed on a senior unsecured basis by our existing and future domestic restricted subsidiaries, subject to certain exceptions (the "Guarantors"). Each of the Guarantors is wholly-owned by Ruby Tuesday, Inc. None of the few remaining subsidiaries of Ruby Tuesday, Inc., which were primarily created to hold liquor license assets, guarantee the Senior Notes (the "Non-Guarantors"). Our Non-Guarantor subsidiaries are immaterial and are aggregated within the Parent information disclosed below.

The following condensed consolidating financial statements present, on a supplemental basis, the financial position, results of operations, and statements of cash flows of the Parent, the Guarantors, and elimination entries necessary to consolidate the Parent and Guarantors. Investments in wholly-owned subsidiaries are accounted for using the equity method for purposes of the consolidated presentation. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF JUNE 5, 2012

(IN THOUSANDS)

	Parent		Guarantors		Eliminations			Consolidated

Assets
Current assets:
Cash and cash equivalents	$	47,986	$	198	$	–		$	48,184
Accounts receivable		2,234		2,466		–			4,700
Inventories		20,896		8,134		–			29,030
Income tax receivable		97,290		–		(96,453	)		837
Deferred income taxes		19,030		8,104		–			27,134
Other current assets		15,216		3,167		–			18,383
Total current assets		202,652		22,069		(96,453	)		128,268

Property and equipment, net		727,379		239,226		–			966,605
Goodwill		7,989		–		–			7,989
Investment in subsidiaries		204,386		–		(204,386	)		–
Due from/(to) subsidiaries		78,799		245,257		(324,056	)		–
Other assets		47,144		23,531		–			70,675
Total assets	$	1,268,349	$	530,083	$	(624,895	)	$	1,173,537

	Parent			Guarantors		Eliminations			Consolidated

Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable	$	28,302		$	6,646	$	–		$	34,948
Accrued and other current liabilities		55,301			29,521		–			84,822
Current maturities of long-term debt,
including capital leases		(344	)		12,798		–			12,454
Income tax payable		–			96,453		(96,453	)		–
Total current liabilities		83,259			145,418		(96,453	)		132,224

Long-term debt and capital leases,
less current maturities		246,892			67,317		–			314,209
Deferred income taxes		20,910			16,657		–			37,567
Due to/(from) subsidiaries		245,257			78,799		(324,056	)		–
Other deferred liabilities		95,807			17,506		–			113,313
Total liabilities		692,125			325,697		(420,509	)		597,313

Shareholders' equity:
Common stock	$	640		$	–	$	–		$	640
Capital in excess of par value		90,856			–		–			90,856
Retained earnings		498,985			204,386		(204,386	)		498,985
Accumulated other comprehensive loss		(14,257	)		–		–			(14,257	)
Total shareholders' equity		576,224			204,386		(204,386	)		576,224

Total liabilities & shareholders' equity	$	1,268,349		$	530,083	$	(624,895	)	$	1,173,537

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MAY 31, 2011

(IN THOUSANDS)

	Parent		Guarantors		Eliminations			Consolidated

Assets
Current assets:
Cash and cash equivalents	$	9,490	$	232	$	–		$	9,722
Accounts receivable		3,360		4,171		–			7,531
Inventories		24,619		9,851		–			34,470
Income tax receivable		72,608		–		(69,531	)		3,077
Deferred income taxes		10,246		4,183		–			14,429
Other current assets		11,308		2,829		–			14,137
Total current assets		131,631		21,266		(69,531	)		83,366

Property and equipment, net		779,718		251,433		–			1,031,151
Goodwill		1,440		14,131		–			15,571
Investment in subsidiaries		225,054		–		(225,054	)		–
Due from/(to) subsidiaries		46,861		232,161		(279,022	)		–
Other assets		41,924		15,014		–			56,938
Total assets	$	1,226,628	$	534,005	$	(573,607	)	$	1,187,026

	Parent			Guarantors		Eliminations			Consolidated

Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable	$	24,693		$	5,114	$	–		$	29,807
Accrued and other current liabilities		48,650			25,777		–			74,427
Current maturities of long-term debt,
including capital leases		–			15,090		–			15,090
Income tax payable		–			69,531		(69,531	)		–
Total current liabilities		73,343			115,512		(69,531	)		119,324

Long-term debt and capital leases,
less current maturities		221,630			107,554		–			329,184
Deferred income taxes		20,396			22,527		–			42,923
Due to/(from) subsidiaries		232,161			46,861		(279,022	)		–
Other deferred liabilities		87,385			16,497		–			103,882
Total liabilities		634,915			308,951		(348,553	)		595,313

Shareholders' equity:
Common stock	$	651		$	–	$	–		$	651
Capital in excess of par value		104,941			–		–			104,941
Retained earnings		499,173			225,054		(225,054	)		499,173
Accumulated other comprehensive loss		(13,052	)		–		–			(13,052	)
Total shareholders' equity		591,713			225,054		(225,054	)		591,713

Total liabilities & shareholders' equity	$	1,226,628		$	534,005	$	(573,607	)	$	1,187,026

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FISCAL YEAR ENDED JUNE 5, 2012

(IN THOUSANDS)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	955,744		$	364,296		$	–		$	1,320,040
Franchise revenue		216			5,522			–			5,738
		955,960			369,818			–			1,325,778
Operating costs and expenses:
Cost of merchandise		275,555			104,965			–			380,520
Payroll and related costs		314,990			132,405			–			447,395
Other restaurant operating costs		189,775			76,872			–			266,647
Depreciation		48,393			16,904			–			65,297
Selling, general, and administrative		80,818			41,143			–			121,961
Intercompany selling, general, and
administrative allocations		71,670			(71,670	)		–			–
Closures and impairments		13,213			5,452			–			18,665
Goodwill impairment		1,440			15,479			–			16,919
Equity in earnings of subsidiaries		(34,513	)		–			34,513			–
Interest expense, net		13,295			10,017			–			23,312
Intcompany interest expense/(income)		13,096			(13,096	)		–			–
		987,732			318,471			34,513			1,340,716

(Loss)/income before income taxes		(31,772	)		51,347			(34,513	)		(14,938	)
(Benefit)/provision for income taxes		(31,584	)		16,834			–			(14,750	)

Net (loss)/income	$	(188	)	$	34,513		$	(34,513	)	$	(188	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FISCAL YEAR ENDED MAY 31, 2011

(IN THOUSANDS)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	986,936		$	271,079		$	–		$	1,258,015
Franchise revenue		429			6,718			–			7,147
		987,365			277,797			–			1,265,162
Operating costs and expenses:
Cost of merchandise		286,437			79,216			–			365,653
Payroll and related costs		319,145			96,055			–			415,200
Other restaurant operating costs		202,258			53,106			–			255,364
Depreciation		50,283			12,595			–			62,878
Selling, general, and administrative		58,912			34,202			–			93,114
Intercompany selling, general, and
administrative allocations		73,709			(73,709	)		–			–
Closures and impairments		4,086			2,163			–			6,249
Equity in earnings of subsidiaries		(57,533	)		500			57,607			574
Interest expense, net		8,157			5,351			–			13,508
Intcompany interest expense/(income)		12,888			(12,888	)		–			–
		958,342			196,591			57,607			1,212,540

Income/(loss) before income taxes		29,023			81,206			(57,607	)		52,622
(Benefit)/provision for income taxes		(17,855	)		23,599			–			5,744

Net income/(loss)	$	46,878		$	57,607		$	(57,607	)	$	46,878

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FISCAL YEAR ENDED JUNE 1, 2010

(IN THOUSANDS)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	993,839		$	194,204		$	–		$	1,188,043
Franchise revenue		299			6,454			–			6,753
		994,138			200,658			–			1,194,796
Operating costs and expenses:
Cost of merchandise		287,940			56,522			–			344,462
Payroll and related costs		319,746			69,365			–			389,111
Other restaurant operating costs		196,938			43,464			–			240,402
Depreciation		54,142			9,625			–			63,767
Selling, general, and administrative		65,663			12,455			–			78,118
Intercompany selling, general, and
administrative allocations		67,968			(67,968	)		–			–
Closures and impairments		3,117			659			–			3,776
Equity in earnings of subsidiaries		(56,730	)		(81	)		57,139			328
Interest expense, net		13,576			3,498			–			17,074
Intcompany interest expense/(income)		12,560			(12,560	)		–			–
		964,920			114,979			57,139			1,137,038

Income/(loss) before income taxes		29,218			85,679			(57,139	)		57,758
(Benefit)/provision for income taxes		(16,126	)		28,540			–			12,414

Net income/(loss)	$	45,344		$	57,139		$	(57,139	)	$	45,344

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FISCAL YEAR ENDED JUNE 5, 2012

(IN THOUSANDS)

	Parent			Guarantors			Eliminations			Consolidated

Net cash provided by operating activities	$	48,516		$	105,820		$	(42,085	)	$	112,251

Investing activities:
Purchases of property and equipment		(28,253	)		(9,713	)		–			(37,966	)
Acquisition of franchise and other entities, net		(24,084	)		–			–			(24,084	)
Proceeds from sale-leaseback transactions		21,150			–			–			21,150
Proceeds from disposal of assets		5,834			160			–			5,994
Other, net		1,151			–			–			1,151
Net cash used by investing activities		(24,202	)		(9,553	)		–			(33,755	)

Financing activities:
Proceeds from issuance of senior unsecured
notes		246,340			–						246,340
Net payments on revolving credit facility		(177,000	)		–			–			(177,000	)
Principal payments on long-term debt		(44,437	)		(41,120	)		–			(85,557	)
Stock repurchases		(18,441	)		–			–			(18,441	)
Payment for debt issuance costs		(5,767	)		–			–			(5,767	)
Proceeds from exercise of stock options		355			–			–			355
Excess tax benefits from share-based
compensation		36			–			–			36
Intercompany transactions		13,096			(55,181	)		42,085			–
Net cash provided/(used) by financing activities		14,182			(96,301	)		42,085			(40,034	)

Increase/(decrease) in cash and cash equivalents		38,496			(34	)		–			38,462
Cash and cash equivalents:
Beginning of year		9,490			232			–			9,722
End of year	$	47,986		$	198		$	–		$	48,184

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FISCAL YEAR ENDED MAY 31, 2011

(IN THOUSANDS)

	Parent			Guarantors			Eliminations			Consolidated

Net cash provided by operating activities	$	30,523		$	123,534		$	(37,765	)	$	116,292

Investing activities:
Purchases of property and equipment		(16,592	)		(10,092	)		–			(26,684	)
Acquisition of franchise and other entities, net		(1,999	)		(2,258	)					(4,257	)
Proceeds from disposal of assets		6,646			95			–			6,741
Other, net		(292	)		–			–			(292	)
Net cash used by investing activities		(12,237	)		(12,255	)		–			(24,492	)

Financing activities:
Net payments on revolving credit facility		(26,800	)		(41,100	)		–			(67,900	)
Principal payments on long-term debt		(4,001	)		(19,436	)		–			(23,437	)
Payment for debt issuance costs		(2,812	)		–			–			(2,812	)
Proceeds from exercise of stock options		1,903			–			–			1,903
Excess tax benefits from share-based
compensation		599			–			–			599
Intercompany transactions		12,888			(50,653	)		37,765			–
Net cash used by financing activities		(18,223	)		(111,189	)		37,765			(91,647	)

Increase in cash and cash equivalents		63			90			–			153
Cash and cash equivalents:
Beginning of year		9,427			142			–			9,569
End of year	$	9,490		$	232		$	–		$	9,722

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FISCAL YEAR ENDED JUNE 1, 2010

(IN THOUSANDS)

	Parent			Guarantors			Eliminations			Consolidated

Net cash provided by operating activities	$	120,332		$	52,178		$	(32,246	)	$	140,264

Investing activities:
Purchases of property and equipment		(13,988	)		(3,684	)		–			(17,672	)
Proceeds from disposal of assets		4,676			803			–			5,479
Other, net		2,754			–			–			2,754
Net cash used by investing activities		(6,558	)		(2,881	)		–			(9,439	)

Financing activities:
Net payments on revolving credit facility		(115,300	)		–			–			(115,300	)
Principal payments on long-term debt		(84,350	)		(4,491	)		–			(88,841	)
Proceeds from issuance of stock, net of fees		73,125			–			–			73,125
Intercompany transactions		12,560			(44,806	)		32,246			–
Net cash used by financing activities		(113,965	)		(49,297	)		32,246			(131,016	)

Decrease in cash and cash equivalents		(191	)		–			–			(191	)
Cash and cash equivalents:
Beginning of year		9,618			142			–			9,760
End of year	$	9,427		$	142		$	–		$	9,569