10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended: August 30, 2016

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 or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

150 West Church Avenue, Maryville, Tennessee 37801
(Address of principal executive offices and zip code)

(865) 379-5700
(Registrant’s telephone number, including area code)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐  No  ☒

The number of shares of common stock outstanding as of October 5, 2016, was 60,196,759.

1

Index
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Thirteen Weeks Ended August 30, 2016 and September 1, 2015	4
	Condensed Consolidated Balance Sheets as of August 30, 2016 and May 31, 2016	5
	Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended August 30, 2016 and September 1, 2015	6
	Notes to Condensed Consolidated Financial Statements	7-24
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25-32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32-33
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	34
	Signatures	35

2

Special Note Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements represent our expectations or beliefs concerning future events, including one or more of the following:  future financial performance (including our estimates of changes in same-restaurant sales, average unit volumes, operating margins, expenses, and other items), future capital expenditures, the effect of strategic initiatives (including statements relating to our asset rationalization project, cost savings initiatives, and the benefits of our marketing), the opening or closing of restaurants by us or our franchisees, sales of our real estate or purchases of new real estate, future borrowings and repayments of debt, availability of financing on terms attractive to the Company, compliance with financial covenants in our debt instruments, payment of dividends, stock and bond repurchases, restaurant acquisitions and dispositions, and changes in senior management and in the Board of Directors. We caution the reader that a number of important factors and uncertainties could, individually or in the aggregate, cause our actual results to differ materially from those included in the forward-looking statements, including, without limitation, the risks and uncertainties described in the Risk Factors included in Part I, Item A of our Annual Report on Form 10-K for the year ended May 31, 2016 and the following:

● general economic conditions;

● changes in promotional, couponing and advertising strategies;

● changes in our customers’ disposable income;

● consumer spending trends and habits;

● increased competition in the restaurant market;

● laws and regulations, including those affecting labor and employee benefit costs, such as further potential increases in state and federally mandated minimum wages and healthcare reform;

● changes in senior management or in the Board of Directors;

● the impact of pending litigation;

● customers’ acceptance of changes in menu items;

● changes in the availability and cost of capital;

● potential limitations imposed by debt covenants under our debt instruments;

● weather conditions in the regions in which Company-owned and franchised restaurants are operated;

● costs and availability of food and beverage inventory, including supply and delivery shortages or interruptions;

● significant fluctuations in energy prices;

● security breaches of our customers’ or employees’ confidential information or personal data or the failure of our information technology and computer systems;

● our ability to attract and retain qualified managers, franchisees and team members;

● impact of adoption of new accounting standards;

● impact of food-borne illnesses resulting from an outbreak at either one of our restaurant concepts or other competing restaurant concepts; and

● effects of actual or threatened future terrorist attacks in the United States.

3

Part I - Financial Information

Item 1.

Ruby Tuesday, Inc. and Subsidiaries

Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Operations and

Comprehensive Loss

(In thousands, except per-share data)

(Unaudited)

	Thirteen Weeks Ended
	August 30, 2016			September 1, 2015
Revenue:
Restaurant sales and operating revenue	$	255,764		$	277,907
Franchise revenue		893			1,573
Total revenue		256,657			279,480
Operating costs and expenses:
Cost of goods sold		72,190			76,241
Payroll and related costs		90,607			95,335
Other restaurant operating costs		57,363			62,207
Depreciation and amortization		11,229			12,806
Selling, general, and administrative, net		31,585			29,396
Closures and impairments, net		30,192			2,712
Interest expense, net		4,877			6,000
Total operating costs and expenses		298,043			284,697
Loss before income taxes		(41,386	)		(5,217	)
Benefit for income taxes		(1,694	)		(1,023	)
Net loss	$	(39,692	)	$	(4,194	)
Other comprehensive income/(loss):
Pension liability reclassification		355			(44	)
Total comprehensive loss	$	(39,337	)	$	(4,238	)
Loss per share:
Basic	$	(0.66	)	$	(0.07	)
Diluted	$	(0.66	)	$	(0.07	)
Weighted average shares:
Basic		59,790			61,344
Diluted		59,790			61,344

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

Ruby Tuesday, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per-share data)

(Unaudited)

	August 30, 2016			May 31, 2016
Assets:
Current assets:
Cash and cash equivalents	$	68,661		$	67,341
Accounts and other receivables		7,108			12,827
Inventories:
Merchandise		11,932			13,799
China, silver and supplies		6,726			7,796
Income tax receivable		4,721			3,003
Prepaid rent and other expenses		10,643			11,508
Assets held for sale		11,849			4,642
Total current assets		121,640			120,916
Property and equipment, net		651,777			671,250
Other assets		44,742			45,751
Total assets	$	818,159		$	837,917
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable	$	22,033		$	22,141
Accrued liabilities:
Taxes, other than income and payroll		11,549			10,769
Payroll and related costs		14,978			14,561
Insurance		5,475			5,109
Rent and other		45,436			18,838
Deferred revenue – gift cards		14,720			16,354
Current maturities of long-term debt, including capital leases		9,781			9,934
Total current liabilities		123,972			97,706
Long-term debt and capital leases, less current maturities		213,728			213,803
Deferred escalating minimum rent		45,787			51,535
Other deferred liabilities		65,393			67,093
Total liabilities		448,880			430,137
Commitments and contingencies (Note 11)
Shareholders’ equity:
Common stock, $0.01 par value; (authorized: 100,000 shares;
issued and outstanding: 2017 – 60,197 shares, 2016 – 60,137 shares)		602			601
Capital in excess of par value		76,772			75,938
Retained earnings		301,658			341,350
Deferred compensation liability payable in Company stock		496			521
Company stock held by Deferred Compensation Plan		(496	)		(521	)
Accumulated other comprehensive loss		(9,753	)		(10,109	)
Total shareholders' equity		369,279			407,780
Total liabilities and shareholders' equity	$	818,159		$	837,917

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

Ruby Tuesday, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Thirteen Weeks Ended
	August 30, 2016			September 1, 2015
Operating activities:
Net loss	$	(39,692	)	$	(4,194	)
Adjustments to reconcile net loss to net cash provided/(used) by operating activities:
Depreciation and amortization		11,229			12,806
Deferred income taxes		–			(1,345	)
Loss on impairments, including disposition of assets		6,253			2,278
Inventory write-off		2,754			–
Share-based compensation expense		861			(279	)
Lease reserve adjustments		17,728			604
Deferred escalating minimum rent		261			557
Other, net		150			1,258
Changes in operating assets and liabilities:
Receivables		1,004			74
Inventories		404			(2,372	)
Income taxes		(1,718	)		(1,501	)
Prepaid and other assets		865			(966	)
Accounts payable, accrued and other liabilities		1,508			(9,391	)
Net cash provided/(used) by operating activities		1,607			(2,471	)
Investing activities:
Purchases of property and equipment		(6,358	)		(9,942	)
Proceeds from sale of assets		5,257			2,746
Insurance proceeds from property claims		150			–
Reductions in Deferred Compensation Plan assets		312			209
Other, net		860			–
Net cash provided/(used) by investing activities		221			(6,987	)
Financing activities:
Principal payments on long-term debt		(475	)		(8,901	)
Stock repurchases		(26	)		(9	)
Payments for debt issuance costs		(7	)		(25	)
Net cash used by financing activities		(508	)		(8,935	)
Increase/(decrease) in cash and cash equivalents		1,320			(18,393	)
Cash and cash equivalents:
Beginning of fiscal year		67,341			75,331
End of quarter	$	68,661		$	56,938
Supplemental disclosure of cash flow information:
Cash paid for:
Interest, net of amount capitalized	$	314		$	1,478
Income taxes, net	$	7		$	1,759
Significant non-cash investing and financing activities:
Retirement of fully depreciated assets	$	7,175		$	5,956
Reclassification of properties to assets held for sale	$	7,493		$	325

The accompanying notes are an integral part of the condensed consolidated financial statements.

6

Ruby Tuesday, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation

Description of Business

Ruby Tuesday, Inc., including its wholly-owned subsidiaries (“RTI,” the “Company,” “we,” and/or “our”), owns and operates Ruby Tuesday® casual dining restaurants. We also franchise the Ruby Tuesday concept in selected domestic and international markets.

As discussed further in Note 7 to the Condensed Consolidated Financial Statements, during the 13 weeks ended August 30, 2016, we closed 99 Company-owned restaurants, 95 of which were closed following a comprehensive review of the Company’s property portfolio due to perceived limited upside due to market concentration, challenged trade areas, and other factors. At August 30, 2016, we owned and operated 547 Ruby Tuesday restaurants concentrated primarily in the Southeast, Northeast, Mid-Atlantic, and Midwest of the United States, which we consider to be our core markets. We also owned and operated one Lime Fresh Mexican Grill® (“Lime Fresh”) fast casual restaurant as of August 30, 2016. As further discussed in Note 4 to the Condensed Consolidated Financial Statements, we entered into an agreement during fiscal year 2016 to sell the assets related to eight Company-owned Lime Fresh restaurants. The one remaining Company-owned Lime Fresh restaurant not closed as of August 30, 2016 is expected to be closed and transferred to the buyer prior to the end of our second quarter of fiscal year 2017.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. In addition, certain reclassifications were made to prior period amounts to conform to the current period presentation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates. Operating results for the 13 weeks ended August 30, 2016 are not necessarily indicative of results that may be expected for the 53-week year ending June 6, 2017. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in RTI’s Annual Report on Form 10-K for the fiscal year ended May 31, 2016.

2. Loss Per Share

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during each period presented. Diluted earnings per share gives effect to stock options and restricted stock outstanding during the applicable periods, except during loss periods as the effect would be anti-dilutive. The following table reflects the calculation of weighted average common and dilutive potential common shares outstanding as presented in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per-share data):

	Thirteen weeks ended
	August 30, 2016			September 1, 2015
Net loss	$	(39,692	)	$	(4,194	)
Weighted average common shares outstanding		59,790			61,344
Dilutive effect of stock options and restricted stock		–			–
Weighted average common and dilutive potential common shares outstanding		59,790			61,344
Basic net loss per share	$	(0.66	)	$	(0.07	)
Diluted net loss per share	$	(0.66	)	$	(0.07	)

7

Stock options with an exercise price greater than the average market price of our common stock and certain options, restricted stock, and restricted stock units with unrecognized compensation expense do not impact the computation of diluted loss per share because the effect would be anti-dilutive. The following table summarizes on a weighted-average basis stock options, restricted stock, and restricted stock units that were excluded from the computation of diluted loss per share because their inclusion would have had an anti-dilutive effect (in thousands):

	Thirteen weeks ended
	August 30, 2016		September 1, 2015
Stock options		2,393		2,813
Restricted stock / Restricted stock units		758		749
Total		3,151		3,562

3. Franchise Programs

As of August 30, 2016, our franchisees collectively operated 68 domestic and international Ruby Tuesday restaurants. We do not own any equity interest in our franchisees.

Under the terms of the franchise operating agreements, we charge a royalty fee (generally 4.0% of monthly gross sales), a marketing and purchasing fee (generally 1.5% of monthly gross sales), and a national advertising fee (generally 1.5% of monthly gross sales as of August 30, 2016, but up to a maximum of 3.0% under the terms of the franchise operating agreements).

Amounts received from franchisees for the marketing and purchasing fee and national advertising fee are considered by RTI to be reimbursements, recorded on an accrual basis as earned, and have been netted against Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss. For the 13 weeks ended August 30, 2016 and September 1, 2015, we recorded $0.2 million and $0.5 million, respectively, in marketing and purchasing fees and national advertising fund fees.

4. Accounts and Other Receivables

Accounts and other receivables consist of the following (in thousands):

	August 30, 2016		May 31, 2016
Amounts due from franchisees	$	3,318	$	3,013
Third-party gift card sales		925		1,272
Rebates receivable		819		1,001
Receivables from sales of Lime Fresh Mexican Grill assets		140		5,289
Other receivables		1,906		2,252
	$	7,108	$	12,827

We negotiate purchase arrangements, including price terms, with designated and approved suppliers on behalf of us and our franchise system. We receive various volume discounts and rebates based on purchases for our Company-owned restaurants from numerous suppliers.

Amounts due from franchisees consist of royalties, license and other miscellaneous fees, a portion of which represents current and recently-invoiced billings.

As of August 30, 2016 and May 31, 2016, other receivables consisted primarily of amounts due from our distributor, online ordering, sales and other miscellaneous tax refunds, and other receivables.

Sales of Lime Fresh Mexican Grill Assets

On May 31, 2016, we entered into agreements with two separate buyers to sell various Lime Fresh Mexican Grill assets. Pursuant to the terms of an asset purchase agreement with another restaurant company, we agreed to sell our eight remaining Lime Fresh Mexican Grill Company-owned restaurants for $6.0 million. Given that closing requirements were satisfied for only six of the eight restaurants, an amendment was agreed upon which allowed for the payment of $5.0 million upon the transfer of the six restaurants and the holdback of $1.0 million until such time that both of the remaining two restaurants had closed and transferred to the buyer. The six restaurants closed and were transferred on May 31, 2016. While one of the two remaining restaurants was sold and transferred to the buyer on June 14, 2016, the final restaurant is expected to remain open and be operated by Ruby Tuesday until a date in our second quarter of fiscal year 2017.

8

The $5.3 million of receivables from sales of Lime Fresh assets included in the table above as of May 31, 2016 consists of $5.0 million due from the buyer of our Lime Fresh restaurants, which was collected on the first day of fiscal year 2017, and $0.3 million due from the buyer of the Lime Fresh brand, of which $0.1 million remains outstanding. Given that the closing requirements were not satisfied on the two remaining restaurants as of August 30, 2016, we did not reflect those restaurants as having been sold during the 13 weeks ended August 30, 2016, nor we did accrue as a receivable the $1.0 million holdback.

5. Property, Equipment, and Assets Held for Sale

Property and equipment, net, is comprised of the following (in thousands):

	August 30, 2016		May 31, 2016
Land	$	182,829	$	209,930
Buildings		381,496		398,984
Improvements		294,500		303,032
Restaurant equipment		216,542		222,646
Other equipment		80,026		82,204
Surplus properties*		37,302		4,354
Construction in progress and other		2,239		3,325
		1,194,934		1,224,475
Less accumulated depreciation		543,157		553,225
Property and equipment, net	$	651,777	$	671,250

* Surplus properties represent assets held for sale that are not classified as such in the Consolidated Balance Sheets as we have yet to conclude that we can sell these assets within the next 12 months. These assets primarily consist of parcels of land upon which we have no intention to build restaurants, closed properties which include a building, and liquor licenses not needed for operations.

Included within the current assets section of our Condensed Consolidated Balance Sheets at August 30, 2016 and May 31, 2016 are amounts classified as assets held for sale totaling $11.8 million and $4.6 million, respectively. Assets held for sale primarily consist of parcels of land upon which we have no intention to build restaurants, land and buildings of closed restaurants, and various liquor licenses. During the 13 weeks ended August 30, 2016 and September 1, 2015, we sold surplus properties with carrying values that were negligible and $2.1 million, respectively, at net gains of $0.1 million and $0.6 million, respectively. Cash proceeds, net of broker fees, from these sales totaled $0.1 million and $2.7 million for the 13 weeks ended August 30, 2016 and September 1, 2015, respectively.

6. Long-Term Debt and Capital Leases

Long-term debt and capital lease obligations consist of the following (in thousands):

	August 30, 2016			May 31, 2016
Senior unsecured notes	$	212,546		$	212,546
Unamortized discount		(1,675	)		(1,771	)
Unamortized debt issuance costs		(2,832	)		(2,995	)
Senior unsecured notes less unamortized discount and
debt issuance costs		208,039			207,780
Revolving credit facility		–			–
Mortgage loan obligations		15,258			15,745
Unamortized premium - mortgage loan obligations		47			75
Unamortized debt issuance costs - mortgage loan obligations		(58	)		(74	)
Capital lease obligations		223			211
Total long-term debt and capital leases		223,509			223,737
Less current maturities		9,781			9,934
Long-term debt and capital leases, less current maturities	$	213,728		$	213,803

On May 14, 2012, we entered into an indenture (the “Indenture”) among Ruby Tuesday, Inc., certain subsidiaries of the Company as guarantors and Wells Fargo Bank, National Association as trustee, governing the Company’s $250.0 million aggregate principal amount of 7.625% senior notes due 2020 (the “Senior Notes”). The Senior Notes were issued at a discount of $3.7 million, which is being amortized to interest expense, net using the effective interest method over the eight-year term of the notes.

9

The Senior Notes are guaranteed on a senior unsecured basis by our existing and future domestic restricted subsidiaries, subject to certain exceptions. They rank equal in right of payment with our existing and future senior indebtedness and senior in right of payment to any of our future subordinated indebtedness. The Senior Notes are effectively subordinated to all of our secured debt, including borrowings outstanding under our revolving credit facility, to the extent of the value of the assets securing such debt and structurally subordinated to all of the liabilities of our existing and future subsidiaries that do not guarantee the Senior Notes.

Interest on the Senior Notes is calculated at 7.625% per annum, payable semiannually on each May 15 and November 15 to holders of record on the May 1 or November 1 immediately preceding the interest payment date. Accrued interest on the Senior Notes and our other long-term debt and capital lease obligations was $5.0 million and $1.0 million as of August 30, 2016 and May 31, 2016, respectively, and is included in Accrued liabilities – Rent and other in our Condensed Consolidated Balance Sheets.

We may redeem the Senior Notes, in whole or in part, at the redemption prices specified in the Indenture plus accrued and unpaid interest. There is no sinking fund for the Senior Notes, which mature on May 15, 2020.

The Indenture contains covenants that limit, among other things, our ability and the ability of certain of our subsidiaries to (i) incur or guarantee additional indebtedness; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make certain investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of their assets; (vi) enter into transactions with affiliates; and (vii) sell or transfer certain assets. The Indenture also restricts the declaration and payment of a dividend or other distribution on, and/or repurchase by RTI in respect of, our outstanding common stock. These covenants are subject to a number of important exceptions and qualifications, as described in the Indenture, and certain covenants will not apply at any time when the Senior Notes are rated investment grade by the Rating Agencies, as defined in the Indenture. The Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Senior Notes to be due and payable immediately.

On December 3, 2013, we entered into a four-year revolving credit agreement (the “Senior Credit Facility”) under which we may borrow up to $50.0 million with the option, subject to certain conditions, to increase the facility by up to $35.0 million. The terms of the Senior Credit Facility provide for a $25.0 million sublimit for the issuance of standby letters of credit.

Under the terms of the Senior Credit Facility, interest rates charged on borrowings can vary depending on the interest rate option we choose to utilize. Our options for the rate are a Base Rate or LIBOR plus an applicable margin, provided that the rate shall not be less than zero. The Base Rate is defined as the highest of the issuing bank’s prime rate, the Federal Funds rate plus 0.50%, or the Adjusted LIBO rate (as defined in the Senior Credit Facility) plus 1.0%. The applicable margin for the LIBOR-based option is a percentage ranging from 2.50% to 3.50% and for the Base Rate option is a percentage ranging from 1.50% to 2.50%. We pay commitment fees quarterly ranging from 0.40% to 0.75% on the unused portion of the Senior Credit Facility.

As security for the Senior Credit Facility, we granted the lenders liens and security interests in substantially all of the shares of capital stock of the Company and each of our present and future subsidiaries, substantially all of the personal property of the Company and each of our present and future subsidiaries, and the real property, improvements, and fixtures of 49 Ruby Tuesday restaurants. The real property, improvements, and fixtures of the 49 restaurants pledged as collateral appraised at $101.4 million at the time of the transaction and have an August 30, 2016 net book value of $77.8 million.

We had no borrowings outstanding under the Senior Credit Facility at August 30, 2016. After consideration of letters of credit outstanding, we had $38.5 million available under the Senior Credit Facility as of August 30, 2016.

The Senior Credit Facility contains a number of customary affirmative and negative covenants that, among other things, limit or restrict our ability to incur liens, engage in mergers or other fundamental changes, make acquisitions, investments, loans and advances, pay dividends or other distributions, sell or otherwise dispose of certain assets, engage in certain transactions with affiliates, enter into burdensome agreements or certain hedging agreements, amend organizational documents, change accounting practices, incur additional indebtedness and prepay other indebtedness.

Under the terms of the Senior Credit Facility we are allowed, under certain circumstances, to repurchase up to $20.0 million of the Senior Notes in any fiscal year. We did not repurchase any Senior Notes during the 13 weeks ended August 30, 2016.

Under the Senior Credit Facility, we are required to comply with financial covenants relating to the maintenance of a maximum leverage ratio and a minimum fixed charge coverage ratio. The terms of the Senior Credit Facility require us to maintain a maximum leverage ratio of no more than 4.40 to 1.0 and a minimum fixed charge coverage ratio of 1.60 to 1.0 for the quarter ended August 30, 2016. For the remainder of fiscal year 2017, the Senior Credit Facility requires us

10

to maintain a maximum leverage ratio of 4.30 to 1.0 for our second and third fiscal quarters and 4.25 to 1.0 for our fourth fiscal quarter, and requires us to maintain a minimum fixed charge coverage ratio of 1.65 to 1.0 for our second and third fiscal quarters and 1.70 to 1.0 for our fourth fiscal quarter.

The Senior Credit Facility terminates no later than December 3, 2017.  Upon the occurrence of an event of default, the lenders may terminate the loan commitments, accelerate all loans and exercise any of their rights under the Senior Credit Facility and any ancillary loan documents.

On December 3, 2013, in connection with our entry into the Senior Credit Facility, the Company and certain of its subsidiaries entered into loan modification agreements (the “Loan Modification Agreements”) with certain mortgage lenders to, among other things, provide waivers and consents under certain of our mortgage loan obligations to enter into the Senior Credit Facility. The Loan Modification Agreements also amended certain financial reporting requirements under the specified loans and modified and/or provided for certain financial covenants for the specified loans, including the maximum leverage ratio and the minimum fixed charge coverage ratio.

We were in compliance with our maximum leverage ratio and our minimum fixed charge coverage ratio as of August 30, 2016.

Our $15.2 million in mortgage loan obligations as of August 30, 2016 consists of various loans acquired upon franchise acquisitions. These loans, which mature between January 2017 and October 2021, have balances which range from $0.6 million to $6.8 million and interest rates of 7.60% to 10.17%. Included in our current maturities of long-term debt as of August 30, 2016 is $9.4 million related to two mortgage loan obligations that have balloon payments due during the third quarter of fiscal year 2017. Many of the properties acquired from franchisees collateralize the loans outstanding.

7. Closures and Impairments Expense

Closures and impairments, net include the following (in thousands):

	Thirteen weeks ended
	August 30, 2016			September 1, 2015
Property impairments	$	6,580		$	2,577
Closed restaurant lease reserves		17,728			604
Inventory write-off		2,754			–
Severance benefits		1,760			18
Other closing expense		1,427			103
Gain on sale of surplus properties		(57	)		(590	)
Closures and impairments, net	$	30,192		$	2,712

During the 13 weeks ended August 30, 2016, we closed 99 Company-owned restaurants, 95 of which were closed in connection with an asset rationalization plan announced on August 11, 2016. The plan was formulated in response to a comprehensive review of our property portfolio through the planned closure of restaurants with perceived limited upside due to market concentration, challenged trade areas, or other factors. Included within Closures and impairments, net for the 13 weeks ended August 30, 2016 are closed restaurant lease reserves, inventory write-off, severance benefits, and other closing expense of $24.7 million related to these closures.

A rollforward of our future lease obligations associated with closed restaurants is as follows (in thousands):

	Reserve for Lease Obligations
Balance at May 31, 2016	$	6,270
Closing expense including rent and other lease charges		17,728
Payments		(1,393	)
Adjustments to deferred escalating minimum rent		9,283
Balance at August 30, 2016	$	31,888

The amounts comprising future lease obligations in the table above are estimated using certain assumptions, including the period of time it will take to settle the lease with the landlord or find a suitable sublease tenant, and the amount of actual future cash payments could differ from our recorded lease obligations. Of the total future lease obligations included in the table above, $27.9 million is included within Accrued liabilities – Rent and other, $3.5 million is included within Deferred escalating minimum rent, and $0.5 million is included within Other deferred liabilities in our Condensed Consolidated Balance Sheet as of August 30, 2016. For the remainder of fiscal year 2017 and beyond, our focus will be on obtaining settlements, or subleases as necessary, on as many of these leases as possible and these settlements could be higher or lower than the amounts recorded. The actual amount of any cash payments made by the

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Company for lease contract termination costs will be dependent upon ongoing negotiations with the landlords of the leased restaurant properties.

 8. Employee Post-Employment Benefits

Pension and Postretirement Medical and Life Benefits

We sponsor three defined benefit pension plans for active employees and offer certain postretirement benefits for retirees. A summary of each of these is presented below.

Retirement Plan
RTI sponsors the Morrison Restaurants Inc. Retirement Plan (the "Retirement Plan"). Effective December 31, 1987, the Retirement Plan was amended so that no additional benefits would accrue and no new participants could enter the Retirement Plan after that date. Participants receive benefits based upon salary and length of service.

Minimum funding for the Retirement Plan is determined in accordance with the guidelines set forth in employee benefit and tax laws. From time to time we may contribute additional amounts as we deem appropriate. We estimate that we will be required to make contributions totaling $0.1 million to the Retirement Plan during the remainder of fiscal year 2017.

Executive Supplemental Pension Plan and Management Retirement Plan
Under these unfunded defined benefit pension plans, eligible employees earn supplemental retirement income based upon salary and length of service, reduced by social security benefits and amounts otherwise receivable under other specified Company retirement plans. Effective June 1, 2001, the Management Retirement Plan was amended so that no additional benefits would accrue and no new participants could enter the plan after that date. In December 2015, the Executive Supplemental Pension Plan was similarly amended effective as of January 1, 2016 for current participants, and as of January 1, 2018 for two specified potential participants, who are currently not named executive officers.

Included in our Condensed Consolidated Balance Sheets as of August 30, 2016 and May 31, 2016 are amounts within Accrued liabilities: Payroll and related costs of $2.5 million as of both dates and amounts within Other deferred liabilities of $34.7 million and $35.7 million, respectively, relating to our three defined benefit pension plans.

Postretirement Medical and Life Benefits
Our Postretirement Medical and Life Benefits plans provide medical benefits to substantially all retired employees and life insurance benefits to certain retirees. The medical plan requires retiree cost sharing provisions that are more substantial for employees who retire after January 1, 1990.

Included in our Condensed Consolidated Balance Sheets as of August 30, 2016 and May 31, 2016 are amounts within Accrued liabilities: Payroll and related costs of $0.1 million as of both dates and amounts within Other deferred liabilities of $1.0 million as of both dates relating to our postretirement medical and life benefits.

The following tables detail the components of net periodic benefit cost for the Retirement Plan, Management Retirement Plan, and the Executive Supplemental Pension Plan (collectively, the "Pension Plans") and the Postretirement Medical and Life Benefits plans, which is recorded as a component of Selling, general, and administrative expense, net in our Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands):

	Pension Plans
	Thirteen weeks ended
	August 30, 2016			September 1, 2015
Service cost	$	6		$	230
Interest cost		420			599
Expected return on plan assets		(91	)		(103	)
Recognized actuarial loss		338			628
Net periodic benefit cost	$	673		$	1,354

	Postretirement Medical and Life Benefits
	Thirteen weeks ended
	August 30, 2016		September 1, 2015
Service cost	$	1	$	1
Interest cost		9		12
Recognized actuarial loss		17		32
Net periodic benefit cost	$	27	$	45

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During the 13 weeks ended August 30, 2016 and September 1, 2015, we reclassified recognized actuarial losses of $0.4 million and $0.7 million, respectively, out of accumulated other comprehensive loss and into pension expense, which is included in Selling, general and administrative, net within our Condensed Consolidated Statements of Operations and Comprehensive Loss.

We also sponsor two defined contribution retirement savings plans. Information regarding these plans is included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2016.

Restaurant Closures and Corporate Restructuring

We closed 99 Company-owned restaurants during the 13 weeks ended August 30, 2016, 95 of which were closed in connection with an asset rationalization plan as previously discussed in Note 7 to the Condensed Consolidated Financial Statements.

As of both August 30, 2016 and May 31, 2016, liabilities of $0.3 million, representing unpaid obligations related to employee severance and vacation accruals, were included within Accrued liabilities: Payroll and related costs in our Consolidated Balance Sheet. Costs of $1.7 million and $0.3 million reflected in the table below related to employee severance and unused vacation accruals are included within Closures and impairments, net and Selling, general, and administrative, net, respectively, in our Consolidated Statements of Operations and Comprehensive Loss. A roll forward of our obligations in connection with employee separations is as follows (in thousands):

Balance at May 31, 2016	$	317
Employee severance and unused vacation accruals		2,020
Cash payments		(2,068	)
Balance at August 30, 2016	$	269

As further discussed in Note 14 to the Condensed Consolidated Financial Statements, on September 13, 2016, James J. Buettgen resigned as the Chairman of the Board of Directors, President, and Chief Executive Officer of the Company.

9. Income Taxes

Under Accounting Standards Codification 740 (“ASC 740”), companies are required to apply their estimated annual tax rate on a year-to-date basis in each interim period. Under ASC 740, companies should not apply the estimated annual tax rate to interim financial results if the estimated annual tax rate is not reliably predictable. In this situation, the interim tax rate should be based on the actual year-to-date results. Due to changes in our projections, which have fluctuated as we work through our brand repositioning, a reliable projection of our annual effective rate has been difficult to determine. As such, we recorded a tax provision for the 13 weeks ended August 30, 2016 and September 1, 2015 based on the actual year-to-date results, in accordance with ASC 740.

We regularly evaluate the need for a valuation allowance for deferred tax assets by assessing whether it is more likely than not that we will realize the deferred tax assets in the future.  A valuation allowance assessment is performed each reporting period, with any additions or adjustments reflected in earnings in the period of assessment.  In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets for each jurisdiction. As of May 31, 2016, we have rolling three-year historical operating losses and have concluded that the negative evidence outweighs the positive evidence.

In accordance with the applicable accounting standards, we are unable to use future income projections to support the realization of our deferred tax assets as a consequence of the above conclusion.   Instead, in determining the appropriate amount of the valuation allowance, we considered the timing of future reversal of our taxable temporary differences and available tax strategies that, if implemented, would result in the realization of deferred tax assets. Our valuation allowance for deferred tax assets totaled $106.2 million and $89.9 million as of August 30, 2016 and May 31, 2016, respectively.

We recorded a tax benefit of $1.7 million and $1.0 million for the 13 weeks ended August 30, 2016 and September 1, 2015, respectively. Netted against our tax benefit was a charge of $16.3 million representing the amount reserved for the increase in deferred tax assets during the quarter which primarily related to general business credit carryforwards and federal and state net operating loss carryforwards.

We had a gross liability for unrecognized tax benefits, exclusive of accrued interest and penalties, of $4.6 million and $4.5 million, respectively, as of August 30, 2016 and May 31, 2016, of which $3.7 million was reclassified against our deferred tax assets as of both dates. As of August 30, 2016 and May 31, 2016, the total amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate was $2.4 million and $2.3 million, respectively. The liability for unrecognized tax benefits as of August 30, 2016 includes $0.4 million related to tax positions for which it is reasonably possible that the total

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amounts could change within the next twelve months based on the outcome of examinations and negotiations with tax authorities.

Interest and penalties related to unrecognized tax benefits are recognized as components of income tax expense. As of both August 30, 2016 and May 31, 2016, we had accrued $0.4 million for the payment of interest and penalties. During the first quarter of fiscal year 2017, accrued interest and penalties increased by an insignificant amount.

At August 30, 2016, we are no longer subject to U.S. federal income tax examinations by tax authorities for fiscal years prior to 2012, and with few exceptions, we are no longer subject to state and local examinations by tax authorities prior to fiscal year 2013.

10. Share-Based Employee Compensation

Preferred Stock

RTI is authorized, under its Certificate of Incorporation, to issue up to 250,000 shares of preferred stock with a par value of $0.01. These shares may be issued from time to time in one or more series. Each series will have dividend rates, rights of conversion and redemption, liquidation prices, and other terms or conditions as determined by the Board of Directors. No preferred shares have been issued as of August 30, 2016 and May 31, 2016.

The Ruby Tuesday, Inc. Stock Incentive Plan and the Ruby Tuesday, Inc. 1996 Stock Incentive Plan

A committee, appointed by the Board of Directors, administers the Ruby Tuesday, Inc. Stock Incentive Plan (“SIP”) and the Ruby Tuesday, Inc. 1996 Stock Incentive Plan (“1996 SIP”), and has full authority in its discretion to determine the key employees, officers, and non-employee directors to whom share-based incentives are granted and the terms and provisions of share-based incentives. Stock option grants under the SIP and 1996 SIP can have varying vesting provisions and exercise periods as determined by such committee. A majority of currently outstanding stock options granted under the SIP and 1996 SIP vest within three years following the date of grant and expire seven years after the date of grant. The SIP and 1996 SIP permit the committee to make awards of shares of common stock, awards of stock options or other derivative securities related to the value of the common stock, and certain cash awards to eligible persons. These discretionary awards may be made on an individual basis or for the benefit of a group of eligible persons. All stock options awarded under the SIP and 1996 SIP have been awarded with an exercise price equal to the fair market value at the time of grant.

At August 30, 2016, we had reserved a total of 6,726,000 shares of common stock for the SIP and 1996 SIP. Of the reserved shares at August 30, 2016, 2,282,000 were subject to stock options outstanding. Stock option exercises are settled with the issuance of new shares. Net shares of common stock available for issuance at August 30, 2016 were 4,444,000.

Stock Options

The following table summarizes our stock option activity under these stock option plans for the 13 weeks ended August 30, 2016 (Stock Options and Aggregate Intrinsic Value are in thousands):

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Service-based vesting:
Outstanding at May 31, 2016		2,066		$	7.89
Granted		809			3.82
Cancellations and forfeitures		(3	)		6.40
Expired		(87	)		6.64
Outstanding at August 30, 2016		2,785		$	6.75		4.07	$	–
Exercisable at August 30, 2016		1,806		$	8.14		2.72	$	–

At May 31, 2016, there was approximately $1.1 million of unrecognized pre-tax compensation expense related to non-vested stock options. This cost is expected to be recognized over a weighted average period of 1.9 years.

During the 13 weeks ended August 30, 2016, we granted 809,000 service-based stock options to certain employees under the terms of the SIP. The stock options awarded vest in equal annual installments over a three-year period following grant of the award, and have a maximum life of seven years. 

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Restricted Stock and Restricted Stock Units (“RSU”)

The following table summarizes our restricted stock and RSU activity for the 13 weeks ended August 30, 2016 (in thousands, except per-share data):

	Shares			Weighted Average Fair Value
Service-Based Vesting:
Unvested at May 31, 2016		564		$	6.29
Granted		292			3.82
Vested		(102	)		6.67
Cancellations and forfeitures		(16	)		6.47
Unvested at August 30, 2016		738		$	5.25
Performance-Based Vesting:
Unvested at May 31, 2016		225		$	6.51
Cancellations and forfeitures		(5	)		6.51
Unvested at August 30, 2016		220		$	6.51

The fair value of restricted stock and RSU awards is based on the closing price of our common stock on the date prior to the grant date. At August 30, 2016, unrecognized compensation expense related to restricted stock and RSU grants expected to vest totaled $2.5 million and will be recognized over a weighted average vesting period of 1.6 years.

During the 13 weeks ended August 30, 2016, we granted 286,000 service-based RSUs to certain employees under the terms of the SIP and 1996 SIP. The service-based RSUs will vest in three equal installments over a three-year period following the date of grant.

Also during the 13 weeks ended August 30, 2016, we granted 571,000 performance-based stock units that will settle in cash and vest approximately three years after the grant date. Vesting of the performance-based stock units is contingent upon the Company’s achievement of a same-restaurant sales performance condition related to the next three fiscal years. Included in our Condensed Consolidated Balance Sheets as of August 30, 2016 and May 31, 2016 are amounts within Other deferred liabilities of $0.4 million and $0.2 million, respectively, relating to all of our long-term incentive awards that will settle in cash.

Included within Selling, general, and administrative, net in our Consolidated Statements of Operations and Comprehensive Loss is share-based compensation expense of $0.9 million for the 13 weeks ended August 30, 2016 and net credit of $0.3 million for the 13 weeks ended September 1, 2015 as a result of forfeitures.

11. Commitments and Contingencies

Litigation

We are presently, and from time to time, subject to pending claims and lawsuits arising in the ordinary course of business. We provide reserves for such claims when payment is probable and estimable in accordance with GAAP. At this time, in the opinion of management, the ultimate resolution of pending legal proceedings will not have a material adverse effect on our operations, financial position, or cash flows.

12. Fair Value Measurements

The following table presents the fair values of our financial assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall (in thousands):

	Level		August 30, 2016			May 31, 2016
Deferred compensation plan – Assets		1	$	6,743		$	6,660
Deferred compensation plan – Liabilities		1		(6,743	)		(6,660	)

There were no transfers among levels within the fair value hierarchy during the 13 weeks ended August 30, 2016.

The Deferred Compensation Plan and the Ruby Tuesday, Inc. Restated Deferred Compensation Plan (the “Predecessor Plan”) are unfunded, non-qualified deferred compensation plans for eligible employees. Assets earmarked to pay benefits under the Deferred Compensation Plan and Predecessor Plan are held by a rabbi trust. We report the accounts of the rabbi trust in our Consolidated Financial Statements. The investments held by these plans are considered trading securities and are reported at fair value based on third-party broker statements. The realized and unrealized holding gains and losses related to these other

15

investments, as well as the offsetting compensation expense, is recorded in Selling, general, and administrative expense, net in the Consolidated Financial Statements.

The investment in RTI common stock and related liability payable in RTI common stock, which are reflected in Shareholders’ Equity in the Consolidated Balance Sheets, are excluded from the fair value table above as these are considered treasury shares and reported at cost.

The following table presents the fair values on our Condensed Consolidated Balance Sheets as of August 30, 2016 for those assets and liabilities measured on a non-recurring basis (in thousands):

	Fair Value Measurements
	Level		August 30, 2016
Long-lived assets held for use		2	$	1,195
Long-lived assets held for sale		2		695
Total			$	1,890

The following table presents the losses recognized during the 13 weeks ended August 30, 2016 and September 1, 2015 resulting from fair value measurements of assets and liabilities measured on a non-recurring basis. The amounts presented are included in Closures and impairments, net in our Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands):

	Thirteen weeks ended
	August 30, 2016		September 1, 2015
Long-lived assets held for use	$	4,266	$	2,485
Long-lived assets held for sale		2,314		92
Property impairments	$	6,580	$	2,577

Long-lived assets held for sale are valued using Level 2 inputs, primarily from information obtained through broker listings or sales agreements. Costs to market and/or sell are factored into the estimates of fair value for those properties included in Assets held for sale on our Condensed Consolidated Balance Sheets.

We review our long-lived assets (primarily property, equipment, and, as appropriate, reacquired franchise rights and favorable leases) related to each restaurant to be held and used in the business, whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be recoverable.

Long-lived assets held for use presented in the table above includes restaurants or groups of restaurants that we have impaired. From time to time, the table will also include closed restaurants or surplus sites not meeting held for sale criteria that have been offered for sale at a price less than their carrying value.

The fair values of our long-lived assets held for use are primarily based on broker estimates of the value of the land, building, leasehold improvements, and other residual assets (Level 2).

Our financial instruments at August 30, 2016 and May 31, 2016 consisted of cash and cash equivalents, accounts receivable and payable, and long-term debt. The fair values of cash and cash equivalents and accounts receivable and payable approximated their carrying values because of the short-term nature of these instruments. The carrying amounts and fair values of our long-term debt, which are not measured on a recurring basis using fair value, are as follows (in thousands):

	August 30, 2016				May 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt (Level 2)	$	223,286	$	218,762	$	223,526	$	223,212

We estimated the fair value of debt using market quotes and calculations based on market rates.  

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13. Supplemental Condensed Consolidating Financial Statements

As discussed in Note 6 to the Condensed 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 information, which has been prepared in accordance with the requirements for presentation of Rule 3-10(f) of Regulation S-X promulgated by the Securities and Exchange Commission, presents the condensed consolidating financial information separately for 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.

17

 Condensed Consolidating Balance Sheet

As of August 30, 2016

(In thousands)

	Parent			Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	68,515		$	146	$	–		$	68,661
Accounts and other receivables		2,625			4,483		–			7,108
Inventories		13,653			5,005		–			18,658
Income tax receivable		170,031			–		(165,310	)		4,721
Other current assets		12,652			9,840		–			22,492
Total current assets		267,476			19,474		(165,310	)		121,640
Property and equipment, net		491,229			160,548		–			651,777
Investment in subsidiaries		82,482			–		(82,482	)		–
Due from/(to) subsidiaries		81,389			216,770		(298,159	)		–
Other assets		39,993			4,749		–			44,742
Total assets	$	962,569		$	401,541	$	(545,951	)	$	818,159
Liabilities & Shareholders’ Equity
Current liabilities:
Accounts payable	$	18,065		$	3,968	$	–		$	22,033
Accrued and other current liabilities		52,324			39,834		–			92,158
Current maturities of long-term debt,
including capital leases		(1,088	)		10,869		–			9,781
Income tax payable		–			165,310		(165,310	)		–
Total current liabilities		69,301			219,981		(165,310	)		123,972
Long-term debt and capital leases,
less current maturities		209,350			4,378		–			213,728
Due to/(from) subsidiaries		216,770			81,389		(298,159	)		–
Other deferred liabilities		97,869			13,311		–			111,180
Total liabilities		593,290			319,059		(463,469	)		448,880
Shareholders’ equity:
Common stock		602			–		–			602
Capital in excess of par value		76,772			–		–			76,772
Retained earnings		301,658			82,482		(82,482	)		301,658
Accumulated other comprehensive loss		(9,753	)		–		–			(9,753	)
Total shareholders’ equity		369,279			82,482		(82,482	)		369,279
Total liabilities & shareholders’ equity	$	962,569		$	401,541	$	(545,951	)	$	818,159

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Condensed Consolidating Balance Sheet

As of May 31, 2016

(In thousands)

	Parent			Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	67,208		$	133	$	–		$	67,341
Accounts and other receivables		8,102			4,725		–			12,827
Inventories		15,401			6,194		–			21,595
Income tax receivable		167,065			–		(164,062	)		3,003
Other current assets		11,282			4,868		–			16,150
Total current assets		269,058			15,920		(164,062	)		120,916
Property and equipment, net		501,482			169,768		–			671,250
Investment in subsidiaries		98,929			–		(98,929	)		–
Due from/(to) subsidiaries		76,208			213,816		(290,024	)		–
Other assets		40,626			5,125		–			45,751
Total assets	$	986,303		$	404,629	$	(553,015	)	$	837,917
Liabilities & Shareholders’ Equity
Current liabilities:
Accounts payable	$	17,405		$	4,736	$	–		$	22,141
Accrued and other current liabilities		35,674			29,957		–			65,631
Current maturities of long-term debt,
including capital leases		(1,067	)		11,001		–			9,934
Income tax payable		–			164,062		(164,062	)		–
Total current liabilities		52,012			209,756		(164,062	)		97,706
Long-term debt and capital leases,
less current maturities		209,058			4,745		–			213,803
Due to/(from) subsidiaries		213,816			76,208		(290,024	)		–
Other deferred liabilities		103,637			14,991		–			118,628
Total liabilities		578,523			305,700		(454,086	)		430,137
Shareholders’ equity:
Common stock		601			–		–			601
Capital in excess of par value		75,938			–		–			75,938
Retained earnings		341,350			98,929		(98,929	)		341,350
Accumulated other comprehensive loss		(10,109	)		–		–			(10,109	)
Total shareholders’ equity		407,780			98,929		(98,929	)		407,780
Total liabilities & shareholders’ equity	$	986,303		$	404,629	$	(553,015	)	$	837,917

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Condensed Consolidating Statement of Operations and

Comprehensive Loss

For the Thirteen Weeks Ended August 30, 2016

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	185,088		$	70,676		$	–		$	255,764
Franchise revenue		10			883			–			893
Total revenue		185,098			71,559			–			256,657
Operating costs and expenses:
Cost of goods sold		52,182			20,008			–			72,190
Payroll and related costs		63,575			27,032			–			90,607
Other restaurant operating costs		40,976			16,387			–			57,363
Depreciation and amortization		8,088			3,141			–			11,229
Selling, general, and administrative		19,386			12,199			–			31,585
Intercompany selling, general, and
administrative allocations		10,363			(10,363	)		–			–
Closures and impairments, net		16,584			13,608			–			30,192
Equity in losses of subsidiaries		9,032			–			(9,032	)		–
Interest expense, net		4,582			295			–			4,877
Intercompany interest expense/(income)		2,953			(2,953	)		–			–
Total operating costs and expenses		227,721			79,354			(9,032	)		298,043
Loss before income taxes		(42,623	)		(7,795	)		9,032			(41,386	)
(Benefit)/provision for income taxes		(2,931	)		1,237			–			(1,694	)
Net loss	$	(39,692	)	$	(9,032	)	$	9,032		$	(39,692	)
Other comprehensive income:
Pension liability reclassification		355			–			–			355
Total comprehensive loss	$	(39,337	)	$	(9,032	)	$	9,032		$	(39,337	)

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Condensed Consolidating Statement of Operations and

Comprehensive Loss

For the Thirteen Weeks Ended September 1, 2015

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	201,416		$	76,491		$	–		$	277,907
Franchise revenue		15			1,558			–			1,573
Total revenue		201,431			78,049			–			279,480
Operating costs and expenses:
Cost of goods sold		55,228			21,013			–			76,241
Payroll and related costs		67,341			27,994			–			95,335
Other restaurant operating costs		45,202			17,005			–			62,207
Depreciation and amortization		9,127			3,679			–			12,806
Selling, general, and administrative		20,589			8,807			–			29,396
Intercompany selling, general, and
administrative allocations		11,126			(11,126	)		–			–
Closures and impairments, net		2,589			123			–			2,712
Equity in earnings of subsidiaries		(11,966	)		–			11,966			–
Interest expense, net		4,598			1,402			–			6,000
Intercompany interest expense/(income)		2,975			(2,975	)		–			–
Total operating costs and expenses		206,809			65,922			11,966			284,697
(Loss)/income before income taxes		(5,378	)		12,127			(11,966	)		(5,217	)
(Benefit)/provision for income taxes		(1,184	)		161			–			(1,023	)
Net (loss)/income	$	(4,194	)	$	11,966		$	(11,966	)	$	(4,194	)
Other comprehensive loss:
Pension liability reclassification, net of tax		(44	)		–			–			(44	)
Total comprehensive (loss)/income	$	(4,238	)	$	11,966		$	(11,966	)	$	(4,238	)

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Condensed Consolidating Statement of Cash Flows

For the Thirteen Weeks Ended August 30, 2016

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Net cash provided by operating activities	$	4,204		$	9,280		$	(11,877	)	$	1,607
Investing activities:
Purchases of property and equipment		(4,992	)		(1,366	)		–			(6,358	)
Proceeds from disposal of assets		5,257			–			–			5,257
Other, net		1,322			–			–			1,322
Net cash provided/(used) by investing activities		1,587			(1,366	)		–			221
Financing activities:
Principal payments on long-term debt		11			(486	)		–			(475	)
Stock repurchases		(26	)		–			–			(26	)
Payments for debt issuance costs		(7	)		–			–			(7	)
Intercompany dividend		–			(7,415	)		7,415			–
Other intercompany transactions		(4,462	)		–			4,462			–
Net cash used by financing activities		(4,484	)		(7,901	)		11,877			(508	)
Increase in cash and cash equivalents		1,307			13			–			1,320
Cash and cash equivalents:
Beginning of fiscal year		67,208			133			–			67,341
End of quarter	$	68,515		$	146		$	–		$	68,661

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Consolidating Statement of Cash Flows

For the Thirteen Weeks Ended September 1, 2015

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Net cash (used)/provided by operating activities	$	(6,213	)	$	22,659		$	(18,917	)	$	(2,471	)
Investing activities:
Purchases of property and equipment		(7,138	)		(2,804	)		–			(9,942	)
Proceeds from disposal of assets		2,746			–			–			2,746
Other, net		209			–			–			209
Net cash used by investing activities		(4,183	)		(2,804	)		–			(6,987	)
Financing activities:
Principal payments on long-term debt		11			(8,912	)		–			(8,901	)
Stock repurchases		(9	)		–			–			(9	)
Payments for debt issuance costs		(25	)		–			–			(25	)
Intercompany dividend		–			(10,946	)		10,946			–
Other intercompany transactions		(7,971	)		–			7,971			–
Net cash used by financing activities		(7,994	)		(19,858	)		18,917			(8,935	)
Decrease in cash and cash equivalents		(18,390	)		(3	)		–			(18,393	)
Cash and cash equivalents:
Beginning of fiscal year		75,034			297			–			75,331
End of quarter	$	56,644		$	294		$	–		$	56,938

14. Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, and interim periods therein (our fiscal year 2020). Early application is permitted. We are currently evaluating the impact of this guidance on our Condensed Consolidated Financial Statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosures in certain circumstances. The guidance is effective for annual periods ending after December 15, 2016, and for interim periods within annual periods beginning thereafter (our fiscal year 2017). We do not believe the adoption of this guidance will have an impact on our Condensed Consolidated Financial Statements.

In May 2014, the FASB and International Accounting Standards Board jointly issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 will replace almost all existing revenue recognition guidance, including industry specific guidance, upon its effective date. The standard’s core principle is for a company to recognize revenue when it transfers goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled. A company may also need to use more judgment and make more estimates when recognizing revenue, which could result in additional disclosures. ASU 2014-09 also provides guidance for transactions that were not addressed comprehensively in previous guidance, such as the recognition of breakage income from the sale of gift cards. The standard permits the use of either the retrospective or cumulative effect transition method. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 (our fiscal year 2019). Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We do not expect the adoption of this guidance to impact our recognition of Company-owned restaurants sales and operating revenue or our recognition of continuing fees from franchisees, which are based on a percentage of franchise sales. We have not yet selected a transition method and are continuing to evaluate the impact of this guidance on our less significant revenue transactions, such as initial franchise license fees.

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15. Subsequent Events

On September 13, 2016, James J. Buettgen resigned as Chairman of the Board of Directors, President, and Chief Executive Officer of the Company. On the same date, F. Lane Cardwell, Jr., a member of the Company’s Board of Directors since October 2012 and an executive with approximately 38 years of leadership experience in the restaurant industry, was appointed Interim President and Chief Executive Officer, Stephen I. Sadove, the Company’s then Lead Director, was appointed Chairman of the Board and Sue Briley was appointed Chief Financial Officer. Ms. Briley had been serving as Interim Chief Financial Officer since June 2016.

On September 22, 2016, we announced that we had entered into an agreement to sell for $2.8 million one of two office buildings comprising our Restaurant Support Center in Maryville, Tennessee. The building being sold had an August 30, 2016 net book value of $6.0 million. We also announced that we will consolidate our two Tennessee Restaurant Support Center office buildings into the one remaining building by January 2017.

As previously mentioned in Note 7 to the Condensed Consolidated Financial Statements, we had a liability for future lease obligations of $31.9 million as of August 30, 2016.  Since then and through the date of this filing, we settled seven of these leases for $3.1 million, which approximated the amount of our accrual for those leases at August 30, 2016.

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  Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations

The discussion and analysis below for the Company should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the notes to such financial statements included elsewhere in this Quarterly Report on Form 10-Q. The discussion below contains forward-looking statements which should be read in conjunction with the “Special Note Regarding Forward-Looking Information” included elsewhere in this Quarterly Report on Form 10-Q.

Introduction

Ruby Tuesday, Inc., including its wholly-owned subsidiaries (“RTI,” the “Company,” “we” and/or “our”), owns and operates Ruby Tuesday® casual dining restaurants. We also franchise the Ruby Tuesday concept in select domestic and international markets. As of August 30, 2016, we owned and operated 547, and franchised 68, Ruby Tuesday restaurants. Ruby Tuesday restaurants can be found in 42 states, 14 foreign countries, and Guam.

On August 11, 2016, following a comprehensive review of the Company’s property portfolio and in conjunction with the launch of a Fresh Start initiative as discussed below, we announced a plan to close 95 Company-owned restaurants with perceived limited upside due to market concentration, challenged trade areas, and other factors. The plan was designed to streamline the organization through asset rationalization, improve financial profitability, and ultimately create long-term value for shareholders. All of the identified restaurants were closed prior to August 30, 2016.

In an effort to focus on our core Ruby Tuesday concept, during the second quarter of fiscal year 2016 we entered into an agreement to sell our eight remaining Company-owned Lime Fresh Mexican Grill® (“Lime Fresh”) restaurants, six of which we closed and transferred to the buyer during fiscal year 2016. During the first quarter of fiscal year 2017, we completed the closure and transfer of one of the two remaining Lime Fresh restaurants.

Overview and Strategies

The bar and grill segment of the casual dining industry in which we primarily operate is intensely competitive with respect to prices, services, convenience, locations, employees, advertising and promotion, and the types and quality of food. We compete with other food service operations, including locally-owned restaurants, and other national and regional restaurant chains that offer similar types of services and products as we do. We continue to believe there are opportunities to grow our same-restaurant sales, strengthen our competitive position, enhance our profitability, and create value through the execution of the following strategies:

Enhancing Our Business Model

Over the past few fiscal years, we have developed strategies to reduce our overall cost structure in the areas of cost of goods sold, payroll and related costs, and selling, general, and administrative expenses. In April 2014, we implemented a new labor management system to facilitate more efficient staffing that we expect will precipitate lower labor costs. We have also implemented enhanced business processes and capabilities, such as an inventory/food waste management system that we expect should benefit our business model by reducing food waste and manager time on inventory management leading to a better customer experience and improved profitability.

Launch of Fresh Start Initiative

In August 2016, we announced the launch of our Fresh Start initiative which is intended to streamline our organization, improve financial profitability and ultimately create long-term value for our shareholders. The Fresh Start initiative was developed to drive more significant topline growth and profitability over time by re-engaging with more women and young families, which we believe represents the largest opportunity for incremental sales growth. The key components of the Fresh Start initiative will be rolled out in phases across multiple markets and include:

● The Asset Rationalization Plan which involved a comprehensive unit-level review and analysis of the sales, cash flows and other key performance metrics of our corporate-owned restaurant properties, as well as site location, market positioning and lease status. Based upon our findings, we concluded that it was in the Company's and our shareholders' best interest to close 95 underperforming restaurants. These 95 restaurants, along with four restaurants closed prior to the announcement of the plan, were closed during the first quarter of fiscal year 2017.

● A Fresh New Menu which is intended to provide culinary innovation and value to our guests while simplifying recipes and procedures for our kitchen. As consumer preference continues to migrate toward healthier food options, we are seeking to make meaningful improvements in our core menu that will incorporate hand-crafted American favorites but will contain more lean proteins and fresh vegetables.

● A Fresh New Garden Bar which we are restaging and optimizing to offer over 50 items in order to provide the most desirable offering in a cost effective way. The Garden Bar is a key brand differentiator that sets us apart from our competition and is the most important item on our menu. Approximately half our guests utilize the Garden Bar when they dine with us, either as an add-on or as a main course.

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● A Fresh New Experience which is focused on revitalizing our brand through improving our service and overall guest experience. As part of our work in this area, we are further testing remodels. Following the outcome of our restaurant portfolio review, we have prioritized those locations that warrant a remodel and the appropriate investment level based on the revenue potential. Additionally, we are working with our teams at the restaurant level with service initiatives to improve the pace of meals and attentiveness, particularly through menu simplification.

Strengthen our Balance Sheet to Facilitate Growth and Value Creation

Our priority for the use of cash is to drive shareholder value. Our objective is to continue to maintain adequate cash levels to support business needs, while investing in key components of our Fresh Start initiatives. In fiscal year 2017, as a result of our Asset Rationalization Plan, we expect fluctuations in cash balances as we hope to generate cash through the sale of surplus properties while using cash to settle leases for closed restaurants. Additionally, from time to time, we will consider other options for cash such as reducing outstanding debt levels and share repurchases within the limitations of our debt covenants. Our success in the key strategic initiatives outlined above should enable us to improve both our returns on assets and equity and create additional shareholder value.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make subjective or complex judgments that may affect the reported financial condition and results of operations. We base our estimates on historical experience and other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We continually evaluate the information used to make these estimates as our business and the economic environment changes.

Results of Operations

The following is an overview of our results of operations for the 13 weeks ended August 30, 2016:

Net loss was $39.7 million for the 13 weeks ended August 30, 2016 compared to $4.2 million for the corresponding period of the previous fiscal year. Diluted loss per share for the 13 weeks ended August 30, 2016 was $0.66 compared to $0.07 for the corresponding period of the prior fiscal year as a result of an increase in net loss as discussed later within this MD&A.

During the 13 weeks ended August 30, 2016:

● Same-restaurant sales* at Company-owned Ruby Tuesday restaurants decreased 2.7% compared to the corresponding period of the prior fiscal year, while same-restaurant sales at domestic franchise Ruby Tuesday restaurants increased 0.5%;

● 95 Company-owned Ruby Tuesday restaurants were closed in connection with our Fresh Start initiative, which resulted in additional closed restaurant lease reserves, inventory write-off, severance benefits, and other closing expense of $24.7 million;

● Four other Company-owned Ruby Tuesday restaurants were closed as expected at, or near, lease expiration;

● One franchised Ruby Tuesday restaurant was opened and 11 were closed; and

● One Company-owned Lime Fresh restaurant was closed.

* We define same-restaurant sales as a year-over-year comparison of sales volumes for restaurants that, in the current year have been open at least 18 months, in order to remove the impact of new openings in comparing the operations of existing restaurants.

Additionally, on September 13, 2016, James J. Buettgen resigned as Chairman of the Board of Directors, President, and Chief Executive Officer of the Company. On the same date, F. Lane Cardwell, Jr., a member of the Company’s Board of Directors since October 2012 and an executive with approximately 38 years of leadership experience in the restaurant industry, was appointed Interim President and Chief Executive Officer, Stephen I. Sadove, the Company’s then Lead Director, was appointed Chairman of the Board, and Sue Briley, who had been serving as interim Chief Financial Officer since June 2016, was appointed Chief Financial Officer.

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Operating Profit

The following table sets forth selected restaurant operating data as a percentage of restaurant sales and operating revenue or total revenue, as appropriate, for the periods indicated. All information is derived from our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

	Thirteen weeks ended
		August 30, 2016		September 1, 2015
Restaurant sales and operating revenue		99.7	%	99.4	%
Franchise revenue		0.3		0.6
Total revenue		100.0		100.0
Operating costs and expenses:
Cost of goods sold (1)		28.2		27.4
Payroll and related costs (1)		35.4		34.3
Other restaurant operating costs (1)		22.4		22.4
Depreciation and amortization (1)		4.4		4.6
Selling, general, and administrative, net		12.3		10.5
Closures and impairments, net		11.8		1.0
Interest expense, net		1.9		2.1
Total operating costs and expenses		116.1		101.9
Loss before income taxes		(16.1	)	(1.9	)
Benefit for income taxes		(0.7	)	(0.4	)
Net loss		(15.5	)%	(1.5	)%

(1)     As a percentage of restaurant sales and operating revenue.

The following table shows Company-owned Ruby Tuesday and Lime Fresh concept restaurant activity for the 13-week periods ended August 30, 2016 and September 1, 2015.

	Ruby Tuesday		Lime Fresh		Total
13 weeks ended August 30, 2016
Beginning number	646		2		648
Closed	(99	)	(1	)	(100)
Ending number	547		1		548
13 weeks ended September 1, 2015
Beginning number	658		19		677
Closed	(2	)	–		(2)
Ending number	656		19		675

The following table shows franchised Ruby Tuesday concept restaurant activity for the 13-week periods ended August 30, 2016 and September 1, 2015.

13 weeks ended August 30, 2016
Beginning number	78
Opened	1
Closed	(11)
Ending number	68
13 weeks ended September 1, 2015
Beginning number	78
Opened	2
Closed	(2)
Ending number	78

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Revenue 

Restaurant sales and operating revenue for the 13 weeks ended August 30, 2016 decreased 8.0% to $255.8 million compared to the corresponding period of the prior fiscal year. This decrease is primarily a result of restaurant closings since the corresponding period of the prior fiscal year coupled with a 2.7% decrease in same-restaurant sales at Company-owned Ruby Tuesday restaurants. The decrease in Ruby Tuesday concept same-restaurant sales is attributable to a 3.1% decrease in customer traffic offset by a 0.3% increase in net check.

Franchise revenue for the 13 weeks ended August 30, 2016 decreased 43.2% to $0.9 million compared to the corresponding period of the prior fiscal year. Franchise revenue is predominantly comprised of domestic and international royalties, which totaled $0.9 million and $1.6 million for the 13 weeks ended August 30, 2016 and September 1, 2015, respectively. The decrease compared to the corresponding period of the prior fiscal year is primarily the result of the closure of ten restaurants by one of our domestic franchisees, the sale of our Lime Fresh franchising rights, and the royalty fee payment default of one of our international franchisees since the corresponding period of the prior fiscal year.     

Pre-tax Loss

Pre-tax loss increased $36.2 million to $41.4 million for the 13 weeks ended August 30, 2016 compared to the corresponding period of the prior fiscal year. The increase in pre-tax loss is due primarily to higher closures and impairments expense ($27.5 million), a decrease in same-restaurant sales of 2.7% at Company-owned Ruby Tuesday restaurants, and an increase, as a percentage of restaurant sales and operating revenue or total revenue, as appropriate, of costs of goods sold, payroll and related costs, and selling, general, and administrative, net. These were partially offset by a decrease in interest expense, net ($1.1 million) and a decrease, as a percentage of restaurant sales and operating revenue, of depreciation and amortization.

In the paragraphs that follow, we discuss in more detail the components of the changes in pre-tax loss for the 13 weeks ended August 30, 2016 compared to the corresponding period of the prior fiscal year. Because a significant portion of the costs recorded in the cost of goods sold, payroll and related costs, other restaurant operating costs, and depreciation categories are either variable or highly correlate with the number of restaurants we operate, we evaluate our trends by comparing the costs as a percentage of restaurant sales and operating revenue, as well as the absolute dollar change, to the comparable prior fiscal year period.

Cost of Goods Sold
Cost of goods sold decreased $4.1 million (5.3%) to $72.2 million for the 13 weeks ended August 30, 2016, compared to the corresponding period of the prior fiscal year. As a percentage of restaurant sales and operating revenue, cost of goods sold increased from 27.4% to 28.2%.

The absolute dollar decrease in cost of goods sold for the 13 weeks ended August 30, 2016 was primarily the result of restaurant closures and a decline in same-restaurant sales, which were offset by price increases on certain commodity items since the corresponding period of the prior fiscal year coupled with a shift in menu mix associated with promotional activity offset by cost savings from our inventory management system.

As a percentage of restaurant sales and operating revenue, the increase in cost of goods sold for the 13 weeks ended August 30, 2016 is primarily the result of price increases on certain commodity items and a shift in menu mix associated with menu changes and promotional activity since the corresponding period of the prior fiscal year as discussed above.

Payroll and Related Costs
Payroll and related costs decreased $4.7 million (5.0%) to $90.6 million for the 13 weeks ended August 30, 2016 compared to the corresponding period of the prior fiscal year. As a percentage of restaurant sales and operating revenue, payroll and related costs increased from 34.3% to 35.4%.

The absolute dollar decrease in payroll and related costs for the 13 weeks ended August 30, 2016 was primarily due to restaurant closures, reductions in overtime as a result of scheduling improvements, decreased management labor costs, and lower health insurance due to favorable claims experience since the corresponding period of the prior fiscal year. These reductions were partially offset by wage inflation and higher workers’ compensation costs due to unfavorable claims experience.

As a percentage of restaurant sales and operating revenue, the increase in payroll and related costs for the 13 weeks ended August 30, 2016 is primarily the result of wage inflation and loss of leveraging associated with lower sales volumes.

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Other Restaurant Operating Costs
Other restaurant operating costs decreased $4.8 million (7.8%) to $57.4 million for the 13 weeks ended August 30, 2016 compared to the corresponding period of the prior fiscal year. As a percentage of restaurant sales and operating revenue, other restaurant operating costs was consistent with the corresponding period of the prior fiscal year at 22.4% as lower costs as discussed below were offset by a loss of leveraging associated with lower sales volumes.

For the 13 weeks ended August 30, 2016, the decrease in other restaurant operating costs related to the following (in thousands):

Rent and leasing	$	1,731
Repairs		1,323
Utilities		924
Other decreases, net		866
Net decrease	$	4,844

The absolute dollar decrease in other restaurant operating costs for the 13 weeks ended August 30, 2016 was a result of lower rent and leasing, building repairs, and utilities, due in part to restaurant closures since the corresponding period of the prior fiscal year.

Depreciation and Amortization
Depreciation and amortization expense decreased $1.6 million (12.3%) to $11.2 million for the 13 weeks ended August 30, 2016 compared to the corresponding period of the prior fiscal year. As a percentage of restaurant sales and operating revenue, depreciation expense decreased from 4.6% to 4.4%.

The absolute dollar decrease in depreciation and amortization for the 13 weeks ended August 30, 2016 is the result of assets that became fully depreciated or were impaired since the corresponding period of the prior fiscal year due primarily to restaurant closures.

Selling, General, and Administrative Expenses, Net
Selling, general, and administrative expenses, net increased $2.2 million (7.4%) to $31.6 million for the 13 weeks ended August 30, 2016 compared to the corresponding period of the prior fiscal year.

The increase for the 13 weeks ended August 30, 2016 is due to higher advertising ($2.0 million) and general and administrative costs ($0.2 million). The increase in advertising is primarily a result of higher internet, direct mail, and other promotional advertising costs offset by decreases in television, magazine, and newspaper advertising. The increase in general and administrative costs is primarily due to higher share-based compensation expense as a result of a forfeiture credit in the corresponding period of the prior fiscal year, a higher accrual for executive bonus, and increased severance and other costs. These were partially offset by higher earnings from company-owned life insurance policies, coupled with lower employee pension-related costs and travel expenses.

Closures and Impairments, Net

Closures and impairments, net increased $27.5 million to $30.2 million for the 13 weeks ended August 30, 2016, as compared to the corresponding period of the prior fiscal year. The $27.5 million increase is primarily due to higher closed restaurant lease reserve expense ($17.1 million), inventory write-off, severance benefits, and other closing costs ($5.8 million), and property impairment charges ($4.0 million), coupled with lower gains on the sale of surplus properties ($0.6 million).

As previously discussed in Note 7 to the Condensed Consolidated Financial Statements, during the 13 weeks ended August 30, 2016, we closed 99 Company-owned restaurants, 95 of which were closed in connection with an asset rationalization plan announced on August 11, 2016. The plan was formulated in response to a comprehensive review of our property portfolio through the planned closure of restaurants with perceived limited upside due to market concentration, challenged trade areas, or other factors. Included within Closures and impairments, net for the 13 weeks ended August 30, 2016 are closed restaurant lease reserves, inventory write-off, severance benefits, and other closing expense of $24.7 million related to these closures.   

See Note 7 to the Condensed Consolidated Financial Statements for further information on our closures and impairment charges recorded during the 13 weeks ended August 30, 2016 and September 1, 2015.

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Within our impairment analysis for the 13-week period ended August 30, 2016, we had 22 restaurants that had been open for more than six full quarters with rolling 12-month negative cash flows of which 12 have been impaired to salvage value. Of the remaining 10 restaurants, we reviewed the plans to improve cash flows and determined that no impairments were necessary. The remaining net book value of the 10 restaurants, none of which are located on owned properties, was $4.3 million at August 30, 2016.

Should cash flows at these cash flow negative restaurants not improve within a reasonable period of time, further impairment charges may occur. Considerable management judgment is necessary to estimate future cash flows, including cash flows from continuing use, terminal value, closure costs, salvage value, and sublease income. Accordingly, actual results could vary significantly from quarter to quarter and from our estimates.

Interest Expense, Net
Interest expense, net decreased $1.1 million to $4.9 million for the 13 weeks ended August 30, 2016, as compared to the corresponding period of the prior fiscal year, primarily due to the early payoff of certain mortgage loans and repurchases of our Senior Notes during the prior fiscal year. 

Benefit for Income Taxes

We recorded a tax benefit of $1.7 million and $1.0 million for the 13 weeks ended August 30, 2016 and September 1, 2015, respectively. Netted against our tax benefit was a charge of $16.3 million representing the amount reserved for the increase in deferred tax assets during the quarter which primarily related to general business credit carryforwards and federal and state net operating loss carryforwards.

We regularly evaluate the need for a valuation allowance for deferred tax assets by assessing whether it is more likely than not that we will realize the deferred tax assets in the future.  A valuation allowance assessment is performed each reporting period, with any additions or adjustments reflected in earnings in the period of assessment.  In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets for each jurisdiction.

Under ASC 740, we are required to assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. In making such judgments, significant weight is given to evidence that can be objectively verified. As a result of, among other charges, closures and impairments, we currently reflect a three-year cumulative pre-tax loss. A cumulative pre-tax loss is given more weight than projections of future income, and a recent historical cumulative loss is considered a significant factor that is difficult to overcome. Our valuation allowance for deferred tax assets totaled $106.2 million and $89.9 million as of August 30, 2016 and May 31, 2016, respectively. Before consideration of the valuation allowance expense, we had an income tax benefit of $18.0 million and $3.6 million, including the tax credits, during the 13 weeks ended August 30, 2016 and September 1, 2015, respectively.

Liquidity and Capital Resources

Sources and Uses of Cash

Our primary source of liquidity is cash provided by operations. The following table presents a summary of our cash flows from operating, investing, and financing activities for the first 13 weeks of fiscal years 2017 and 2016 (in thousands).

	Thirteen weeks ended
		August 30, 2016			September 1, 2015
Net cash provided/(used) by operating activities		$	1,607		$	(2,471	)
Net cash provided/(used) by investing activities			221			(6,987	)
Net cash used by financing activities			(508	)		(8,935	)
Net increase/(decrease) in cash and cash equivalents		$	1,320		$	(18,393	)

Operating Activities

Our cash provided by operations is generally derived from cash receipts generated by our restaurant customers and franchisees.  Substantially all of the $255.8 million and $277.9 million of restaurant sales and operating revenue disclosed in our Condensed Consolidated Statements of Operations and Comprehensive Loss for the 13 weeks ended August 30, 2016 and September 1, 2015, respectively, was received in cash either at the point of sale or within two to four days (when our customers paid with debit or credit cards).  Our primary uses of cash for operating activities are food and beverage purchases, payroll and benefit costs, restaurant operating costs, general and administrative expenses, and marketing, a significant portion of which are incurred and paid in the same period.

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Cash provided by operating activities for the 13 weeks ended August 30, 2016 was $1.6 million as compared to cash used from operating activities of $2.5 million for the corresponding period of the prior fiscal year. The change is primarily the result of decreases in amounts spent to acquire inventory (approximately $2.8 million), lower cash paid for taxes ($1.8 million), lower cash paid for interest ($1.2 million) due to the prepayment of certain of our mortgage obligations and other principal payments on our debt since the corresponding period of the prior fiscal year, and a decrease in amounts spent on media advertising (approximately $0.2 million). These were partially offset by lower Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) for reasons previously discussed within this MD&A.

Our working capital deficiency and current ratio as of August 30, 2016 were $2.3 million and 1.0:1, respectively. As is typical in the restaurant industry, we typically carry current liabilities in excess of current assets because cash (a current asset) generated from operating activities is reinvested in capital expenditures (a long-term asset), debt reduction (a long-term liability), or stock repurchases (thereby reducing equity), and receivable and inventory levels are generally not significant.

Investing Activities

We require capital principally for the maintenance, upkeep, and remodeling of our existing restaurants, limited new restaurant construction, investments in technology, equipment, and on occasion for the acquisition of franchisees or other restaurant concepts. Property and equipment expenditures purchased primarily with cash on hand and/or internally-generated cash flows for the 13 weeks ended August 30, 2016 and September 1, 2015 were $6.4 million and $9.9 million, respectively. In addition, proceeds from the disposal of assets produced $5.3 million and $2.7 million of cash during the 13 weeks ended August 30, 2016 and September 1, 2015, respectively.

We intend to fund our future investing activities with cash on hand, cash provided by operations, proceeds from the sale of surplus properties, or borrowings on the Senior Credit Facility.

Financing Activities

Historically our primary sources of cash have been operating activities, coupled with sale-leaseback transactions and sales of surplus properties. When these alone have not provided sufficient funds for both our capital and other needs, we have obtained funds through the incurrence of indebtedness or through the issuance of additional shares of common stock.

Our current borrowings and credit facilities include $212.5 million outstanding principal of 7.625% senior notes due 2020 (the “Senior Notes”), a four year revolving credit agreement (the “Senior Credit Facility”) under which we may borrow up to $50.0 million, and $15.3 million of mortgage loan obligations acquired upon franchise acquisitions. See Note 6 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for key terms and further information on our Senior Notes, Senior Credit Facility, and mortgage loan obligations.

Significant Contractual Obligations and Commercial Commitments
There were no material changes to our significant contractual obligations and commercial commitments during the 13 weeks ended August 30, 2016 as compared to the amounts reported in the prior reporting period.

Recently Issued Accounting Pronouncements

Information regarding accounting pronouncements not yet adopted is incorporated by reference from Note 13 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Known Events, Uncertainties, and Trends

Resignation of Chief Executive Officer

On September 13, 2016, James J. Buettgen resigned as Chairman of the Board of Directors, President, and Chief Executive Officer of the Company. On the same date, F. Lane Cardwell, Jr., a member of the Company’s Board of Directors since October 2012 and an executive with approximately 38 years of leadership experience in the restaurant industry, was appointed Interim President and Chief Executive Officer, Stephen I. Sadove, the Company’s then Lead Director, was appointed Chairman of the Board, and Sue Briley was appointed Chief Financial Officer. Ms. Briley had been serving as Interim Chief Financial Officer since June 2016.

Sale of Property

On September 22, 2016, we announced that we had entered into an agreement to sell for $2.8 million one of two office buildings comprising our Restaurant Support Center in Maryville, Tennessee.  The completion of the transaction is targeted for October 2016, subject to customary closing conditions.  The building being sold had an August 30, 2016 net book value of $6.0 million.  Accordingly, we expect to record a second quarter fiscal year 2017 impairment charge of approximately $3.2 million related to this property.  We also announced that we will consolidate our two Tennessee Restaurant Support Center office buildings into the one remaining building by January 2017.

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Impact on Cash from Sale of Surplus Properties and Lease Settlements

As further discussed in Note 5 to the Condensed Consolidated Financial Statements, as of August 30, 2016 we had surplus properties classified as assets held for sale of $11.8 million and surplus properties of $37.3 million not classified as held for sale as we had yet to conclude for accounting purposes that we can sell these assets within 12 months of the balance sheet date.  Additionally, as discussed in Note 7 to the Condensed Consolidated Financial Statements, as of August 30, 2016 we had a liability for future lease obligations of $31.9 million. While we settled seven of these leases for $3.1 million since August 30, 2016, the amounts of future settlements could be higher or lower than the amounts recorded, and the actual amount of any cash payments made by the Company for lease contract termination costs will be dependent upon ongoing negotiations with the landlords of the leased properties. During the remainder of fiscal year 2017, we expect fluctuations in our cash balances as we hope to generate cash through the sale of surplus properties while using cash to settle closed restaurant lease obligations.

Financial Strategy and Stock Repurchase Plan

Cash and cash equivalents as of August 30, 2016 were $68.7 million. Our overall goal is to invest in our brand and to strengthen our balance sheet to improve credit metrics. As such, our first priority is to ensure that we have adequate cash levels to run the business and internally fund our capital expenditures. Our second priority is to reduce our outstanding debt to help improve our credit metrics with the goal of improved flexibility and access to capital at reasonable rates. Lastly, we would consider share repurchases within the limitations of our debt covenants to return capital to shareholders. As of August 30, 2016, the total number of remaining shares authorized to be repurchased was 9.9 million. Any of these actions, in any particular period and the actual amount thereof, remain at the discretion of the Board of Directors, and no assurance can be given that any such actions will be taken in the future.

Repurchases of Senior Notes

We are allowed under the terms of the Senior Credit Facility to repurchase, in any fiscal year, up to $20.0 million of indebtedness to various holders of the Senior Notes. We did not repurchase any of the Senior Notes during the 13 weeks ended August 30, 2016. As of the date of this filing, we may repurchase $20.0 million of the Senior Notes during the remainder of fiscal year 2017. Future repurchases of the Senior Notes, if any, will be funded with available cash on hand.

Dividends

During fiscal 1997, our Board of Directors approved a dividend policy as an additional means of returning capital to our shareholders. No dividends were declared or paid during the 13 weeks ended August 30, 2016 or September 1, 2015. The payment of a dividend in any particular period and the actual amount thereof remain at the discretion of the Board of Directors, and no assurance can be given that dividends will be paid in the future.

Impact of Inflation
The impact of inflation on the cost of food, labor, supplies, utilities, real estate, and construction costs could adversely impact our operating results. Historically, we have been able to recover certain inflationary cost increases through increased menu prices coupled with more efficient purchasing practices and productivity improvements. Competitive pressures may limit our ability to completely recover such cost increases. Historically, the effect of inflation has not significantly impacted our net income.

Item 3. Quantitative and Qualitative

Disclosure About Market Risk

There were no material changes during the 13 weeks ended August 30, 2016 to the disclosures made in Item 7A of our Form 10-K for the fiscal year ended May 31, 2016.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and under the supervision of the Interim Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management

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necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation, the Interim Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of August 30, 2016.

Changes in Internal Control

During the fiscal quarter ended August 30, 2016, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II – Other Information

Item 1. Legal Proceedings

We are presently, and from time to time, subject to pending claims and lawsuits arising in the ordinary course of business, including claims relating to injury or wrongful death under “dram shop” laws, workers’ compensation and employment matters, claims relating to lease and contractual obligations, and claims from customers alleging illness or injury. We provide accruals for such claims when payment is probable and estimable in accordance with U.S. generally accepted accounting principles. At this time, in the opinion of management, the ultimate resolution of pending legal proceedings will not have a material adverse effect on our consolidated results of operations, financial position, or cash flows.

Item 1A. Risk Factors

Information regarding risk factors appears in our Annual Report on Form 10-K for the year ended May 31, 2016 in Part I, Item 1A. Risk Factors. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table includes information regarding purchases of our common stock made by us during the fiscal quarter ended August 30, 2016:

	(a)	(b)	(c)	(d)
	Total number	Average	Total number of shares	Maximum number of shares
	of shares	price paid	purchased as part of publicly	that may yet be purchased
Period	purchased (1)	per share	announced plans or programs (1)	under the plans or programs (2)
June 1 to July 5	6,525	$ 3.92	6,525	9,884,829
July 6 to August 2	–	–	–	9,884,829
August 3 to August 30	–	–	–	9,884,829
Total	6,525	$ 3.92	6,525

(1) No shares were repurchased other than through our publicly-announced repurchase programs and authorizations during the first fiscal quarter ended August 30, 2016.

(2) As of August 30, 2016, 9.9 million shares remained available for purchase under an existing January 8, 2013 authorization by the Board of Directors to repurchase 10.0 million shares. The timing, price, quantity, and manner of the purchases to be made are at the discretion of management upon instruction from the Board of Directors, depending upon market conditions.  The repurchase of shares in any particular future period and the actual amount thereof remain at the discretion of the Board of Directors, and no assurance can be given that shares will be repurchased in the future.

 Item 3. Defaults Upon Senior Securities

None. 

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  Item 4. Mine Safety Disclosures

Not Applicable.

 Item 5. Other Information

On October 4, 2016, Franklin E. Southall, Jr., the Company's Corporate Controller and Principal Accounting Officer, announced his intention to retire from the Company effective December 16, 2016.

Item 6. Exhibit Index

The following exhibits are filed as part of this report:

Exhibit Number	Description of Exhibit
10.1	First Amendment, dated as of October 5, 2016, to the Ruby Tuesday, Inc. Stock Incentive Plan.
10.2	Second Amendment, dated as of October 5, 2016, to the restated Ruby Tuesday, Inc. 1996 Stock Incentive Plan.
10.3	Form of Non-Qualified Stock Option Award.
10.4	Form of Service-Based Restricted Stock Unit Award.
10.5	Form of Performance Stock Unit Award.
10.6	Form of Service-Based Phantom Stock Unit Award.
12.1	Computation of Ratio of Consolidated Earnings to Fixed Charges.
31.1	Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Schema Document.
101.CAL	XBRL Calculation Linkbase Document.
101.DEF	XBRL Definition Linkbase Document.
101.LAB	XBRL Labels Linkbase Document.
101.PRE	XBRL Presentation Linkbase Document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Name	Position	Date
/s/ Sue Briley Sue Briley	Chief Financial Officer (Principal Financial Officer)	Date: October 7, 2016
/s/ Franklin E. Southall, Jr. Franklin E. Southall, Jr.	Vice President, Corporate Controller (Principal Accounting Officer)	Date: October 7, 2016

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EX-10.1

FIRST AMENDMENT TO THE

RUBY TUESDAY, INC. STOCK INCENTIVE PLAN

THIS FIRST AMENDMENT is made this 5th day of October, 2016, by Ruby Tuesday, Inc., a corporation organized and existing under the laws of the State of Georgia (hereinafter called the “Company”).

WHEREAS, the Company maintains the Ruby Tuesday, Inc. Stock Incentive Plan (the “Plan”), as approved by the Company’s shareholders at the October 2015 Annual Meeting;

WHEREAS, the Company wishes to amend the Plan to modify certain definitions to align them with corresponding definitions in certain of the Company’s other compensatory arrangements;

WHEREAS, this First Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this amendment.

NOW, THEREFORE, the Company does hereby amend the Plan, as follows:

1.     By deleting Section 1.1(b) in its entirety and by substituting therefor the following:

(b)     “Cause” shall mean: (i) fraud or dishonesty in the performance of Participant’s duties with the Company or its affiliates; (ii) willful misconduct; (iii) any intentional, willful and material failure of Participant to perform his or her employment duties (other than any such failure resulting from Participant's Disability) for thirty (30) days after the Board of Directors delivers a written demand for performance to Participant that specifically identifies the manner in which the Board of Directors believes that Participant has not substantially performed his or her employment duties; (iv) conduct in material violation of the Company’s Code of Business Conduct and Ethics; (v) conviction or plea of guilty or nolo contendere to a felony; or (vi) material breach or violation of the terms of any agreement to which Participant and the Company (or any affiliate) are party. For purposes of this paragraph, no act or failure to act on the part of Participant shall be considered "intentional "or "willful" unless it is done, or omitted to be done, by Participant in bad faith and without reasonable belief that Participant's act or omission was in the best interests of the Company and its affiliates, and any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board of Directors or advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Participant in good faith and in the best interests of the Company and its affiliates.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

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2.     By adding the following new paragraph after subsection (v) of Section 1.1(c):

Notwithstanding anything in this Plan to the contrary, to the extent any provision of this Plan or a Stock Incentive would cause a payment or benefit not exempt from the requirements of Code Section 409A to be made because of the occurrence of a Change in Control, then such payment or benefit shall not be made unless such Change in Control also constitutes a “change in ownership”, “change in effective control” or “change in ownership of a substantial portion of the Company’s assets” within the meaning of Code Section 409A. Any payment that would have been made except for the application of the preceding sentence shall be made in accordance with the payment schedule that would have applied in the absence of a Change in Control (and other Participant rights that are tied to a Change in Control shall not be affected by this paragraph).

These amendments to Sections 1.1 shall be effective with respect to Stock Incentives granted on or after the date first set forth above.

IN WITNESS WHEREOF, the Company has caused this First Amendment to be executed on the day and year first above written.

RUBY TUESDAY, INC.

                  By:     /s/ F. Lane Cardwell, Jr. 

                  Title:  Interim President & Chief Executive Officer 

Attest:/s/ Rhonda Parish

By:     Rhonda Parish                    

Title:  Chief Legal Officer & Secretary     

[CORPORATE SEAL]

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EX-10.2

SECOND AMENDMENT TO THE RESTATED (SEPTEMBER 30, 1999)

RUBY TUESDAY, INC. 1996 STOCK INCENTIVE PLAN

THIS SECOND AMENDMENT is made this 5th day of October, 2016, by Ruby Tuesday, Inc., a corporation organized and existing under the laws of the State of Georgia (hereinafter called the “Company”).

WHEREAS, the Company maintains the Ruby Tuesday, Inc. 1996 Stock Incentive Plan (the “Plan”), restated as of September 30, 1999;

WHEREAS, the Company wishes to amend the Plan to modify certain definitions to align them with corresponding definitions in certain of the Company’s other compensatory arrangements;

WHEREAS, this Second Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this amendment.

NOW, THEREFORE, the Company does hereby amend the Plan, as follows:

1.     By deleting Section 1.1(b) in its entirety and by substituting therefor the following:

(b)     “Cause” shall mean: (i) fraud or dishonesty in the performance of Participant’s duties with the Company or its affiliates; (ii) willful misconduct; (iii) any intentional, willful and material failure of Participant to perform his or her employment duties (other than any such failure resulting from Participant's Disability) for thirty (30) days after the Board of Directors delivers a written demand for performance to Participant that specifically identifies the manner in which the Board of Directors believes that Participant has not substantially performed his or her employment duties; (iv) conduct in material violation of the Company’s Code of Business Conduct and Ethics; (v) conviction or plea of guilty or nolo contendere to a felony; or (vi) material breach or violation of the terms of any agreement to which Participant and the Company (or any affiliate) are party. For purposes of this paragraph, no act or failure to act on the part of Participant shall be considered "intentional "or "willful" unless it is done, or omitted to be done, by Participant in bad faith and without reasonable belief that Participant's act or omission was in the best interests of the Company and its affiliates, and any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board of Directors or advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Participant in good faith and in the best interests of the Company and its affiliates.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

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2.     By deleting Section 1.1(c) in its entirety and by substituting therefor the following:

“Change in Control” means any one of the following events:

(i) the acquisition by any individual, entity or “group” (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934 (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of voting securities of the Company where such acquisition causes any such Person to own twenty-five percent (25%) or more of the combined voting power of the then outstanding voting securities then entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however, that the following shall not constitute a Change in Control: (1) any acquisition directly from the Company, unless such a Person subsequently acquires additional shares of Outstanding Voting Securities other than from the Company; or (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate;

(ii) within any twelve-month period (beginning on or after the date the Stock Incentive is granted), the persons who were directors of the Company immediately before the beginning of such twelve-month period (the “Incumbent Directors”) shall cease to constitute at least a majority of the Board of Directors of the Company; provided that any director who was not a director as of the date the Stock Incentive is granted shall be deemed to be an Incumbent Director if that director was elected to the Board of Directors by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors shall be deemed to be an Incumbent Director;

(iii) the consummation of a reorganization, merger or consolidation, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities;

(iv) the sale, transfer or assignment of all or substantially all of the assets of the Company and its affiliates to any third party; or

(v) the liquidation or dissolution of the Company.

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Notwithstanding anything in this Plan to the contrary, to the extent any provision of this Plan or a Stock Incentive would cause a payment or benefit not exempt from the requirements of Code Section 409A to be made because of the occurrence of a Change in Control, then such payment or benefit shall not be made unless such Change in Control also constitutes a “change in ownership”, “change in effective control” or “change in ownership of a substantial portion of the Company’s assets” within the meaning of Code Section 409A. Any payment that would have been made except for the application of the preceding sentence shall be made in accordance with the payment schedule that would have applied in the absence of a Change in Control (and other Participant rights that are tied to a Change in Control shall not be affected by this paragraph).

These amendments to Sections 1.1 shall be effective with respect to Stock Incentives granted on or after the date first set forth above.

IN WITNESS WHEREOF, the Company has caused this Second Amendment to be executed on the day and year first above written.

RUBY TUESDAY, INC.

                  By:     /s/ F. Lane Cardwell, Jr. 

                  Title:  Interim President & Chief Executive Officer 

Attest:/s/ Rhonda Parish

By:     Rhonda Parish                    

Title:  Chief Legal Officer & Secretary     

[CORPORATE SEAL]

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EX-10.3

RUBY TUESDAY, INC.

NON-QUALIFIED STOCK OPTION AWARD

THIS NON-QUALIFIED STOCK OPTION AWARD (“Award” or “Option”) is made as of the Grant Date, by RUBY TUESDAY, INC. (the “Company”), a Georgia corporation, to ___________________ (the “Optionee”).

Upon and subject to the Terms and Conditions attached hereto and incorporated herein by reference as part of this Award, the Company hereby awards as of the Grant Date to the Optionee the Option described below pursuant to the Ruby Tuesday, Inc. 1996 Stock Incentive Plan or the Ruby Tuesday, Inc. Stock Incentive Plan (collectively the “Plan”) in consideration of the Optionee’s services to the Company.

A.     Grant Date: ______________.

B.     Type of Option: Non-Qualified Stock Option.

C.     Option Shares: All or any part of _____ shares of the Company’s common stock (the “Common Stock”), $0.01 par value per share, subject to adjustment as provided in the attached Terms and Conditions.

D.     Exercise Price: $____ per share.

E.     Option Period: The Option may be exercised as to the Vested Option Shares (as defined below) during the Option Period, which commences on the Grant Date and ends on the seventh (7th) anniversary of the Grant Date or on an earlier date as provided in the attached Terms and Conditions. Note that other restrictions to exercising the Option described in the attached Terms and Conditions may apply.

F.     Vested Option Shares: The Option Shares shall become Vested Option Shares, as and to the extent indicated below, only if and to the extent the Service Condition is satisfied. The Service Condition is satisfied only if the Optionee provides Continuous Service (as defined below) to the Company and/or any affiliate for the period beginning with the Grant Date through the date described in the following Vesting Schedule:

Continuous Service Date	Percentage of Option Shares which become Vested Option Shares
Prior to _________	0%
_________ through _______	331/3%
_________ through _________	662/3%
_________ and after	100%

The Optionee shall be determined to have provided “Continuous Service” through the date specified in the Vesting Schedule above if the Optionee continues in the employ of the Company

1

and/or any affiliate without experiencing a Termination of Service / Termination of Employment, regardless of the reason. All or a portion of the Option Shares may become Vested Option Shares on an earlier date as provided in the attached Terms and Conditions.

Any portion of the Option Shares which have not become Vested Option Shares in accordance with this Paragraph F or Section 3 of the attached Terms and Conditions before or at the time of Optionee’s Termination of Service / Termination of Employment shall be forfeited.

IN WITNESS WHEREOF, the Company has agreed to this Award as of the Grant Date set forth above.

RUBY TUESDAY, INC.

                  By:     __________________________________

                  Title:  __________________________________

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TERMS AND CONDITIONS TO THE

RUBY TUESDAY, INC.

NON-QUALIFIED STOCK OPTION AWARD

1.     Exercise of Option. Subject to the provisions provided herein or in the Award made pursuant to the Ruby Tuesday, Inc. 1996 Stock Incentive Plan or the Ruby Tuesday, Inc. Stock Incentive Plan (collectively the “Plan”), the Option may be exercised with respect to all or any portion of the Vested Option Shares at any time during the Option Period by the delivery to the Company, at its principal place of business, of:

(a)     a written notice of exercise form, available from the Company upon request, which shall be actually delivered to the Company prior to the date upon which Optionee desires to exercise all or any portion of the Option;

(b)     payment to the Company of the Exercise Price multiplied by the number of shares being purchased (the “Purchase Price”) as provided in Section 5; and

(c)     payment of the tax withholding liability as provided in Section 6.

Upon acceptance of such notice and receipt of payment in full of the Purchase Price and the tax withholding liability, the Company shall cause to be issued a certificate representing the Option Shares purchased.

2.     Adjustment of Option Shares. If Optionee is demoted to a job category with respect to which either (a) no option or (b) an option subject to fewer option shares would have been granted to the Optionee had the Optionee been in that job category on the Grant Date, then the number of Option Shares as to which the Option has not been exercised as of the date of the demotion shall be adjusted as follows: If the Optionee would not have been granted an option in Optionee’s new job category on the Grant Date, the number of remaining Option Shares shall be reduced to zero. If the Optionee would have been granted an option for fewer option shares on the Grant Date, the remaining Option Shares, if any, shall equal the number of shares that would have been granted to the Optionee in Optionee’s new job category on the Grant Date less the number of Option Shares previously purchased by the Optionee under the Option before Optionee’s demotion, if such number is less than zero, the number of remaining Option Shares shall be reduced to zero.

3.     Vested Option Shares. Notwithstanding Paragraph F of the Award, the Service Condition will be deemed satisfied as to all or a portion of the Option Shares if the Optionee provides Continuous Service to the Company and/or any affiliate following the Grant Date through the date of any of the earlier events listed below:

(a)     (i) In the event of Termination of Service / Termination of Employment due to Disability or death or (ii) in the event of a Termination of Service / Termination of Employment by the Company or an affiliate without Cause, all Option Shares shall become Vested Option Shares on the date of such event.

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(b)     In the event of a Change in Control (as defined in Section 21 of these Terms and Conditions), all Option Shares shall become Vested Option Shares.

4.     Early Expiration of Option Period. The Option Period commences on the Grant Date and with respect to Vested Option Shares generally ends on the seventh anniversary of the Grant Date. However, with respect to Vested Option Shares, the Option Period shall expire on an earlier date as follows:

(a)     in the event of Optionee’s voluntary Termination of Service / Termination of Employment with the Company or an affiliate (not to include Disability or death), the Option Period shall expire ninety (90) days following the last day of Optionee’s employment with the Company or such affiliate;

(b)     in the event of the Optionee’s involuntary Termination of Service / Termination of Employment by the Company or an affiliate without Cause (as defined in Section 21 of these Terms and Conditions), the Option Period shall expire ninety (90) days following the last day of Optionee’s employment with the Company or such affiliate; and

(c)     in the event of the Optionee’s involuntary Termination of Service / Termination of Employment by the Company or an affiliate with Cause, the Option Period shall expire fifteen (15) days following the last day of Optionee’s employment with the Company or such affiliate.

5.     Purchase Price. Payment of the Purchase Price for all Option Shares purchased pursuant to the exercise of an Option shall be made in cash or, alternatively, as follows:

(a)     by delivery to the Company of a number of shares of Common Stock which have been owned by the Optionee prior to the date of the Option’s exercise, having a Fair Market Value, as determined under the Plan, on the date of exercise either equal to the Purchase Price or in combination with cash to equal the Purchase Price; or

(b)     by receipt of the Purchase Price in cash from a broker, dealer or other “creditor” as defined by Regulation T issued by the Board of Governors of the Federal Reserve System following delivery by the Optionee to the Committee of instructions in a form acceptable to the Committee regarding delivery to such broker, dealer or other creditor of that number of Option Shares with respect to which the Option is exercised; provided, however, any such cashless exercise must be effected in a manner consistent with the restrictions of Section 13(k) of the Securities Exchange Act of 1934 (Section 402 of the Sarbanes-Oxley Act of 2002).

6.     Withholding. The Optionee must pay to the Company the full amount of the federal, state and local tax withholding obligation arising from the exercise of the Option.

(a)     The tax withholding liability may be paid in cash, or, alternatively, as follows:

4

(i)     by the Optionee making a Withholding Election on or prior to the date on which the amount of tax required to be withheld is determined (the “Tax Date”) to reduce the number of Option Shares to be issued upon exercise by the whole number of shares of Common Stock having a Fair Market Value equal to the amount of withholding tax;

(ii)     by the Optionee making a Withholding Election and delivering to the Company before the Tax Date a whole number of shares of Common Stock that the Optionee has owned having a Fair Market Value equal to the amount of withholding tax; or

(iii)     by the Optionee making a Withholding Election prior to the Tax Date to have a broker, dealer or other “creditor” (as defined by Regulation T issued by the Board of Governors of the Federal Reserve System) deliver the amount of tax withholding due in cash to the Company after the Optionee has delivered to the Committee instructions acceptable to the Committee regarding the delivery of the number of Option Shares being exercised to such broker, dealer or other creditor provided, however, that any such delivery must be effected in a manner consistent with the restrictions of Section 13(k) of the Securities Exchange Act of 1934 (Section 402 of the Sarbanes-Oxley Act of 2002).

(b)     A Withholding Election must be made in the form available from the Company upon request, and may be made only if:

(i)     the Optionee delivers to the Company a completed written Withholding Election no later than on the Tax Date;

(ii)     the Withholding Election is irrevocable and satisfies the requirements of the exemption provided under Rule 16b-3 of the Securities Exchange Act of 1934; and

(iii)     the Optionee delivers to the Company the Withholding Election on a date determined by the Committee (i.e., at least six (6) months prior to the Tax Date or prior to the Tax Date and in any ten-day period beginning on the third day following the release of the Company’s quarterly or annual summary statement of sales and earnings), if the Optionee is considered by the Committee to be subject to Section 16 of the Securities Exchange Act of 1934.

The Committee may give no effect to any Withholding Election in its discretion.

7.     Rights as Shareholder. Until the stock certificates reflecting the Option Shares accruing to the Optionee upon exercise of the Option are issued to the Optionee, the Optionee shall have no rights as a shareholder with respect to such Option Shares. The Company shall make no

5

adjustment for any dividends or distributions or other rights on or with respect to Option Shares for which the record date is prior to the issuance of that stock certificate, except as the Plan or this Award otherwise provides.

8.     Restriction on Transfer of Option and of Option Shares. The Option evidenced hereby is nontransferable other than by will or the laws of descent and distribution, and shall be exercisable during the lifetime of the Optionee only by the Optionee (or in the event of Optionee’s Disability, by Optionee’s personal representative) and after Optionee’s death, only by Optionee’s legatee or the executor of Optionee’s estate.

9.     Changes in Capitalization; Merger; Reorganization.

(a)     The number of Option Shares and the Exercise Price shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or combination of shares or the payment of a stock dividend in shares of Common Stock to holders of outstanding shares of Common Stock or any other increase or decrease in the number of shares of Common Stock outstanding effected without receipt of consideration by the Company.

(b)     In the event of a merger, consolidation, extraordinary dividend (including a spin-off), or other reorganization involving the Company or a tender offer for shares of Common Stock, whether or not such an event constitutes a Change in Control, the Committee may, in its sole discretion, adjust the number and class of securities subject to the Option, with a corresponding adjustment made in the Exercise Price; substitute a new option to replace the Option; or accelerate the termination of the Option Period to a date prior to the occurrence of any event specified in Paragraph E of the Award or Section 4 of the Terms and Conditions.

(c)     The existence of the Plan and this Award shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Common Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding.

10.     Special Limitation on Exercise. Any exercise of the Option is subject to the condition that if at any time the Committee, in its discretion, shall determine that the listing, registration or qualification of the shares covered by the Option upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the delivery of shares thereunder, the delivery of any or all shares pursuant to the Option may be withheld unless and until such listing, registration or qualification shall have been effected. The Optionee shall deliver to the Company, prior to the exercise of the Option, such information, representations and warranties as the Company may reasonably request in order for the Company to be able to satisfy itself that the Option Shares are being acquired in accordance with the terms of an applicable

6

exemption from the securities registration requirements of applicable federal and state securities laws.

11.     Legend on Stock Certificates.  Certificates evidencing the Option Shares, to the extent appropriate at the time, shall have noted conspicuously on the certificates a legend intended to give all persons full notice of the existence of the conditions, restrictions, rights and obligations set forth in this Award and in the Plan.

12.     Governing Laws. This Award shall be construed, administered and enforced according to the laws of the State of Georgia; provided, however, no option may be exercised except, in the reasonable judgment of the Board of Directors, in compliance with exemptions under applicable state securities laws of the state in which the Optionee resides, and/or any other applicable securities laws.

13.     Successors. This Award shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the parties.

14.     Notice. Except as otherwise specified herein, all notices and other communications under this Award shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein.

15.     Severability. In the event that any one or more of the provisions or portion thereof contained in this Award shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Award, and this Award shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

16.     Entire Agreement. Subject to the terms and conditions of the Plan, this Award expresses the entire understanding and agreement of the parties.

17.     Violation. Any transfer, pledge, sale, assignment, or hypothecation of the Option or any portion thereof shall be a violation of the terms of this Award and shall be void and without effect.

18.     Headings and Capitalized Terms. Section headings used herein are for convenience of reference only and shall not be considered in construing this Award. Capitalized terms used, but not defined, herein shall be given the meaning ascribed to them in the Plan.

19.     Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Award, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

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20.     No Right to Continued Employment. Neither the establishment of the Plan nor the award of Option Shares hereunder shall be construed as giving the Optionee the right to continued employment.

21.     Special Definitions.

(a)     For purposes of this Award, the term “Cause” has the same meaning as provided in the employment agreement between the Optionee and the Company or, if applicable, any affiliate of the Company on the date of Termination of Service / Termination of Employment, or if no such definition or employment agreement exists, “Cause” shall mean conduct amounting to: (i) fraud or dishonesty in the performance of Optionee’s duties with the Company or its affiliates; (ii) willful misconduct; (iii) any intentional, willful and material failure of Optionee to perform his or her employment duties (other than any such failure resulting from Optionee's Disability) for thirty (30) days after the Board of Directors delivers a written demand for performance to Optionee that specifically identifies the manner in which the Board of Directors believes that Optionee has not substantially performed his or her employment duties; (iv) conduct in material violation of the Company’s Code of Business Conduct and Ethics; (v) conviction or plea of guilty or nolo contendere to a felony; or (vi) material breach or violation of the terms of any agreement to which Optionee and the Company (or any affiliate) are party. For purposes of this paragraph, no act or failure to act on the part of Optionee shall be considered "intentional "or "willful" unless it is done, or omitted to be done, by Optionee in bad faith and without reasonable belief that Optionee's act or omission was in the best interests of the Company and its affiliates, and any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board of Directors or advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Optionee in good faith and in the best interests of the Company and its affiliates.

(b)     “Change in Control” means any one of the following events:

(i)     the acquisition by any individual, entity or “group” (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934 (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of voting securities of the Company where such acquisition causes any such Person to own twenty-five percent (25%) or more of the combined voting power of the then outstanding voting securities then entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however, that the following shall not constitute a Change in Control: (1) any acquisition directly from the Company, unless such a Person subsequently acquires additional shares of Outstanding Voting Securities other than from the Company; or (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate;

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(ii)     within any twelve-month period (beginning on or after the Grant Date), the persons who were directors of the Company immediately before the beginning of such twelve-month period (the “Incumbent Directors”) shall cease to constitute at least a majority of the Board of Directors of the Company; provided that any director who was not a director as of the Grant Date shall be deemed to be an Incumbent Director if that director was elected to the Board of Directors by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors shall be deemed to be an Incumbent Director;

(iii)     the consummation of a reorganization, merger or consolidation, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities;

(iv)     the sale, transfer or assignment of all or substantially all of the assets of the Company and its affiliates to any third party; or

(v)     the liquidation or dissolution of the Company.

(c)     “Disability” has the same meaning as provided in the employment agreement currently or most recently in effect between the Employee and the Company or, if applicable, any affiliate of the Company, or if no such definition or employment agreement ever existed, “Disability” shall be given the same meaning provided in the Plan.

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EX-10.4

RUBY TUESDAY, INC.

SERVICE-BASED RESTRICTED STOCK UNIT AWARD

This SERVICE-BASED RESTRICTED STOCK UNIT AWARD (the  “Award”) is made and entered into as of the ___ of _____, ___ by and between Ruby Tuesday, Inc. (the “Company”), a Georgia corporation, and ____________________________ (the “Employee”).

Upon and subject to the provisions of the Plan and the Additional Terms and Conditions attached hereto and incorporated herein by reference as part of this Award, the Company hereby awards as of the Grant Date to the Employee the Restricted Stock Units described below in consideration of the Employee’s services to the Company.

A. Grant Date: ________, ____.

B. Plan Under Which Granted: Ruby Tuesday, Inc. 1996 Stock Incentive Plan or the Ruby Tuesday, Inc. Stock Incentive Plan (the “Plan”).

C. Restricted Stock Units: The number of Restricted Stock Units subject to the Award shall be _________________________________ (_______). Each Restricted Stock Unit represents the Company’s unfunded and unsecured obligation to issue one share of the Company’s common stock (“Common Stock”), $.01 par value per share, in accordance with this Award, subject to the terms of this Award and the Plan.

D. Vesting Schedule: The Restricted Stock Units shall become vested, as and to the extent indicated below, only if and to the extent the Employee provides continuous service to the Company and/or any affiliate for the period beginning with the Grant Date through the date described in the following Vesting Schedule without experiencing a Termination of Employment (the “Service Condition”):

Continuous Service Date	Percentage of Restricted Stock Units which are Vested Stock Units
Prior to ________	0%
________ until ________	331/3%
________ until ________	662/3%
________ and after	100%

Notwithstanding the foregoing, the Service Condition will be deemed satisfied as to all or a portion of the Restricted Stock Units, as indicated below, if the Employee provides continuous service to the Company and/or any affiliate following the Grant Date through the date of any of the earlier events listed below without experiencing a Termination of Employment:

(a)     (i) In the event of a Termination of Employment due to Disability or death; or (ii) in the event of an involuntary Termination of Employment, other than for Cause, all of the Restricted Stock Units not previously vested shall be deemed to have satisfied the Service Condition immediately prior to the effective date of the event.

(b)     In the event of a Change in Control, all of the Restricted Stock Units not previously vested shall be deemed to have satisfied the Service Condition immediately prior to the effective date of such Change in Control.

The Restricted Stock Units which have satisfied, or are deemed to have satisfied, the Service Condition are herein referred to as the “Vested Stock Units.” Any portion of the Restricted Stock Units which have not become Vested Stock Units in accordance with this Paragraph D before or at the time of Employee’s Termination of Employment shall be forfeited.

F. Distribution Period: Subject to the attached Additional Terms and Conditions, the shares of Common Stock attributable to the Vested Stock Units shall be issued to the Employee within ninety (90) days following the date the Restricted Stock Units become vested (each a “Distribution Period”).

IN WITNESS WHEREOF, the Company and Employee agree to this Award as of the Grant Date set forth above.

RUBY TUESDAY, INC.

By:
	[Name of Employee]
Title:

ADDITIONAL TERMS AND CONDITIONS TO THE

RUBY TUESDAY, INC.

RESTRICTED STOCK UNIT AWARD

1.     Settlement and Delivery of Vested Stock Units.

(a)     During the Distribution Period, the Company shall issue and deliver a share certificate, or make or caused to be made an appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company, representing the number of shares of Common Stock attributable to Vested Stock Units to the Employee in settlement of the Employee’s rights under this Award.

(b)     The Company shall not be required to issue fractional shares (or cash in lieu of fractional shares) upon the settlement of the Award.

(c)     Notwithstanding anything in the Plan, the Award, or any other agreement (written or oral) to the contrary, if the Employee is a “specified employee” (within the meaning of Code Section 409A) on the date of a Termination of Employment, then any payment made or settlement occurring with respect to such Termination of Employment under this Award will be delayed to the extent necessary to comply with Code Section 409A(a)(2)(B)(i), and the applicable stock will be paid or settled to the Employee during the five-day period commencing on the earlier of: (i) the expiration of the six-month period measured from the date of the Employee’s Termination of Employment, or (ii) the date of the Employee’s death. Upon the expiration of the applicable six-month period under Code Section 409A(a)(2)(B)(i) (or, if earlier, the date of the Employee’s death), all stock deferred pursuant to this Subsection (c) will be paid or delivered to Employee (or the Employee’s estate, in the event of the Employee’s death) in a lump sum.

2.     Tax Withholding. The minimum amount of the required tax withholding obligations (the “Withholding Obligation”) imposed on the Company by reason of the issuance of the shares of Common Stock attributable to Vested Stock Units shall be satisfied as follows:

(a)     The Employee shall elect in writing by notice to the Company received at least five (5) days before the applicable vesting date to satisfy the Withholding Obligation by either (i) remitting sufficient cash (or a check payable to the Company), or (ii) committing with the Employee’s broker to satisfy the Withholding Obligation by selling a sufficient number of shares of the Common Stock.

(b)     Should the Employee fail to make a election under subsection (a) above, the Company may, in its discretion, satisfy the Withholding Obligation by (i) reducing the actual number of shares of Common Stock by the number of whole shares of Common Stock which, when multiplied by the Fair Market Value of the Common Stock

on the applicable vesting date, is sufficient to satisfy the Withholding Obligation, or (ii) withholding sufficient cash from any cash payments then owed to the Employee.

(c)     If the Employee does not timely satisfy payment of the Withholding Obligation, the Employee will forfeit the Vested Stock Units.

3.     Rights as Shareholder. Until shares of Common Stock received in settlement of the Vested Stock Units are issued to the Employee, the Employee shall have no rights as a shareholder with respect to the either Restricted Stock Units or Vested Stock Units. Except as otherwise provided in Section 7 and Section 5.2 of the Plan, the Company shall make no adjustment for any dividends or distributions or other rights on or with respect to shares of Common Stock issued in settlement of the Vested Stock Units for which the record date is prior to the issuance of that stock certificate.

4.     Special Limitations. If a registration statement is not in effect under the Securities Act of 1933 (the “Securities Act”) or any applicable state securities law with respect to shares of Common Stock otherwise deliverable under this Award, the Employee (a) shall deliver to the Company, prior to the delivery of Common Stock pursuant to the settlement of the Vested Stock Units, such information, representations and warranties as the Company may reasonably request in order for the Company to be able to satisfy itself that the shares of Common Stock are being acquired in accordance with the terms of an applicable exemption from the securities registration requirements of applicable federal and state securities laws; and (b) shall agree that the shares of Common Stock so acquired will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act and any applicable state securities law.

5.     Restrictions on Transfer. The Employee shall not have the right to make or permit to exist any transfer or hypothecation, whether outright or as security, with or without consideration, voluntary or involuntary, of all or any part of any right, title or interest in or to any Restricted Stock Units (including, without limitation, Vested Stock Units). Any such disposition not made in accordance with this Award shall be deemed null and void. The restrictions contained in this Section 5 will not apply with respect to transfers of the Restricted Stock Units pursuant to applicable laws of descent and distribution; provided that any applicable the restrictions contained in this Section 5 will continue to be applicable to the Restricted Stock Units after any such transfer; and provided further that the transferee(s) of such Restricted Stock Units must agree in writing to be bound by the provisions of the Plan and this Award.

6.     Legends on Shares. No holder of shares of Common Stock issued pursuant to this Award may sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) any interest in or any beneficial interest in any such shares, except (a) pursuant to an effective registration statement under the Securities Act; or (b) in a transaction that fully complies with Rule 144, without first delivering to the Company an opinion of counsel (reasonably acceptable in form

and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer. The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of Common Stock issued pursuant to this Award. The Employee or any other holder shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to this Award in the possession of that person to carry out the provisions of this Section.

7.     Change in Capitalization.

(a)     The number and kind of shares of Common Stock subject to the Restricted Stock Units (including, without limitation, Vested Stock Units) shall be proportionately adjusted for nonreciprocal transactions between the Company and the holders of capital stock of the Company that cause the per share value of the shares of Common Stock referenced by the Restricted Stock Units to change, such as a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend or distribution (each, an “Equity Restructuring”).

(b)     In the event of a merger, consolidation, extraordinary dividend (including a spin-off), reorganization, recapitalization, sale of substantially all of the Company’s assets, other change in capital structure of the Company, tender offer for shares of Common Stock, or a Change in Control of the Company, that in each case does not constitute an Equity Restructuring, the Committee, in its sole discretion, may make such adjustments with respect to the Restricted Stock Units and take such action as it deems necessary or appropriate, including, without limitation, adjusting the number of Restricted Stock Units, making a corresponding adjustment in the number of shares subject to the Restricted Stock Units, substituting a new award to replace the Award, removing restrictions on outstanding Awards, accelerating the termination of the Award or terminating the Award in exchange for the cash value determined in good faith by the Committee of the Restricted Stock Units, as the Committee may determine. Any determination made by the Committee will be final and binding on the Employee.

(c)     No fractional shares shall be created in making any adjustment pursuant to this Section 7. Instead, any adjustment pursuant to this Section 7 that would otherwise result in a fractional Restricted Stock Unit or fractional share of Common Stock becoming subject to the Award shall be further adjusted to round down the numbers of Restricted Stock Units to the next lowest Restricted Stock Unit or share of Common Stock, as applicable.

(d)     All determinations and adjustments made by the Committee pursuant to this Section will be final and binding on the Employee. Any action taken by the Committee need not treat all recipients of equity incentives equally.

(e)     The existence of the Plan and the Award shall not affect the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Common Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or part of its business or assets, or any other corporate act or proceeding.

8.     Clawback. Notwithstanding anything herein to the contrary, this Award and any Common Stock issued pursuant to this Award is expressly subject to any “clawback policy” now or hereafter adopted by the Company, as the same may be amended from time to time, or any recoupment permitted or required by law.

9.     Section 409A. This Award is intended to comply with, or otherwise be exempt from, Code Section 409A, as applicable. This Award shall be administered, interpreted, and construed in a manner consistent with such Code section. Should any provision of this Award be found not to comply with, or otherwise be exempt from, the provisions of Code Section 409A, it shall be modified and given effect, in the sole discretion of the Committee and without requiring the Employee’s consent, in such manner as the Committee determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Code Section 409A. No acceleration of payment or settlement may be made except as permitted under Code Section 409A.

10.     Governing Laws. This Award shall be construed, administered and enforced according to the laws of the State of Georgia; provided, however, no shares of Common Stock shall be issued except, in the reasonable judgment of the Committee, in compliance with exemptions under applicable state securities laws of the state in which the Employee resides, and/or any other applicable securities laws.

11.     Successors. This Award shall be binding upon and inure to the benefit of the heirs, legal representatives, successors, and permitted assigns of the parties.

12.     Notice. Except as otherwise specified herein, all notices and other communications required or permitted under this Award shall be in writing and, if mailed by prepaid first-class mail or certified mail, return receipt requested, shall be deemed to have been received on the earlier of the date shown on the receipt or three (3) business days after the postmarked date thereof. In addition, notices hereunder may be delivered by hand, facsimile transmission or overnight courier, in which event the notice shall be deemed effective when delivered or transmitted. All notices and other communications under this Award shall be given to the parties hereto at the following addresses: to the Company (attention of the Chief Legal Officer), at the principal office of the Company or at any other address as the Company, by notice to Employee, may designate in writing from time to time; and to Employee, at

Employee’s address as shown on the records of the Company, or at any other address as Employee, by notice to the Company, may designate in writing from time to time.

13.     Severability. In the event that any one or more of the provisions or portion thereof contained in this Award shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Award, and this Award shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

14.     Entire Agreement. Subject to the terms and conditions of the Plan, this Award (including the Additional Terms and Conditions) expresses the entire understanding and agreement of the parties with respect to the subject matter. The Committee shall have full and conclusive authority to interpret the Award and to make all other determinations necessary or advisable for the proper administration of the arrangement reflected by this Award. The Committee’s interpretations and determinations in this regard shall be final and binding on the Employee.

15.     Headings. Paragraph headings used herein are for convenience of reference only and shall not be considered in construing this Award.

16.     Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Award, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

17.     No Right to Continued Service. Neither this Award nor the issuance of the Restricted Stock Units hereunder shall be construed as giving the Employee the right to continued service with the Company or any affiliate.

18.     Definitions. Except as provided below, all capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Plan. The following capitalized terms shall have the following meanings:

(a)     “Cause” has the same meaning as provided in the employment agreement currently or most recently in effect between the Employee and the Company or, if applicable, any affiliate of the Company, or if no such definition or employment agreement ever existed, “Cause” means conduct amounting to: (i) fraud or dishonesty in the performance of Employee’s duties with the Company or its affiliates; (ii) willful misconduct; (iii) any intentional, willful and material failure of Employee to perform his or her employment duties (other than any such failure resulting from Employee's Disability) for thirty (30) days after the Board of Directors delivers a written demand for performance to Employee that specifically identifies the manner in which the Board of

Directors believes that Employee has not substantially performed his or her employment duties; (iv) conduct in material violation of the Company’s Code of Business Conduct and Ethics; (v) conviction or plea of guilty or nolo contendere to a felony; or (vi) material breach or violation of the terms of any agreement to which Employee and the Company (or any affiliate) are party. For purposes of this paragraph, no act or failure to act on the part of Employee shall be considered "intentional "or "willful" unless it is done, or omitted to be done, by Employee in bad faith and without reasonable belief that Employee's act or omission was in the best interests of the Company and its affiliates, and any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board of Directors or advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Employee in good faith and in the best interests of the Company and its affiliates.

(b)     “Change in Control” means any one of the following events:

(i) the acquisition by any individual, entity or “group” (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934 (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of voting securities of the Company where such acquisition causes any such Person to own twenty-five percent (25%) or more of the combined voting power of the then outstanding voting securities then entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however, that the following shall not constitute a Change in Control: (1) any acquisition directly from the Company, unless such a Person subsequently acquires additional shares of Outstanding Voting Securities other than from the Company; or (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate;

(ii) within any twelve-month period (beginning on or after the date the Stock Incentive is granted), the persons who were directors of the Company immediately before the beginning of such twelve-month period (the “Incumbent Directors”) shall cease to constitute at least a majority of the Board of Directors of the Company; provided that any director who was not a director as of the date the Stock Incentive is granted shall be deemed to be an Incumbent Director if that director was elected to the Board of Directors by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors shall be deemed to be an Incumbent Director;

(iii) the consummation of a reorganization, merger or consolidation, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter,

own more than fifty percent (50%) of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities;

(iv) the sale, transfer or assignment of all or substantially all of the assets of the Company and its affiliates to any third party; or

(v) the liquidation or dissolution of the Company.

Notwithstanding anything in this Award to the contrary, to the extent any provision of this Award would cause a payment or benefit not exempt from the requirements of Code Section 409A to be made because of the occurrence of a Change in Control, then such payment or benefit shall not be made unless such Change in Control also constitutes a “change in ownership”, “change in effective control” or “change in ownership of a substantial portion of the Company’s assets” within the meaning of Code Section 409A. Any payment that would have been made except for the application of the preceding sentence shall be made in accordance with the payment schedule that would have applied in the absence of a Change in Control (and other Employee rights that are tied to a Change in Control shall not be affected by this paragraph).

(c)     “Disability” means the Employee is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company and its affiliates. The determination of Disability will be made in accordance with the definition of “disability” under Code Section 409A.

     (d)     “Termination of Employment” means a “separation from service” within the meaning of Code Section 409A and the rules and regulations promulgated thereunder.

EX-10.5

RUBY TUESDAY, INC.

PERFORMANCE STOCK UNIT AWARD

This PERFORMANCE STOCK UNIT AWARD (the “Award”) is made and entered into as of the ____ of _______, ____ by and between Ruby Tuesday, Inc. (the “Company”), a Georgia corporation, and ____________________________ (the “Employee”).

Upon and subject to the provisions of the Plan and the Additional Terms and Conditions attached hereto and incorporated herein by reference as part of this Award, the Company hereby awards as of the Grant Date to the Employee the Performance Stock Units described below in consideration of the Employee’s services to the Company.

A. Grant Date: ___________.

B. Plan Under Which Granted: Ruby Tuesday, Inc. 1996 Stock Incentive Plan or the Ruby Tuesday, Inc. Stock Incentive Plan (the “Plan”).

C. Performance Stock Units: The number of Performance Stock Units subject to the Award at “Target” level shall be _____________. Each Performance Stock Unit represents the Company’s unfunded and unsecured obligation to issue the cash equivalent of one share of the Company’s common stock (“Common Stock”), $.01 par value per share, subject to the terms of this Award and the Plan.

D.     Performance Goal: [INSERT PERFORMANCE GOAL]

Performance Goal Exception. In the event of a Termination of Employment as identified in E(1) below, the Performance Goal will be met based on the completed years identified in the table above. In the event of a Change in Control, the Performance Goal will be deemed to have been met at the “Target” level.

E. Vesting Schedule: Regardless of the Performance Level attained, as determined by the table in Paragraph D above, no Performance Stock Units shall become Vested Stock Units (as defined below) unless the Employee remains in the continuous service of the Company or any affiliate through the last day of fiscal year ____ (the “Performance Period End Date”) without experiencing a Termination of Employment (the “Service Condition”)

Notwithstanding the foregoing, the Service Condition will be deemed satisfied as to all or a portion of the Performance Stock Units, as indicated below, if the Employee provides continuous service to the Company and/or any affiliate following the Grant Date through the date of any of the earlier events listed below without experiencing a Termination of Employment:

1)                  (a) In the event of a Termination of Employment due to Disability or death; or (b) in the event of an involuntary Termination of Employment, other than for Cause, the Performance Stock Units will vest based on the following schedule:

Continuous Service Date		Percentage of Payout
Prior to _________	0%
_________ through _________	331/3%
_________ through _________	662/3%
_________ and after	100%

2)                  In the event of a Change in Control, all of the Performance Stock Units not previously vested shall be deemed to have satisfied the Service Condition immediately prior to the effective date of such Change in Control.

The Performance Stock Units with respect to which both a Performance Level and Service Condition have been, or are deemed to have been, achieved or satisfied, as applicable, are herein referred to as the “Vested Stock Units”.

F. Distribution of Vested Stock Units: Subject to the attached Additional Terms and

1

Conditions, the cash equivalent of shares of Common Stock attributable to the Vested Stock Units shall be paid to the Employee within the earlier of (i) a period of sixty (60) days immediately following the effective date of a Change in Control or (ii) a period of ninety (90) days immediately following the Performance Period End Date (the “Distribution Period”).

G. Forfeiture. Any portion of the Performance Stock Units which have not, or have not been deemed to have, satisfied both the Service Condition and a Performance Level in accordance with Paragraphs D and E by the earlier of a Change in Control or the Performance Period End Date shall be forfeited.

IN WITNESS WHEREOF, the Company and Employee have agreed to this Award as of the Grant Date set forth above.

RUBY TUESDAY, INC.

By:
	[Name of Employee]
Title:

2

ADDITIONAL TERMS AND CONDITIONS TO THE

RUBY TUESDAY, INC.

PERFORMANCE STOCK UNIT AWARD

1.     Settlement and Delivery of Vested Stock Units.

(a)     The Committee shall certify as to the achievement of any Performance Level before proceeding with any settlement of the Award.

(b)     During the Distribution Period, the Company shall pay to the Employee a cash amount calculated based upon the Fair Market Value of a share of Common Stock on the date the Committee determines the Performance Level achieved and the number of Vested Stock Units to be issued in settlement of the Award.

(c)     The Company shall not be required to issue cash in lieu of fractional shares upon the settlement of the Award.

(d)     Notwithstanding anything in the Plan, the Award, or any other agreement (written or oral) to the contrary, if the Employee is a “specified employee” (within the meaning of Code Section 409A) on the date of a Termination of Employment, then any payment made with respect to such Termination of Employment under this Award will be delayed to the extent necessary to comply with Code Section 409A(a)(2)(B)(i), and the applicable cash will be paid to the Employee during the five-day period commencing on the earlier of: (1) the expiration of the six-month period measured from the date of the Employee’s Termination of Employment, or (2) the date of the Employee’s death. Upon the expiration of the applicable six-month period under Code Section 409A(a)(2)(B)(i) (or, if earlier, the date of the Employee’s death), all payments deferred pursuant to this Subsection (d) will be paid or delivered to Employee (or the Employee’s estate, in the event of the Employee’s death) in a lump sum.

2.     Tax Withholding. The Company shall withhold the amount of taxes, which in the determination of the Company are required to be withheld under federal, state and local laws and all other applicable payroll withholding with respect to any amount payable under the Award.

3.     Rights as Shareholder. The Employee shall have no rights as a shareholder with respect to the either Performance Stock Units or Vested Stock Units. Except as otherwise provided in Section 7 and Section 5.2 of the Plan, the Company shall make no adjustment for any dividends or distributions.

4.     Restrictions on Transfer. The Employee shall not have the right to make or permit to exist any transfer or hypothecation, whether outright or as security, with or without consideration, voluntary or involuntary, of all or any part of any right, title or interest in or to

3

any Performance Stock Units (including, without limitation, Vested Stock Units). Any such disposition not made in accordance with this Award shall be deemed null and void. The restrictions contained in this Section 5 will not apply with respect to transfers of the Performance Stock Units pursuant to applicable laws of descent and distribution; provided that any applicable restrictions contained in this Section 4 will continue to be applicable to the Performance Stock Units after any such transfer; and provided further that the transferee(s) of such Performance Stock Units must agree in writing to be bound by the provisions of the Plan and this Award.

5.     Change in Capitalization.

(a)     The number and kind of shares of Common Stock upon which the settlement of this Award is calculated shall be proportionately adjusted for nonreciprocal transactions between the Company and the holders of capital stock of the Company that cause the per share value of the shares of Common Stock referenced by the Performance Stock Units to change, such as a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend or distribution (each, an “Equity Restructuring”).

(b)     In the event of a merger, consolidation, extraordinary dividend (including a spin-off), reorganization, recapitalization, sale of substantially all of the Company’s assets, other change in capital structure of the Company, tender offer for shares of Common Stock, or a Change in Control of the Company, that in each case does not constitute an Equity Restructuring, the Committee, in its sole discretion, may make such adjustments with respect to the Performance Stock Units and take such action as it deems necessary or appropriate, including, without limitation, adjusting the number of Performance Stock Units, making a corresponding adjustment in the number of shares subject to the Performance Stock Units, substituting a new award to replace the Award, removing restrictions on outstanding Awards, accelerating the termination of the Award or terminating the Award in exchange for the cash value determined in good faith by the Committee of the Performance Stock Units, as the Committee may determine. Any determination made by the Committee will be final and binding on the Employee.

(c)     No fractional Performance Stock Units shall be created in making any adjustment pursuant to this Section 7. Instead, any adjustment pursuant to this Section 5 that would otherwise result in a fractional Performance Stock Unit becoming subject to the Award shall be further adjusted to round down the numbers of Performance Stock Units to the next lowest Performance Stock Unit.

(d)     All determinations and adjustments made by the Committee pursuant to this Section will be final and binding on the Employee. Any action taken by the Committee need not treat all recipients of equity incentives equally.

4

(e)     The existence of the Plan and the Award shall not affect the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Common Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or part of its business or assets, or any other corporate act or proceeding.

6.     Clawback. Notwithstanding anything herein to the contrary, this Award is expressly subject to any “clawback policy” now or hereafter adopted by the Company, as the same may be amended from time to time, or any recoupment permitted or required by law.

7.     Section 409A. This Award is intended to comply with, or otherwise be exempt from, Code Section 409A, as applicable. This Award shall be administered, interpreted, and construed in a manner consistent with such Code section. Should any provision of this Award be found not to comply with, or otherwise be exempt from, the provisions of Code Section 409A, it shall be modified and given effect, in the sole discretion of the Committee and without requiring the Employee’s consent, in such manner as the Committee determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Code Section 409A. No acceleration of payment or settlement may be made except as permitted under Code Section 409A.

8.     Governing Laws. This Award shall be construed, administered and enforced according to the laws of the State of Georgia.

9.     Successors. This Award shall be binding upon and inure to the benefit of the heirs, legal representatives, successors, and permitted assigns of the parties.

10.     Notice. Except as otherwise specified herein, all notices and other communications required or permitted under this Award shall be in writing and, if mailed by prepaid first-class mail or certified mail, return receipt requested, shall be deemed to have been received on the earlier of the date shown on the receipt or three (3) business days after the postmarked date thereof. In addition, notices hereunder may be delivered by hand, facsimile transmission or overnight courier, in which event the notice shall be deemed effective when delivered or transmitted. All notices and other communications under this Award shall be given to the parties hereto at the following addresses: to the Company (attention of the Chief Legal Officer), at the principal office of the Company or at any other address as the Company, by notice to Employee, may designate in writing from time to time; and to Employee, at Employee’s address as shown on the records of the Company, or at any other address as Employee, by notice to the Company, may designate in writing from time to time.

11.     Severability. In the event that any one or more of the provisions or portion thereof contained in this Award shall for any reason be held to be invalid, illegal, or

5

unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Award, and this Award shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

12.     Entire Agreement. Subject to the terms and conditions of the Plan, this Award (including the Additional Terms and Conditions) expresses the entire understanding and agreement of the parties with respect to the subject matter. The Committee shall have full and conclusive authority to interpret the Award and to make all other determinations necessary or advisable for the proper administration of the arrangement reflected by this Award. The Committee’s interpretations and determinations in this regard shall be final and binding on the Employee.

13.     Headings. Paragraph headings used herein are for convenience of reference only and shall not be considered in construing this Award.

14.     Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Award, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

15.     No Right to Continued Service. Neither this Award nor the issuance of the Performance Stock Units hereunder shall be construed as giving the Employee the right to continued service with the Company or any affiliate.

16.     Definitions. Except as provided below, all capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Plan. The following capitalized terms shall have the following meanings:

(a)     “Cause” has the same meaning as provided in the employment agreement currently or most recently in effect between the Employee and the Company or, if applicable, any affiliate of the Company, or if no such definition or employment agreement ever existed, “Cause” means conduct amounting to: (i) fraud or dishonesty in the performance of Employee’s duties with the Company or its affiliates; (ii) willful misconduct; (iii) any intentional, willful and material failure of Employee to perform his or her employment duties (other than any such failure resulting from Employee's Disability) for thirty (30) days after the Board of Directors delivers a written demand for performance to Employee that specifically identifies the manner in which the Board of Directors believes that Employee has not substantially performed his or her employment duties; (iv) conduct in material violation of the Company’s Code of Business Conduct and Ethics; (v) conviction or plea of guilty or nolo contendere to a felony; or (vi) material breach or violation of the terms of any agreement to which Employee and the Company (or any affiliate) are party. For purposes of this paragraph, no act or failure to act on the

6

part of Employee shall be considered "intentional "or "willful" unless it is done, or omitted to be done, by Employee in bad faith and without reasonable belief that Employee's act or omission was in the best interests of the Company and its affiliates, and any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board of Directors or advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Employee in good faith and in the best interests of the Company and its affiliates.

(b)     “Change in Control” means any one of the following events occurring after the Grant Date:

(i) the acquisition by any individual, entity or “group” (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934 (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of voting securities of the Company where such acquisition causes any such Person to own twenty-five percent (25%) or more of the combined voting power of the then outstanding voting securities then entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however, that the following shall not constitute a Change in Control: (1) any acquisition directly from the Company, unless such a Person subsequently acquires additional shares of Outstanding Voting Securities other than from the Company; or (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate;

(ii) within any twelve-month period (beginning on or after the date the Stock Incentive is granted), the persons who were directors of the Company immediately before the beginning of such twelve-month period (the “Incumbent Directors”) shall cease to constitute at least a majority of the Board of Directors of the Company; provided that any director who was not a director as of the date the Stock Incentive is granted shall be deemed to be an Incumbent Director if that director was elected to the Board of Directors by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors shall be deemed to be an Incumbent Director;

(iii) the consummation of a reorganization, merger or consolidation, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities;

7

(iv) the sale, transfer or assignment of all or substantially all of the assets of the Company and its affiliates to any third party; or

(v) the liquidation or dissolution of the Company.

Notwithstanding anything in this Plan to the contrary, to the extent any provision of this Plan would cause a payment or benefit not exempt from the requirements of Code Section 409A to be made because of the occurrence of a Change in Control, then such payment or benefit shall not be made unless such Change in Control also constitutes a “change in ownership”, “change in effective control” or “change in ownership of a substantial portion of the Company’s assets” within the meaning of Code Section 409A. Any payment that would have been made except for the application of the preceding sentence shall be made in accordance with the payment schedule that would have applied in the absence of a Change in Control (and other Executive rights that are tied to a Change in Control shall not be affected by this paragraph).

(c)     “Disability” means the Employee is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company and its affiliates. The determination of Disability will be made in accordance with the definition of “disability” under Code Section 409A.

   (d)     “Termination of Employment” means a “separation from service” within the meaning of Code Section 409A and the rules and regulations promulgated thereunder.

8

EX-10.6

RUBY TUESDAY, INC.

SERVICE-BASED PHANTOM STOCK UNIT AWARD

This SERVICE-BASED PHANTOM STOCK UNIT AWARD (the  “Award”) is made and entered into as of the ___________ by and between Ruby Tuesday, Inc. (the “Company”), a Georgia corporation, and ____________________________ (the “Employee”).

Upon and subject to the provisions of the Plan and the Additional Terms and Conditions attached hereto and incorporated herein by reference as part of this Award, the Company hereby awards as of the Grant Date to the Employee the Phantom Stock Units described below in consideration of the Employee’s services to the Company.

A. Grant Date: __________.

B. Plan Under Which Granted: Ruby Tuesday, Inc. 1996 Stock Incentive Plan or the Ruby Tuesday, Inc. Stock Incentive Plan (the “Plan”).

C. Phantom Stock Units: The number of Phantom Stock Units subject to the Award shall be _________________________________ (_______). Each Phantom Stock Unit represents the Company’s unfunded and unsecured obligation to make a cash payment equal to the value of one share of the Company’s common stock (“Common Stock”), $.01 par value per share, in accordance with this Award, subject to the terms of this Award and the Plan.

D. Vesting Schedule: The Phantom Stock Units shall become vested, as and to the extent indicated below, only if and to the extent the Employee provides continuous service to the Company and/or any affiliate for the period beginning with the Grant Date through the date described in the following Vesting Schedule without experiencing a Termination of Employment (the “Service Condition”):

Continuous Service Date	Percentage of Phantom Stock Units which are Vested Stock Units
Prior to __________	0%
__________ and after	100%

Notwithstanding the foregoing, the Service Condition will be deemed satisfied as to all or a portion of the Phantom Stock Units, as indicated below, if the Employee provides continuous service to the Company and/or any affiliate following the Grant Date through the date of any of the earlier events listed below without experiencing a Termination of Employment: (a) in the event of a Termination of Employment due to Disability or death; or (b) in the event of an involuntary Termination of Employment, other than for Cause, all of the Phantom Stock Units not previously vested shall be deemed to have satisfied the Service Condition immediately prior to the effective date of the event.

The Phantom Stock Units which have satisfied, or are deemed to have satisfied, the Service Condition are herein referred to as the “Vested Stock Units.” Any portion of the Phantom Stock units which have not become Vested Stock Units in accordance with this Paragraph D before or at the time of Employee’s Termination of Employment shall be forfeited.

E. Distribution Period: Subject to the attached Additional Terms and Conditions, the shares of Common Stock attributable to the Vested Stock Units shall be issued to the Employee within ninety (90) days following the date the Phantom Stock Units become vested (each a “Distribution Period”).

IN WITNESS WHEREOF, the Company and Employee have agreed to this Award as of the Grant Date set forth above.

RUBY TUESDAY, INC.

     By:     ________________

   [Name]

Title: 

ADDITIONAL TERMS AND CONDITIONS TO THE

RUBY TUESDAY, INC.

PHANTOM STOCK UNIT AWARD

1.     Settlement and Delivery of Vested Stock Units.

(a)     During the Distribution Period, the Company shall deliver a cash payment equal to the value of the number of shares of Common Stock attributable to Vested Stock Units to the Employee in settlement of the Employee’s rights under this Award. The value of the Common Stock will be determined as of the date the Phantom Stock Units become vested.

(b)     The Company shall not be required to issue cash in lieu of fractional shares upon the settlement of the Award.

(c)     Notwithstanding anything in the Plan, the Award, or any other agreement (written or oral) to the contrary:

(i)     In the event the Service Condition has been deemed satisfied pursuant to Paragraph D.b. of the Award with respect to the Employee, the Award will nevertheless be forfeited if the Committee determines that, between the effective date of the Termination of Employment and the settlement of the Award, the Employee provided services in any capacity within the United States which involves duties and responsibilities similar to those undertaken for the Company with any of the following competitors: Chipotle Mexican Grill, Salsarita’s Fresh Cantina, Moe’s Southwestern Grill, Olive Garden Italian Restaurant, Red Lobster, Longhorn Steakhouse, Outback Steakhouse, Applebee’s, Chili’s Grill & Bar, T.G.I. Friday’s, Red Robin Gourmet Burgers, and O’Charley’s, Inc., or any of their parents, affiliated companies, or successors.

(ii)     If the Employee is a “specified employee” (within the meaning of Code Section 409A) on the date of a Termination of Employment, then any payment made or settlement occurring with respect to such Termination of Employment under this Award will be delayed to the extent necessary to comply with Code Section 409A(a)(2)(B)(i), and the applicable stock will be paid or settled to the Employee during the five-day period commencing on the earlier of: (i) the expiration of the six-month period measured from the date of the Employee’s Termination of Employment, or (ii) the date of the Employee’s death. Upon the expiration of the applicable six-month period under Code Section 409A(a)(2)(B)(i) (or, if earlier, the date of the Employee’s death), all stock deferred pursuant to this Subsection (c) will be paid or delivered to Employee (or the Employee’s estate, in the event of the Employee’s death) in a lump sum.

2.     Tax Withholding.

(a)     The minimum amount of the required tax withholding obligations imposed on the Company by reason of the settlement of the Award attributable to Vested Stock Units shall be withheld from settlement of the Award.

(b)     If the Employee does not timely satisfy payment of the tax withholding obligations, the Employee will forfeit the Vested Stock Units.

3.     Rights as Shareholder. The Employee shall have no rights as a shareholder with respect to the either Phantom Stock Units or Vested Stock Units.

4.     Restrictions on Transfer. The Employee shall not have the right to make or permit to exist any transfer or hypothecation, whether outright or as security, with or without consideration, voluntary or involuntary, of all or any part of any right, title or interest in or to any Phantom Stock Units (including, without limitation, Vested Stock Units). Any such disposition not made in accordance with this Award shall be deemed null and void. The restrictions contained in this Section will not apply with respect to transfers of the Phantom Stock Units pursuant to applicable laws of descent and distribution; provided that any applicable the restrictions contained in this Section will continue to be applicable to the Phantom Stock Units after any such transfer; and provided further that the transferee(s) of such Phantom Stock Units must agree in writing to be bound by the provisions of the Plan and this Award.

5.     Change in Capitalization.

(a)     The number and kind of shares of Common Stock upon which the Phantom Stock Units are based (including, without limitation, Vested Stock Units) shall be proportionately adjusted for nonreciprocal transactions between the Company and the holders of capital stock of the Company that cause the per share value of the shares of Common Stock referenced by the Phantom Stock Units to change, such as a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend or distribution (each, an “Equity Restructuring”).

(b)     In the event of a merger, consolidation, extraordinary dividend (including a spin-off), reorganization, recapitalization, sale of substantially all of the Company’s assets, other change in capital structure of the Company, tender offer for shares of Common Stock, or a Change in Control of the Company, that in each case does not constitute an Equity Restructuring, the Committee, in its sole discretion, may make such adjustments with respect to the Phantom Stock Units and take such action as it deems necessary or appropriate, including, without limitation, adjusting the number of Phantom Stock Units, making a corresponding adjustment in the number of shares subject to the Phantom Stock Units, substituting a new award to replace the Award, removing restrictions on outstanding Awards, accelerating the termination of the Award or terminating the Award in exchange for the cash value determined in good faith by the Committee of the Phantom Stock Units, as the Committee may determine. Any determination made by the Committee will be final and binding on the Employee.

(c)     No fractional shares shall be created in making any adjustment pursuant to this Section. Instead, any adjustment pursuant to this Section that would otherwise result in a fractional Phantom Stock Unit shall be further adjusted to round down the numbers of Phantom Stock Units to the next lowest Phantom Stock Unit.

(d)     All determinations and adjustments made by the Committee pursuant to this Section will be final and binding on the Employee. Any action taken by the Committee need not treat all recipients of equity incentives equally.

(e)     The existence of the Plan and the Award shall not affect the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Common Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or part of its business or assets, or any other corporate act or proceeding.

6.     Clawback. Notwithstanding anything herein to the contrary, this Award and any Common Stock issued pursuant to this Award is expressly subject to any “clawback policy” now or hereafter adopted by the Company, as the same may be amended from time to time, or any recoupment permitted or required by law.

7.     Section 409A. This Award is intended to comply with, or otherwise be exempt from, Code Section 409A, as applicable. This Award shall be administered, interpreted, and construed in a manner consistent with such Code section. Should any provision of this Award be found not to comply with, or otherwise be exempt from, the provisions of Code Section 409A, it shall be modified and given effect, in the sole discretion of the Committee and without requiring the Employee’s consent, in such manner as the Committee determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Code Section 409A. No acceleration of payment or settlement may be made except as permitted under Code Section 409A.

8.     Governing Laws. This Award shall be construed, administered and enforced according to the laws of the State of Georgia.

9.     Successors. This Award shall be binding upon and inure to the benefit of the heirs, legal representatives, successors, and permitted assigns of the parties.

10.     Notice. Except as otherwise specified herein, all notices and other communications required or permitted under this Award shall be in writing and, if mailed by prepaid first-class mail or certified mail, return receipt requested, shall be deemed to have been received on the earlier of the date shown on the receipt or three (3) business days after the postmarked date thereof. In addition, notices hereunder may be delivered by hand, facsimile transmission or overnight courier, in which event the notice shall be deemed effective when delivered or transmitted. All notices and other communications under this Award shall be given to the parties hereto at the following addresses: to the Company (attention of the Chief Legal Officer), at the principal office of the Company or at any other address as the Company, by notice to Employee, may designate in writing from time to time; and to Employee, at Employee’s address as shown on the records of the Company, or at any other address as Employee, by notice to the Company, may designate in writing from time to time.

11.     Severability. In the event that any one or more of the provisions or portion thereof contained in this Award shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Award, and this Award shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

12.     Entire Agreement. Subject to the terms and conditions of the Plan, this Award (including the Additional Terms and Conditions) expresses the entire understanding and agreement of the parties with respect to the subject matter. The Committee shall have full and conclusive authority to interpret the Award and to make all other determinations necessary or advisable for the proper administration of the arrangement reflected by this Award. The Committee’s interpretations and determinations in this regard shall be final and binding on the Employee.

13.     Headings. Paragraph headings used herein are for convenience of reference only and shall not be considered in construing this Award.

14.     Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Award, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

15.     No Right to Continued Service. Neither this Award nor the issuance of the Phantom Stock Units hereunder shall be construed as giving the Employee the right to continued service with the Company or any affiliate.

16.     Definitions. Except as provided below, all capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Plan. The following capitalized terms shall have the following meanings:

(a)     “Cause” has the same meaning as provided in the employment agreement currently or most recently in effect between the Employee and the Company or, if applicable, any affiliate of the Company, or if no such definition or employment agreement ever existed, “Cause” means conduct amounting to: (i) fraud or dishonesty in the performance of the duties of Employee’s service with the Company or its affiliates, (ii) Employee’s willful misconduct, refusal to follow the reasonable directions of his/her supervisors, or knowing violation of law, rules or regulations (including misdemeanors relating to public intoxication, driving under the influence, use or possession of controlled substances or relating to conduct of a similarly nature), (iii) acts of moral turpitude or personal conduct in violation of Company’s Code of Business Conduct and Ethics, (iv) absence from work without reasonable excuse, (v) intoxication with alcohol or drugs while on Company’s or affiliates’ premises, (vi) a conviction or plea of guilty or nolo contendere to a crime involving dishonesty, or (vii) a breach or violation of the terms of any agreement to which Employee and the Company (or any affiliate) are party.

(b)     “Disability” means the Employee is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company and its affiliates. The determination of Disability will be made in accordance with the definition of “disability” under Code Section 409A.

6614812.2

     (c)     “Termination of Employment” means a “separation from service” within the meaning of Code Section 409A and the rules and regulations promulgated thereunder. 6614812.2

EX-12.1

Ruby Tuesday, Inc
Unaudited Computation of Ratio of Consolidated Earnings to Fixed Charges
(Dollar Amounts in Millions)
	Thirteen Weeks Ended		Fiscal Year Ended
	August 30, 2016		May 1, 2016		June 2, 2015			June 3, 2014		June 4, 2013
Earnings before fixed charges:
Loss from continuing operations before income taxes	$	(41.4)	$	(52.9)	$	(5.1)	$	(69.6)	$	(21.9)
Less Capitalized interest		0.2		0.6		0.5		0.5		0.5
		(41.2)		(52.3)		(4.6)		(69.1)		(21.4)
Fixed charges:
Interest expense		4.9		21.8		22.8		25.0		26.7
Interest portion of rent expense		3.2		13.6		14.9		16.0		16.6
Total fixed charges		8.1		35.4		37.7		41.0		43.3
Adjusted earnings from continuing operations before income taxes available to cover fixed charges	$	(33.1)	$	(16.9)	$	33.1	$	(28.1)	$	21.9
Ratio of earnings to fixed charges		(4.09)		(0.48)		0.88		(0.69)		0.51
Amount by which earnings were insufficient to cover fixed charges	$	(41.2)	$	(52.3)	$	(4.6)	$	(69.1)	$	(21.4)
* We are presenting the ratio above solely pursuant to the requirement set forth in Item 503 of Regulation S-K.  The earnings and fixed charges in the above ratio are calculated using the definitions as set for by Regulation S-K.

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, F. Lane Cardwell, Jr, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ruby Tuesday, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 7, 2016	/s/ F. Lane Cardwell, Jr.
	F. Lane Cardwell, Jr.
	Interim President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sue Briley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ruby Tuesday, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)()Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 7, 2016	/s/ Sue Briley
	Sue Briley
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ruby Tuesday, Inc. (the “Company”) on Form 10-Q for the quarter ended August 30, 2016 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, F. Lane Cardwell, Jr., Interim President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 7, 2016	/s/ F. Lane Cardwell, Jr.
	F. Lane Cardwell, Jr
	Interim President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ruby Tuesday, Inc. (the “Company”) on Form 10-Q for the quarter ended August 30, 2016 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Sue Briley, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 7, 2016	/s/ Sue Briley
	Sue Briley
	Chief Financial Officer

XML

Document And Entity Information - shares	3 Months Ended
	Aug. 30, 2016	Oct. 05, 2016
Document Information [Line Items]
Entity Registrant Name	RUBY TUESDAY INC
Entity Central Index Key	0000068270
Trading Symbol	rt
Current Fiscal Year End Date	--06-06
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		60,196,759
Document Type	10-Q
Document Period End Date	Aug. 30, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Aug. 30, 2016	Sep. 01, 2015
Revenue:
Restaurant sales and operating revenue	$ 255,764	$ 277,907
Franchise revenue	893	1,573
Total revenue	256,657	279,480
Operating costs and expenses:
Cost of goods sold	72,190	76,241
Payroll and related costs	90,607	95,335
Other restaurant operating costs	57,363	62,207
Depreciation and amortization	11,229	12,806
Selling, general, and administrative, net	31,585	29,396
Closures and impairments, net	30,192	2,712
Interest expense, net	4,877	6,000
Total operating costs and expenses	298,043	284,697
Loss before income taxes	(41,386)	(5,217)
Benefit for income taxes	(1,694)	(1,023)
Net loss	(39,692)	(4,194)
Other comprehensive income:
Pension liability reclassification	355	(44)
Total comprehensive loss	$ (39,337)	$ (4,238)
Loss per share:
Basic (in dollars per share)	$ (0.66)	$ (0.07)
Diluted (in dollars per share)	$ (0.66)	$ (0.07)
Weighted average shares:
Basic (in shares)	59,790	61,344
Diluted (in shares)	59,790	61,344

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Aug. 30, 2016	May 31, 2016
Current assets:
Cash and cash equivalents	$ 68,661	$ 67,341
Accounts and other receivables	7,108	12,827
Inventories:
Merchandise	11,932	13,799
China, silver and supplies	6,726	7,796
Income tax receivable	4,721	3,003
Prepaid rent and other expenses	10,643	11,508
Assets held for sale	11,849	4,642
Total current assets	121,640	120,916
Property and equipment, net	651,777	671,250
Other assets	44,742	45,751
Total assets	818,159	837,917
Current liabilities:
Accounts payable	22,033	22,141
Accrued liabilities:
Taxes, other than income and payroll	11,549	10,769
Employee-related Liabilities, Current	14,978	14,561
Insurance	5,475	5,109
Rent and other	45,436	18,838
Deferred revenue – gift cards	14,720	16,354
Less current maturities	9,781	9,934
Total current liabilities	123,972	97,706
Long-term debt and capital leases, less current maturities	213,728	213,803
Deferred escalating minimum rent	45,787	51,535
Other deferred liabilities	65,393	67,093
Total liabilities	448,880	430,137
Commitments and contingencies (Note 11)
Shareholders’ equity:
Common stock, $0.01 par value; (authorized: 100,000 shares; issued and outstanding: 2017 – 60,197 shares, 2016 – 60,137 shares)	602	601
Capital in excess of par value	76,772	75,938
Retained earnings	301,658	341,350
Deferred compensation liability payable in Company stock	496	521
Company stock held by Deferred Compensation Plan	(496)	(521)
Accumulated other comprehensive loss	(9,753)	(10,109)
Total shareholders' equity	369,279	407,780
Total liabilities and shareholders' equity	$ 818,159	$ 837,917

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares shares in Thousands	Aug. 30, 2016	May 31, 2016
Common stock, issued (in shares)	60,197	60,137
Common stock, outstanding (in shares)	60,197	60,137
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	100,000	100,000

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Aug. 30, 2016	Sep. 01, 2015
Operating activities:
Net loss	$ (39,692)	$ (4,194)
Adjustments to reconcile net loss to net cash provided/(used) by operating activities:
Depreciation and amortization	11,229	12,806
Deferred income taxes		(1,345)
Loss on impairments, including disposition of assets	6,253	2,278
Inventory write-off	2,754
Share-based compensation expense	861	(279)
Lease reserve adjustments	17,728	604
Deferred escalating minimum rent	261	557
Other, net	150	1,258
Changes in operating assets and liabilities:
Receivables	1,004	74
Inventories	404	(2,372)
Income taxes	(1,718)	(1,501)
Prepaid and other assets	865	(966)
Accounts payable, accrued and other liabilities	1,508	(9,391)
Net cash provided/(used) by operating activities	1,607	(2,471)
Investing activities:
Purchases of property and equipment	(6,358)	(9,942)
Proceeds from sale of assets	5,257	2,746
Insurance proceeds from property claims	150
Reductions in Deferred Compensation Plan assets	312	209
Other, net	860
Net cash provided/(used) by investing activities	221	(6,987)
Financing activities:
Principal payments on long-term debt	(475)	(8,901)
Stock repurchases	(26)	(9)
Payments for debt issuance costs	(7)	(25)
Net cash used by financing activities	(508)	(8,935)
Increase/(decrease) in cash and cash equivalents	1,320	(18,393)
Cash and cash equivalents:
Beginning of fiscal year	67,341	75,331
End of quarter	68,661	56,938
Supplemental disclosure of cash flow information:
Interest, net of amount capitalized	314	1,478
Income taxes, net	7	1,759
Significant non-cash investing and financing activities:
Retirement of fully depreciated assets	7,175	5,956
Reclassification of properties to assets held for sale	$ 7,493	$ 325

XML

Note 1 - Basis of Presentation

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.

Basis of Presentation

Description of Business

Ruby Tuesday, Inc., including its wholly-owned subsidiaries (“RTI,” the “Company,” “we,” and/or “our”), owns and operates Ruby Tuesday® casual dining restaurants. We also franchise the Ruby Tuesday concept in selected domestic and international

markets.

As discussed further in Note 7 to the Condensed Consolidated Financial Statements,

during the 13 weeks ended August 30, 2016, we closed 99 Company-owned restaurants, 95 of which were closed following a comprehensive review of the Company’s property portfolio due to perceived limited upside due to market concentration, challenged trade areas, and other factors. At August 30, 2016, we owned and operated 547 Ruby Tuesday restaurants concentrated primarily in the Southeast, Northeast, Mid-Atlantic, and Midwest of the United States, which we consider to be our core markets. We also owned and operated one Lime Fresh Mexican Grill® (“Lime Fresh”) fast casual restaurant as of August 30, 2016. As further discussed in Note 4 to the Condensed Consolidated Financial Statements, we entered into an agreement during fiscal year 2016 to sell the assets related to eight Company-owned Lime Fresh restaurants. The one remaining Company-owned Lime Fresh restaurant not closed as of August 30, 2016 is expected to be closed and transferred to the buyer prior to the end of our second quarter of fiscal year 2017.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not

include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. In addition, certain reclassifications were made to prior period amounts to conform to the current period presentation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates. Operating results for the 13 weeks ended August 30, 2016 are not necessarily indicative of results that may be expected for the 53-week year ending June 6, 2017. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in RTI’s Annual Report on Form 10-K for the fiscal year ended May 31, 2016.

XML

Note 2 - Loss Per Share

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

2.

Loss Per Share

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during each period presented. Diluted earnings per share gives effect to stock options and restricted stock outstanding during the applicable periods, except during loss periods as the effect would be anti-dilutive. The following table reflects the calculation of weighted average common and dilutive potential common shares outstanding as presented in the accompanying

Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per-share data):

	Thirteen weeks ended
	August 30, 2016			September 1, 2015
Net loss	$	( 39,692	)	$	(4,194	)
Weighted average common shares outstanding		59,790			61,344
Dilutive effect of stock options and restricted stock		–			–
Weighted average common and dilutive potential  common shares outstanding		59,790			61,344
Basic net loss per share	$	(0. 66	)	$	(0.07	)
Diluted net loss per share	$	(0. 66	)	$	(0.07	)

Stock options with an exercise price greater than the average market price of our c

ommon stock and certain options, restricted stock, and restricted stock units with unrecognized compensation expense do not impact the computation of diluted loss per share because the effect would be anti-dilutive. The following table summarizes on a weighted-average basis stock options, restricted stock, and restricted stock units that were excluded from the computation of diluted loss per share because their inclusion would have had an anti-dilutive effect (in thousands):

	Thirteen weeks ended
	August 30, 2016		September 1, 2015
Stock options		2,393		2,813
Restricted stock / Restricted stock units		758		749
Total		3,151		3,562

XML

Note 3 - Franchise Programs

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Franchise Programs [Text Block]

3. Franchise Programs

As of August 30, 2016, our franchisees collectively operated

68 domestic and international Ruby Tuesday restaurants. We do not own any equity interest in our franchisees.

Under the terms of the franchise operating agreements, we charge a royalty fee (generally 4.0% of monthly gross sales)

, a marketing and purchasing fee (generally 1.5% of monthly gross sales), and a national advertising fee (generally 1.5% of monthly gross sales as of August 30, 2016, but up to a maximum of 3.0% under the terms of the franchise operating agreements).

Amounts received from franchisees for the marketing and purchasing fee and national advertising fee are considered by RTI to be reimbursements, recorded on an accrual basis as earned, and have been netted against Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss. For the 13 weeks ended August 30, 2016 and September 1, 2015, we recorded $

0.2 million and $0.5 million, respectively, in marketing and purchasing fees and national advertising fund fees.

XML

Note 4 - Accounts and Other Receivables

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

4. Accounts and Other Receivables

Accounts and other receivables consist of the following (in thousands):

	August 30, 2016		May 31, 2016
Amounts due from franchisees	$	3,318	$	3,013
Third-party gift card sales		925		1,272
Rebates receivable		819		1,001
Receivables from sales of Lime Fresh Mexican Grill assets		140		5,289
Other receivables		1, 906		2,252
	$	7,108	$	12,827

We negotiate purchase arrangements, including price terms, with designated and approved suppliers on behalf of us and our franchise system. We receive various volume discounts and rebates based on purchases for our Company-owned restaurants from numerous suppliers.

Amounts due from franchisees consist of royalties, license and other miscellaneous fees, a portion of which represents current and recently-invoiced billings.

As of August 30, 2016 and May 31, 2016, other receivables consisted primarily of amounts due from our distributor, online ordering, sales and other miscellaneous tax refunds, and other receivables.

Sale

s

of Lime Fresh Mexican Grill

Assets

On May 31, 2016, we entered into agreements with two separate buyers to sell various Lime Fresh

Mexican Grill assets. Pursuant to the terms of an asset purchase agreement with another restaurant company, we agreed to sell our eight remaining Lime Fresh Mexican Grill Company-owned restaurants for $6.0 million. Given that closing requirements were satisfied for only six of the eight restaurants, an amendment was agreed upon which allowed for the payment of $5.0 million upon the transfer of the six restaurants and the holdback of $1.0 million until such time that both of the remaining two restaurants had closed and transferred to the buyer. The six restaurants closed and were transferred on May 31, 2016. While one of the two remaining restaurants was sold and transferred to the buyer on June 14, 2016, the final restaurant is expected to remain open and be operated by Ruby Tuesday until a date in our second quarter of fiscal year 2017.

The $5.3 million of receivables from sales of Lime Fresh assets

included in the table above as of May 31, 2016 consists of $5.0 million due from the buyer of our Lime Fresh restaurants, which was collected on the first day of fiscal year 2017, and $0.3 million due from the buyer of the Lime Fresh brand, of which $0.1 million remains outstanding. Given that the closing requirements were not satisfied on the two remaining restaurants as of August 30, 2016, we did not reflect those restaurants as having been sold during the 13 weeks ended August 30, 2016, nor we did accrue as a receivable the $1.0 million holdback.

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Note 5 - Property, Equipment, and Assets Held for Sale

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

5. Property, Equipment, and Assets Held for Sale

Property and equipment, net, is comprised of the following (in thousands):

	August 30, 2016		May 31, 2016
Land	$	182,829	$	209,930
Buildings		381,496		398,984
Improvements		294,500		303,032
Restaurant equipment		216,542		222,646
Other equipment		80,026		82,204
Surplus properties*		37,302		4,354
Construction in progress and other		2,239		3,325
		1,194,93 4		1,224,475
Less accumulated depreciation		543,157		553,225
Property and equipment, net	$	651,777	$	671,250

* Surplus properties represent assets held for sale that are not classified as such in the Consolidated Balance Sheets as we

have yet to conclude that we can sell these assets within the next 12 months. These assets primarily consist of parcels of land upon which we have no intention to build restaurants, closed properties which include a building, and liquor licenses not needed for operations.

Included within the current assets section of our

Condensed Consolidated Balance Sheets at August 30, 2016 and May 31, 2016 are amounts classified as assets held for sale totaling $11.8 million and $4.6 million, respectively. Assets held for sale primarily consist of parcels of land upon which we have no intention to build restaurants, land and buildings of closed restaurants, and various liquor licenses. During the 13 weeks ended August 30, 2016 and September 1, 2015, we sold surplus properties with carrying values that were negligible and $2.1 million, respectively, at net gains of $0.1 million and $0.6 million, respectively. Cash proceeds, net of broker fees, from these sales totaled $0.1 million and $2.7 million for the 13 weeks ended August 30, 2016 and September 1, 2015, respectively.

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Note 6 - Long-term Debt and Capital Leases

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Debt and Capital Leases Disclosures [Text Block]

6. Long-Term Debt and Capital Leases

Long-term debt and capital lease obligations consist of the following (in thousands):

	August 30, 2016			May 31 , 2016
Senior unsecured notes	$	212,546		$	212,546
Unamortized discount		( 1,675	)		(1,771	)
Unamortized debt issuance costs		( 2,832	)		(2,995	)
Senior unsecured notes less unamortized discount and
debt issuance costs		208,039			207,780
Revolving credit facility		–			–
Mortgage loan obligations		15,258			15,745
Unamortized premium - mortgage loan obligations		47			75
Unamortized debt issuance costs - mortgage loan obligations		( 58	)		(74	)
Capital lease obligations		223			211
Total long-term debt and capital leases		223,509			223,737
Less current maturities		9,781			9,934
Long-term debt and capital leases, less current maturities	$	213,728		$	213,803

On May 14, 2012, we entered into an indenture (the “Indenture”) among Ruby Tuesday, Inc., certain subsidiaries of the Company as guarantors and Wells Fargo Bank, National Association as trustee, governing the Company

’s $250.0 million aggregate principal amount of 7.625% senior notes due 2020 (the “Senior Notes”). The Senior Notes were issued at a discount of $3.7 million, which is being amortized to interest expense, net using the effective interest method over the eight-year term of the notes.

The Senior Notes are guaranteed on a senior unsecured basis by our existing and future domestic restricted subsidiaries, subject to certain exceptions. They rank equal in right of payment with our existing and future senior indebtedness and senior in right of payment to any of our future subordinated indebtedness. The Senior Notes are

effectively subordinated to all of our secured debt, including borrowings outstanding under our revolving credit facility, to the extent of the value of the assets securing such debt and structurally subordinated to all of the liabilities of our existing and future subsidiaries that do not guarantee the Senior Notes.

Interest on the Senior Notes is calculated at 7.625% per annum, payable semiannually on each May 15 and November 15 to holders of record on the May 1 or November 1 immediately preceding the interest payment date.

Accrued interest on the Senior Notes and our other long-term debt and capital lease obligations was $5.0 million and $1.0 million as of August 30, 2016 and May 31, 2016, respectively, and is included in Accrued liabilities – Rent and other in our Condensed Consolidated Balance Sheets.

We may redeem the Senior Notes, in whole or in part, at the redemption prices specified in the Indenture plus accrued and unpaid interest. There is no sinking fund for the Senior Notes, which mature on May 15, 2020.

The Indenture contains covenants that limit, among other things, our ability and the ability of certain of our subsidiaries to (i) incur or guarantee additional indebtedness; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make certain investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of their assets; (vi) enter into transactions with affiliates;

and (vii) sell or transfer certain assets. The Indenture also restricts the declaration and payment of a dividend or other distribution on, and/or repurchase by RTI in respect of, our outstanding common stock. These covenants are subject to a number of important exceptions and qualifications, as described in the Indenture, and certain covenants will not apply at any time when the Senior Notes are rated investment grade by the Rating Agencies, as defined in the Indenture. The Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Senior Notes to be due and payable immediately.

On December 3, 2013, we entered into a four-year revolving credit agreement (the “Senior Credit Facility”) under which we may borrow up to $50.0 million with the option, subject to certain conditions, to increase the facility by up to $35.0 million. The terms of the Senior Credit Facility provide for a $25.0 million sublimit for the issuance of standby letters of credit.

Under the terms of the Senior Credit Facility, interest rates charged on borrowings can

vary depending on the interest rate option we choose to utilize. Our options for the rate are a Base Rate or LIBOR plus an applicable margin, provided that the rate shall not be less than zero. The Base Rate is defined as the highest of the issuing bank’s prime rate, the Federal Funds rate plus 0.50%, or the Adjusted LIBO rate (as defined in the Senior Credit Facility) plus 1.0%. The applicable margin for the LIBOR-based option is a percentage ranging from 2.50% to 3.50% and for the Base Rate option is a percentage ranging from 1.50% to 2.50%. We pay commitment fees quarterly ranging from 0.40% to 0.75% on the unused portion of the Senior Credit Facility.

As security for the Senior Credit Facility, we granted the lenders liens and security interests in substantially all of the shares of capital stock of the Company and each of our present and future subsidiaries, substantially all of the personal property of the Company and each of our present and future subsidiaries, and the real property, improvements, and fixtures of 49 Ruby Tuesday restaurants. The real property, improvements, and fixtures of the 49 restaurants pledged as collateral appraised at $101.4 million at the time of the transaction and have a

n August 30, 2016 net book value of $77.8 million.

We had no borrowings outstanding under the Senior Credit Facility at

August 30, 2016. After consideration of letters of credit outstanding, we had $38.5 million available under the Senior Credit Facility as of August 30, 2016.

The Senior Credit Facility contains a number of customary affirmative and negative covenants that, among other things, limit or restrict our ability to incur liens, engage in mergers or other fundamental changes, make acquisitions, investments, loans and advances, pay dividends or other distributions, sell or otherwise dispose of certain assets, engage in certain transactions with affiliates, enter into burdensome agreements or certain hedging agreements, amend organizational documents, change accounting practices, incur additional indebtedness and prepay other indebtedness.

Under the terms of the Senior Credit Facility we are allowed, under certain circumstances, to repurchase up to $20.0 million of the S

enior Notes in any fiscal year. We did not repurchase any Senior Notes during the 13 weeks ended August 30, 2016.

Under the Senior Credit Facility, we are required to comply with financial covenants relating to the maintenance of a maximum leverage ratio and a minimum fixed charge coverage ratio. The terms of the Senior Credit Facility require us to maintain a maximum leverage ratio of no more than 4.40 to 1.0 and a minimum fixed charge coverage ratio of 1.60 to 1.0 for the quarter ended

August 30, 2016. For the remainder of fiscal year 2017, the Senior Credit Facility requires us

to maintain a maximum leverage ratio of 4.30 to 1.0 for our second and third fiscal quarters and 4.25 to 1.0 for our fourth fiscal quarter, and requires us to maintain a minimum fixed charge coverage ratio of 1.65 to 1.0 for our second and third fiscal quarters and 1.70 to 1.0 for our fourth fiscal quarter.

The Senior Credit Facility terminates no later than December 3, 2017.

  Upon the occurrence of an event of default, the lenders may terminate the loan commitments, accelerate all loans and exercise any of their rights under the Senior Credit Facility and any ancillary loan documents.

On December 3, 2013, in connection with our entry into the Senior Credit Facility, the Company and certain of its subsidiaries entered into loan modification agreements (the “Loan Modification Agreements”) with certain mortgage lenders to, among other things, provide waivers and consents under certain of our mortgage loan obligations to enter into the Senior Credit Facility. The Loan Modification Agreements also amended certain financial reporting requirements under the specified loans and modified and/or provided for certain financial covenants for the specified loans, including the maximum leverage ratio and the minimum fixed charge coverage ratio.

We were in compliance with our maximum leverage ratio and our minimum fixed charge coverage ratio as of

August 30, 2016.

Our $15.

2 million in mortgage loan obligations as of August 30, 2016 consists of various loans acquired upon franchise acquisitions. These loans, which mature between January 2017 and October 2021, have balances which range from $0.6 million to $6.8 million and interest rates of 7.60% to 10.17%. Included in our current maturities of long-term debt as of August 30, 2016 is $9.4 million related to two mortgage loan obligations that have balloon payments due during the third quarter of fiscal year 2017. Many of the properties acquired from franchisees collateralize the loans outstanding.

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Note 7 - Closures and Impairments Expense

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Asset Impairment Charges [Text Block]

7. Closures and Impairments Expense

Closures and impairments, net include the following (in thousands):

	Thirteen weeks ended
	August 30, 2016			September 1, 2015
Property impairments	$	6,580		$	2,577
Closed restaurant lease reserves		17,728			604
Inventory write-off		2,754			–
Severance benefits		1, 760			18
Other closing expense		1,427			103
Gain on sale of surplus properties		( 57	)		(590	)
Closures and impairments, net	$	30,192		$	2,712

During the 13 weeks ended August 30, 2016, we closed

99 Company-owned restaurants, 95 of which were closed in connection with an asset rationalization plan announced on August 11, 2016. The plan was formulated in response to a comprehensive review of our property portfolio through the planned closure of restaurants with perceived limited upside due to market concentration, challenged trade areas, or other factors. Included within Closures and impairments, net for the 13 weeks ended August 30, 2016 are closed restaurant lease reserves, inventory write-off, severance benefits, and other closing expense of $24.7 million related to these closures.

A rollforward of our future lease obligations associated with closed restaurants is as follows (in thousands):

	Reserve for Lease Obligations
Balance at May 31, 2016	$	6,270
Closing expense including rent and other lease charges		17,728
Payments		( 1,393	)
Adjustments to deferred escalating minimum rent		9,283
Balance at August 30, 2016	$	31,888

The amounts comprising future lease obligations in the table above are estimated using certain assumptions, including the period of time it will take to settle the lease with the landlord or find a suitable sublease tenant, and the amount of actual future cash payments could differ from our recorded lease obligations. Of the total future lease obligations included in the table above,

$27.9 million is included within Accrued liabilities – Rent and other, $3.5 million is included within Deferred escalating minimum rent, and $0.5 million is included within Other deferred liabilities in our Condensed Consolidated Balance Sheet as of August 30, 2016. For the remainder of fiscal year 2017 and beyond, our focus will be on obtaining settlements, or subleases as necessary, on as many of these leases as possible and these settlements could be higher or lower than the amounts recorded. The actual amount of any cash payments made by the

Company for lease contract termination costs will be dependent upon ongoing negotiations with the landlords of the leased restaurant properties.

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Note 8 - Employee Post-employment Benefits

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

 

8. Employee Post-Employment Benefits

Pension and Postretirement Medical and Life Benefits

We sponsor three defined benefit pension plans for active employees and offer certain postretirement benefits for retirees. A summary of each of these is presented below.

Retirement Plan

RTI sponsors the Morrison Restaurants Inc. Retirement Plan (the "Retirement Plan"). Effective December 31, 1987, the Retirement Plan was amended so that no additional benefits would accrue and no new participants could enter the Retirement Plan after that date. Participants receive benefits based upon salary and length of service.

Minimum funding for the Retirement Plan is determined in accordance with the guidelines set forth in employee benefit and tax laws. From time to

time we may contribute additional amounts as we deem appropriate. We estimate that we will be required to make contributions totaling $0.1 million to the Retirement Plan during the remainder of fiscal year 2017.

Executive Supplemental Pension Plan and Management Retirement Plan

Under these unfunded defined benefit pension plans, eligible employees earn supplemental retirement income based upon salary and length of service, reduced by social security benefits and amounts otherwise receivable under other specified Company retirement plans. Effective June 1, 2001, the Management Retirement Plan was amended so that no additional benefits would accrue and no new participants could enter the plan after that date. In December 2015, the Executive Supplemental Pension Plan was similarly amended effective as of January 1, 2016 for current participants, and as of January 1, 2018 for two specified potential participants, who are currently not named executive officers.

Included in our Condensed Consolidated Balance Sheets as of August 30, 2016 and May 31, 2016 are amounts within Accrued liabilities: Payroll and related costs of

$2.5 million as of both dates and amounts within Other deferred liabilities of $34.7 million and $35.7 million, respectively, relating to our three defined benefit pension plans.

Postretirement Medical and Life Benefits

Our Postretirement Medical and Life Benefits plans provide medical benefits to substantially all retired employees and life insurance benefits to certain retirees. The medical plan requires retiree cost sharing provisions that are more substantial for employees who retire after January 1, 1990.

Included in our Condensed Consolidated Balance Sheets as of August 30, 2016 and May 31, 2016 are amounts within Accrued liabilities: Payroll and related costs of $0.1 million as of both dates and amounts within Other deferred liabilities of $1.0 million as of both dates relating to our postretirement medical and life benefits.

The following tables detail the components of net periodic benefit cost for the Retirement Plan, Management Retirement Plan, and the Executive Supplemental Pension Plan (collectively, the "Pension Plans") and the Postretirement Medical

and Life Benefits plans, which is recorded as a component of Selling, general, and administrative expense, net in our Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands):

	Pension Plans
	Thirteen weeks ended
	August 30, 2016			September 1, 2015
Service cost	$	6		$	230
Interest cost		420			599
Expected return on plan assets		( 91	)		( 103	)
Recognized actuarial loss		338			628
Net periodic benefit cost	$	673		$	1,354

	Postretirement Medical and Life Benefits
	Thirteen weeks ended
	August 30, 2016		September 1, 2015
Service cost	$	1	$	1
Interest cost		9		12
Recognized actuarial loss		17		32
Net periodic benefit cost	$	2 7	$	45

During the 13 weeks ended August 30, 2016 and September 1, 2015, we reclassified recognized actuarial losses of $

0.4 million and $0.7 million, respectively, out of accumulated other comprehensive loss and into pension expense, which is included in Selling, general and administrative, net within our Condensed Consolidated Statements of Operations and Comprehensive Loss.

We also sponsor two defined contribution retirement savings plans. Information regarding these plans is included in our Annual Report on Form 10-K for the fiscal year ended

May 31, 2016.

Restaurant Closures and

Corporate Restructuring

W

e closed 99 Company-owned restaurants during the 13 weeks ended August 30, 2016, 95 of which were closed in connection with an asset rationalization plan as previously discussed in Note 7 to the Condensed Consolidated Financial Statements.

A

s of both August 30, 2016 and May 31, 2016, liabilities of $0.3 million, representing unpaid obligations related to employee severance and vacation accruals, were included within Accrued liabilities: Payroll and related costs in our Consolidated Balance Sheet. Costs of $1.7 million and $0.3 million reflected in the table below related to employee severance and unused vacation accruals are included within Closures and impairments, net and Selling, general, and administrative, net, respectively, in our Consolidated Statements of Operations and Comprehensive Loss. A roll forward of our obligations in connection with employee separations is as follows (in thousands):

Balance at May 31, 2016	$	317
Employee severance and unused vacation accruals		2,020
Cash payments		( 2,068	)
Balance at August 30, 2016	$	269

As further discussed in Note 14 to the Condensed Consolidated Financial Statements, on

September 13, 2016, James J. Buettgen resigned as the Chairman of the Board of Directors, President, and Chief Executive Officer of the Company.

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Note 9 - Income Taxes

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

9. Income Taxes

Under Accounting Standards Codification 740 (“ASC 740”), companies are required

to apply their estimated annual tax rate on a year-to-date basis in each interim period. Under ASC 740, companies should not apply the estimated annual tax rate to interim financial results if the estimated annual tax rate is not reliably predictable. In this situation, the interim tax rate should be based on the actual year-to-date results. Due to changes in our projections, which have fluctuated as we work through our brand repositioning, a reliable projection of our annual effective rate has been difficult to determine. As such, we recorded a tax provision for the 13 weeks ended August 30, 2016 and September 1, 2015 based on the actual year-to-date results, in accordance with ASC 740.

We regularly evaluate the need for a valuation allowance for deferred tax assets by assessing

whether it is more likely than not that we will realize the deferred tax assets in the future.  A valuation allowance assessment is performed each reporting period, with any additions or adjustments reflected in earnings in the period of assessment.  In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets for each jurisdiction. As of May 31, 2016, we have rolling three-year historical operating losses and have concluded that the negative evidence outweighs the positive evidence.

In accordance with the applicable accounting standards, we are unable to use future income projections to support the realization of our deferred tax assets as a consequence of the above conclusion.

   Instead, in determining the appropriate amount of the valuation allowance, we considered the timing of future reversal of our taxable temporary differences and available tax strategies that, if implemented, would result in the realization of deferred tax assets. Our valuation allowance for deferred tax assets totaled $106.2 million and $89.9 million as of August 30, 2016 and May 31, 2016, respectively.

We recorded a tax benefit of $

1.7 million and $1.0 million for the 13 weeks ended August 30, 2016 and September 1, 2015, respectively. Netted against our tax benefit was a charge of $16.3 million representing the amount reserved for the increase in deferred tax assets during the quarter which primarily related to general business credit carryforwards and federal and state net operating loss carryforwards.

We had a gross liability for unrecognized tax benefits, exclusive of accrued interest and penalties, of $

4.6 million and $4.5 million, respectively, as of August 30, 2016 and May 31, 2016, of which $3.7 million was reclassified against our deferred tax assets as of both dates. As of August 30, 2016 and May 31, 2016, the total amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate was $2.4 million and $2.3 million, respectively. The liability for unrecognized tax benefits as of August 30, 2016 includes $0.4 million related to tax positions for which it is reasonably possible that the total

amounts could change within the next twelve months based on the outcome of examinations and negotiations with tax authorities.

Interest and penalties related to unrecognized tax benefits are recognized as components of income tax expense. As of

both August 30, 2016 and May 31, 2016, we had accrued $0.4 million for the payment of interest and penalties. During the first quarter of fiscal year 2017, accrued interest and penalties increased by an insignificant amount.

At

August 30, 2016, we are no longer subject to U.S. federal income tax examinations by tax authorities for fiscal years prior to 2012, and with few exceptions, we are no longer subject to state and local examinations by tax authorities prior to fiscal year 2013.

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Note 10 - Share-based Employee Compensation

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

 

10. Share-Based Employee Compensation

Preferred Stock

RTI is authorized, under its Certificate of Incorporation, to issue up to 250,000 shares of preferred stock with a par value of $0.01. These shares may be issued from time to time in one or more series. Each series will have dividend rates, rights of conversion and redemption, liquidation prices, and other terms or conditions as determined by the Board of Directors. No preferred shares have been issued as of

August 30, 2016 and May 31, 2016.

The Ruby Tuesday, Inc. Stock Incentive Plan and the Ruby Tuesday, Inc. 1996 Stock Incentive Plan

A committee, appointed by the Board of Directors, administers the Ruby Tuesday, Inc. Stock Incentive Plan (“SIP”) and the Ruby Tuesday, Inc. 1996 Stock Incentive Plan (“1996 SIP”), and has full authority in its discretion to determine the key employees, officers, and non-employee directors to whom share-based incentives are granted and the terms and provisions of share-based incentives. Stock option grants under the SIP and 1996 SIP can have varying vesting provisions and exercise periods as determined by such committee. A majority of currently outstanding stock options granted under the SIP and 1996 SIP vest within three years following the date of grant and expire seven years after the date of grant. The SIP and 1996 SIP permit the committee to make awards of shares of common stock, awards of stock options or other derivative securities related to the value of the common

stock, and certain cash awards to eligible persons. These discretionary awards may be made on an individual basis or for the benefit of a group of eligible persons. All stock options awarded under the SIP and 1996 SIP have been awarded with an exercise price equal to the fair market value at the time of grant.

At

August 30, 2016, we had reserved a total of 6,726,000 shares of common stock for the SIP and 1996 SIP. Of the reserved shares at August 30, 2016, 2,282,000 were subject to stock options outstanding. Stock option exercises are settled with the issuance of new shares. Net shares of common stock available for issuance at August 30, 2016 were 4,444,000.

Stock Options

The following table summarizes our stock option activity under these stock option plans for the

13 weeks ended August 30, 2016 (Stock Options and Aggregate Intrinsic Value are in thousands):

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Service-based vesting:
Outstanding at May 31, 2016		2,066		$	7. 89
Granted		809			3.82
Cancellations and forfeitures		( 3	)		6.40
Expired		( 87	)		6.64
Outstanding at August 30, 2016		2,785		$	6.75		4.07	$	–
Exercisable at August 30, 2016		1,806		$	8.14		2.72	$	–

At May 31, 2016, there was approximately $

1.1 million of unrecognized pre-tax compensation expense related to non-vested stock options. This cost is expected to be recognized over a weighted average period of 1.9 years.

During the 13 weeks ended August 30, 2016, we granted 809,000 service-based stock options to certain employees under the terms of the SIP. The stock options awarded vest in equal annual installments over a three-year period following grant of the award, and have a maximum life of seven years.

Restricted Stock and Restricted Stock Units (“RSU”)

The following table summarizes our restricted stock and RSU activity for the

13 weeks ended August 30, 2016 (in thousands, except per-share data):

	Shares			Weighted Average Fair Value
Service-Based Vesting:
Unvested at May 31, 2016		564		$	6. 29
Granted		292			3.82
Vested		( 102	)		6.67
Cancellations and forfeitures		( 16	)		6.47
Unvested at August 30, 2016		738		$	5.25
Performance-Based Vesting:
Unvested at May 31, 2016		225		$	6.51
Cancellations and forfeitures		( 5	)		6.51
Unvested at August 30, 2016		220		$	6.51

The

fair value of restricted stock and RSU awards is based on the closing price of our common stock on the date prior to the grant date. At August 30, 2016, unrecognized compensation expense related to restricted stock and RSU grants expected to vest totaled $2.5 million and will be recognized over a weighted average vesting period of 1.6 years.

During

the 13 weeks ended August 30, 2016, we granted 286,000 service-based RSUs to certain employees under the terms of the SIP and 1996 SIP. The service-based RSUs will vest in three equal installments over a three-year period following the date of grant.

Also during the 13 weeks ended August

30, 2016, we granted 571,000 performance-based stock units that will settle in cash and vest approximately three years after the grant date. Vesting of the performance-based stock units is contingent upon the Company’s achievement of a same-restaurant sales performance condition related to the next three fiscal years. Included in our Condensed Consolidated Balance Sheets as of August 30, 2016 and May 31, 2016 are amounts within Other deferred liabilities of $0.4 million and $0.2 million, respectively, relating to all of our long-term incentive awards that will settle in cash.

I

ncluded within Selling, general, and administrative, net in our Consolidated Statements of Operations and Comprehensive Loss is share-based compensation expense of $0.9 million for the 13 weeks ended August 30, 2016 and net credit of $0.3 million for the 13 weeks ended September 1, 2015 as a result of forfeitures.

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Note 11 - Commitments and Contingencies

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

1

1

. Commitments and Contingencies

Litigation

We are presently, and from time to time, subject to pending claims and lawsuits arising in the ordinary course of business. We provide reserves for such claims when payment is probable and estimable in accordance with GAAP. At this time, in the opinion of management, the ultimate resolution of pending legal proceedings will not have a material adverse effect on our operations, financial position, or cash flows.

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Note 12 - Fair Value Measurements

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

1

2

. Fair Value Measurements

The following table presents the fair values of our financial assets and

liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall (in thousands):

	Level		August 30, 2016			May 31, 2016
Deferred compensation plan – Assets		1	$	6,743		$	6,660
Deferred compensation plan – Liabilities		1		( 6,743	)		(6,660	)

There were no transfers among levels within the fair value hierarchy during

the 13 weeks ended August 30, 2016.

The Deferred Compensation Plan and the Ruby Tuesday, Inc. Restated Deferred Compensation Plan (

the “Predecessor Plan”) are unfunded, non-qualified deferred compensation plans for eligible employees. Assets earmarked to pay benefits under the Deferred Compensation Plan and Predecessor Plan are held by a rabbi trust. We report the accounts of the rabbi trust in our Consolidated Financial Statements. The investments held by these plans are considered trading securities and are reported at fair value based on third-party broker statements. The realized and unrealized holding gains and losses related to these other

investments, as well as the offsetting compensation expense, is recorded in Selling, general, and administrative expense, net in the Consolidated Financial Statements.

The investment in RTI common stock and related liability payable in RTI common stock, which are reflected in Shareholders

’ Equity in the Consolidated Balance Sheets, are excluded from the fair value table above as these are considered treasury shares and reported at cost.

The following table

presents the fair values on our Condensed Consolidated Balance Sheets as of August 30, 2016 for those assets and liabilities measured on a non-recurring basis (in thousands):

	Fair Value Measurements
	Level		August 30, 2016
Long-lived assets held for use		2	$	1,195
Long-lived assets held for sale		2		695
Total			$	1,890

The following table presents the losses recognized during the

13 weeks ended August 30, 2016 and September 1, 2015 resulting from fair value measurements of assets and liabilities measured on a non-recurring basis. The amounts presented are included in Closures and impairments, net in our Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands):

	Thirteen weeks ended
	August 30, 2016		September 1, 2015
Long-lived assets held for use	$	4,266	$	2,485
Long-lived assets held for sale		2,314		92
Property impairments	$	6,580	$	2,577

Long-lived assets held for sale are valued using Level 2 inputs, primarily from information obtained through broker listings or sales agreements. Costs to market and/or sell are factored into the estimates of fair value for those properties included in Assets held for sale on our

Condensed Consolidated Balance Sheets.

We review our long-lived assets (primarily property, equipment, and, as appropriate, reacquired franchise rights and favorable leases) related to each restaurant to be held and used in the business, whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be recoverable.

Long-lived assets held for use presented in the table above includes restaurants or groups of restaurants that we have impaired. From time to time, the table will also include closed restaurants or surplus sites not meeting held for sale criteria that have been offered for sale at a price less than their carrying value.

The fair values of our long-lived assets held for use are primarily based on broker estimates of the value of the land, building, leasehold improvements, and other residual assets (Level 2).

Our

financial instruments at August 30, 2016 and May 31, 2016 consisted of cash and cash equivalents, accounts receivable and payable, and long-term debt. The fair values of cash and cash equivalents and accounts receivable and payable approximated their carrying values because of the short-term nature of these instruments. The carrying amounts and fair values of our long-term debt, which are not measured on a recurring basis using fair value, are as follows (in thousands):

	August 30, 2016				May 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt (Level 2)	$	223,286	$	218,762	$	223,526	$	223,212

We estimated the fair value of debt using market quotes and calculations based on market rates.

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Note 13 - Supplemental Condensed Consolidating Financial Statements

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Condensed Financial Statements [Text Block]

13

. Supplemental Condensed Consolidating Financial Statements

As discussed in Note 6 to the

Condensed 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 information, which has been prepared in accordance with the requirements for presentation of Rule 3-10(f) of Regulation S-X promulgated by the Securities and Exchange Commission, presents the condensed consolidating financial information separately for 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 August 30, 2016

(In thousands)

	Parent			Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	68,515		$	146	$	–		$	68,661
Accounts and other receivables		2, 625			4, 483		–			7,108
Inventories		13,653			5,005		–			18,658
Income tax receivable		170,031			–		( 165,310	)		4,721
Other current assets		12, 652			9, 840		–			22,49 2
Total current assets		267,476			19,474		( 165,310	)		121,6 40
Property and equipment, net		491,229			160,548		–			651,777
Investment in subsidiaries		8 2,482			–		( 82,482	)		–
Due from/(to) subsidiaries		8 1,389			216,770		( 298,159	)		–
Other assets		39,993			4,749		–			44,7 42
Total assets	$	962,569		$	401,541	$	( 545,951	)	$	818,159
Liabilities & Shareholders ’ Equity
Current liabilities:
Accounts payable	$	18,065		$	3,968	$	–		$	2 2,033
Accrued and other current liabilities		5 2,324			39, 834		–			92,158
Current maturities of long-term debt,
including capital leases		( 1,088	)		10,869		–			9, 781
Income tax payable		–			165,310		( 165,310	)		–
Total current liabilities		69,301			219,981		( 165,310	)		123,972
Long-term debt and capital leases,
less current maturities		209,350			4,378		–			213,728
Due to/(from) subsidiaries		216,770			8 1,389		( 298,159	)		–
Other deferred liabilities		97, 869			13, 311		–			111, 180
Total liabilities		593, 290			3 19,059		( 463,469	)		448,880
Shareholders ’ equity:
Common stock		602			–		–			602
Capital in excess of par value		7 6,772			–		–			7 6,772
Retained earnings		301,658			82,482		( 82,482	)		301,658
Accumulated other comprehensive loss		( 9,753	)		–		–			( 9,753	)
Total shareholders ’ equity		369,279			82,482		( 82,482	)		369,279
Total liabilities & shareholders ’ equity	$	962, 569		$	40 1,541	$	( 545,951	)	$	818,159

Condensed Consolidating Balance Sheet

As of May 31, 2016

(In thousands)

	Parent			Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	67,208		$	133	$	–		$	67,341
Accounts and other receivables		8,102			4,725		–			12,827
Inventories		15,401			6,194		–			21,595
Income tax receivable		167,065			–		(164,062	)		3,003
Other current assets		11,282			4,868		–			16,150
Total current assets		269,058			15,920		(164,062	)		120,916
Property and equipment, net		501,482			169,768		–			671,250
Investment in subsidiaries		98,929			–		(98,929	)		–
Due from/(to) subsidiaries		76,208			213,816		(290,024	)		–
Other assets		40,626			5,125		–			45,751
Total assets	$	986,303		$	404,629	$	(553,015	)	$	837,917
Liabilities & Shareholders ’ Equity
Current liabilities:
Accounts payable	$	17,405		$	4,736	$	–		$	22,141
Accrued and other current liabilities		35,674			29,957		–			65,631
Current maturities of long-term debt,
including capital leases		(1,067	)		11,001		–			9,934
Income tax payable		–			164,062		(164,062	)		–
Total current liabilities		52,012			209,756		(164,062	)		97,706
Long-term debt and capital leases,
less current maturities		209,058			4,745		–			213,803
Due to/(from) subsidiaries		213,816			76,208		(290,024	)		–
Other deferred liabilities		103,637			14,991		–			118,628
Total liabilities		578,523			305,700		(454,086	)		430,137
Shareholders ’ equity:
Common stock		601			–		–			601
Capital in excess of par value		75,938			–		–			75,938
Retained earnings		341,350			98,929		(98,929	)		341,350
Accumulated other comprehensive loss		(10,109	)		–		–			(10,109	)
Total shareholders ’ equity		407,780			98,929		(98,929	)		407,780
Total liabilities & shareholders ’ equity	$	986,303		$	404,629	$	(553,015	)	$	837,917

Condensed Consolidating Statement of Operations and

Comprehensive Loss

For the

Thirteen Weeks Ended August 30, 2016

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	185,088		$	70,676		$	–		$	255,764
Franchise revenue		10			883			–			893
Total revenue		185,098			71,559			–			256,657
Operating costs and expenses:
Cost of goods sold		52,182			20,008			–			72,190
Payroll and related costs		63,575			27,032			–			90,607
Other restaurant operating costs		40,976			16,387			–			57,363
Depreciation and amortization		8,088			3,141			–			11,229
Selling, general, and administrative		19,386			12,199			–			31,585
Intercompany selling, general, and
administrative allocations		10,363			( 10,363	)		–			–
Closures and impairments, net		1 6,584			1 3,608			–			30,192
Equity in losses of subsidiaries		9,032			–			(9,032	)		–
Interest expense, net		4,582			295			–			4,877
Intercompany interest expense/(income)		2,953			( 2,953	)		–			–
Total operating costs and expenses		22 7,721			79,354			(9,032	)		298,043
Loss before income taxes		( 42,623	)		(7,795	)		9,032			( 41,386	)
(Benefit)/provision for income taxes		( 2,931	)		1,237			–			( 1,694	)
Net loss	$	( 39,692	)	$	(9,032	)	$	9,032		$	( 39,692	)
Other comprehensive income:
Pension liability reclassification		355			–			–			355
Total comprehensive loss	$	( 39,337	)	$	(9,032	)	$	9,032		$	( 39,337	)

Condensed Consolidating Statement of Operations and

Comprehensive Loss

For the

Thirteen Weeks Ended September 1, 2015

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	201,416		$	76,491		$	–		$	277,907
Franchise revenue		15			1,558			–			1,573
Total revenue		201,431			78,049			–			279,480
Operating costs and expenses:
Cost of goods sold		55,228			21,013			–			76,241
Payroll and related costs		67,341			27,994			–			95,335
Other restaurant operating costs		45,202			17,005			–			62,207
Depreciation and amortization		9,127			3,679			–			12,806
Selling, general, and administrative		20,589			8,807			–			29,396
Intercompany selling, general, and
administrative allocations		11,126			( 11,126	)		–			–
Closures and impairments, net		2,589			123			–			2,712
Equity in earnings of subsidiaries		( 11,966	)		–			11,966			–
Interest expense, net		4,598			1,402			–			6,000
Intercompany interest expense/(income)		2,975			( 2,975	)		–			–
Total operating costs and expenses		206,809			65,922			11,966			284,697
(Loss)/income before income taxes		( 5,378	)		12,127			( 11,966	)		( 5,217	)
(Benefit)/provision for income taxes		( 1,184	)		161			–			( 1,023	)
Net (loss)/income	$	( 4,194	)	$	11,966		$	( 11,966	)	$	( 4,194	)
Other comprehensive loss:
Pension liability reclassification, net of tax		( 44	)		–			–			( 44	)
Total comprehensive (loss)/income	$	( 4,238	)	$	11,966		$	( 11,966	)	$	( 4,238	)

Condensed Consolidating Statement of Cash Flows

For the

Thirteen Weeks Ended August 30, 2016

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Net cash provided by operating activities	$	4,204		$	9,280		$	( 11,877	)	$	1, 607
Investing activities:
Purchases of property and equipment		(4,992	)		(1,366	)		–			( 6,358	)
Proceeds from disposal of assets		5,257			–			–			5,257
Other, net		1,322			–			–			1,322
Net cash provided/(used) by investing activities		1,587			(1,366	)		–			221
Financing activities:
Principal payments on long-term debt		11			(486	)		–			( 475	)
Stock repurchases		( 26	)		–			–			( 26	)
Payments for debt issuance costs		( 7	)		–			–			( 7	)
Intercompany dividend		–			(7,415	)		7,415			–
Other intercompany transactions		(4,462	)		–			4,462			–
Net cash used by financing activities		(4,484	)		(7,901	)		11,877			( 508	)
In crease in cash and cash equivalents		1,307			13			–			1,320
Cash and cash equivalents:
Beginning of fiscal year		67,208			133			–			67,341
End of quarter	$	68,515		$	146		$	–		$	6 8,661

Consolidating Statement of Cash Flows

For the

Thirteen Weeks Ended September 1, 2015

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Net cash (used)/provided by operating activities	$	(6,213	)	$	22,659		$	(18,917	)	$	(2,471	)
Investing activities:
Purchases of property and equipment		( 7,138	)		( 2,804	)		–			( 9,942	)
Proceeds from disposal of assets		2,746			–			–			2,746
Other, net		209			–			–			209
Net cash used by investing activities		( 4,183	)		( 2,804	)		–			( 6,987	)
Financing activities:
Principal payments on long-term debt		11			( 8,912	)		–			( 8,901	)
Stock repurchases		( 9	)		–			–			( 9	)
Payments for debt issuance costs		( 25	)		–			–			( 25	)
Intercompany dividend		–			(10,946	)		10,946			–
Other intercompany transactions		(7,971	)		–			7,971			–
Net cash used by financing activities		(7,994	)		( 19,858	)		18,917			( 8,935	)
D ecrease in cash and cash equivalents		(18,390	)		( 3	)		–			(18,393	)
Cash and cash equivalents:
Beginning of fiscal year		75,034			297			–			75,331
End of quarter	$	56,644		$	294		$	–		$	56,938

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Note 14 - Recently Issued Accounting Pronouncements

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Significant Accounting Policies [Text Block]

14. Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02,

Leases (Topic 842)

(“ASU 2016-02”), which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, and interim periods therein (our fiscal year 2020). Early application is permitted. We are currently evaluating the impact of this guidance on our Condensed Consolidated Financial Statements.

In August 2014, the FASB issued ASU 2014-15,

Presentation of Finan

cial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

(“ASU 2014-15”)

.

The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosures in certain circumstances. The guidance is effective for annual periods ending after December 15, 2016, and for interim periods within annual periods beginning thereafter (our fiscal year 2017). We do not believe the adoption of this guidance will have an impact on our Condensed Consolidated Financial Statements.

In May 2014, the FASB and International Accounting Standards Board jointly issued ASU 2014-09,

Revenue from Contracts with Customers (Topic 606)

(“ASU 2014-09”)

.

ASU 2014-09 will replace almost all existing revenue recognition guidance, including industry specific guidance, upon its effective date. The standard’s core principle is for a company to recognize revenue when it transfers goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled. A company may also need to use more judgment and make more estimates when recognizing revenue, which could result in additional disclosures. ASU 2014-09 also provides guidance for transactions that were not addressed comprehensively in previous guidance, such as the recognition of breakage income from the sale of gift cards. The standard permits the use of either the retrospective or cumulative effect transition method. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 (our fiscal year 2019). Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We do not expect the adoption of this guidance to impact our recognition of Company-owned restaurants sales and operating revenue or our recognition of continuing fees from franchisees, which are based on a percentage of franchise sales. We have not yet selected a transition method and are continuing to evaluate the impact of this guidance on our less significant revenue transactions, such as initial franchise license fees.

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Note 15 - Subsequent Events

3 Months Ended

Aug. 30, 2016

Notes to Financial Statements

Subsequent Events [Text Block]

15. Subsequent Events

On September 13, 2016, James J. Buettgen resigned as Chairman of the Board

of Directors, President, and Chief Executive Officer of the Company. On the same date, F. Lane Cardwell, Jr., a member of the Company’s Board of Directors since October 2012 and an executive with approximately 38 years of leadership experience in the restaurant industry, was appointed Interim President and Chief Executive Officer, Stephen I. Sadove, the Company’s then Lead Director, was appointed Chairman of the Board and Sue Briley was appointed Chief Financial Officer. Ms. Briley had been serving as Interim Chief Financial Officer since June 2016.

On September 22, 2016, we announced that we had entered into an agreement to sell for $2.8 million one of two

office buildings comprising our Restaurant Support Center in Maryville, Tennessee. The building being sold had an August 30, 2016 net book value of $6.0 million. We also announced that we will consolidate our two Tennessee Restaurant Support Center office buildings into the one remaining building by January 2017.

As previously mentioned in Note 7 to the Condensed Consolidated Financial Statements,

we had a liability for future lease obligations of $31.9 million as of August 30, 2016.  Since then and through the date of this filing

, we settled seven of these leases for $3.1 million, which approximated the amount of our accrual for those leases at August 30, 2016.

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Significant Accounting Policies (Policies)

3 Months Ended

Aug. 30, 2016

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02,

Leases (Topic 842)

(“ASU 2016-02”), which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, and interim periods therein (our fiscal year 2020). Early application is permitted. We are currently evaluating the impact of this guidance on our Condensed Consolidated Financial Statements.

In August 2014, the FASB issued ASU 2014-15,

Presentation of Finan

cial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

(“ASU 2014-15”)

.

The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosures in certain circumstances. The guidance is effective for annual periods ending after December 15, 2016, and for interim periods within annual periods beginning thereafter (our fiscal year 2017). We do not believe the adoption of this guidance will have an impact on our Condensed Consolidated Financial Statements.

In May 2014, the FASB and International Accounting Standards Board jointly issued ASU 2014-09,

Revenue from Contracts with Customers (Topic 606)

(“ASU 2014-09”)

.

ASU 2014-09 will replace almost all existing revenue recognition guidance, including industry specific guidance, upon its effective date. The standard’s core principle is for a company to recognize revenue when it transfers goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled. A company may also need to use more judgment and make more estimates when recognizing revenue, which could result in additional disclosures. ASU 2014-09 also provides guidance for transactions that were not addressed comprehensively in previous guidance, such as the recognition of breakage income from the sale of gift cards. The standard permits the use of either the retrospective or cumulative effect transition method. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 (our fiscal year 2019). Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We do not expect the adoption of this guidance to impact our recognition of Company-owned restaurants sales and operating revenue or our recognition of continuing fees from franchisees, which are based on a percentage of franchise sales. We have not yet selected a transition method and are continuing to evaluate the impact of this guidance on our less significant revenue transactions, such as initial franchise license fees.

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Note 2 - Loss Per Share (Tables)

3 Months Ended

Aug. 30, 2016

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Thirteen weeks ended
	August 30, 2016			September 1, 2015
Net loss	$	( 39,692	)	$	(4,194	)
Weighted average common shares outstanding		59,790			61,344
Dilutive effect of stock options and restricted stock		–			–
Weighted average common and dilutive potential  common shares outstanding		59,790			61,344
Basic net loss per share	$	(0. 66	)	$	(0.07	)
Diluted net loss per share	$	(0. 66	)	$	(0.07	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Thirteen weeks ended
	August 30, 2016		September 1, 2015
Stock options		2,393		2,813
Restricted stock / Restricted stock units		758		749
Total		3,151		3,562

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Note 4 - Accounts and Other Receivables (Tables)

3 Months Ended

Aug. 30, 2016

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	August 30, 2016		May 31, 2016
Amounts due from franchisees	$	3,318	$	3,013
Third-party gift card sales		925		1,272
Rebates receivable		819		1,001
Receivables from sales of Lime Fresh Mexican Grill assets		140		5,289
Other receivables		1, 906		2,252
	$	7,108	$	12,827

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Note 5 - Property, Equipment, and Assets Held for Sale (Tables)

3 Months Ended

Aug. 30, 2016

Notes Tables

Property, Plant and Equipment [Table Text Block]

	August 30, 2016		May 31, 2016
Land	$	182,829	$	209,930
Buildings		381,496		398,984
Improvements		294,500		303,032
Restaurant equipment		216,542		222,646
Other equipment		80,026		82,204
Surplus properties*		37,302		4,354
Construction in progress and other		2,239		3,325
		1,194,93 4		1,224,475
Less accumulated depreciation		543,157		553,225
Property and equipment, net	$	651,777	$	671,250

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Note 6 - Long-term Debt and Capital Leases (Tables)

3 Months Ended

Aug. 30, 2016

Notes Tables

Schedule of Long-term Debt Instruments [Table Text Block]

	August 30, 2016			May 31 , 2016
Senior unsecured notes	$	212,546		$	212,546
Unamortized discount		( 1,675	)		(1,771	)
Unamortized debt issuance costs		( 2,832	)		(2,995	)
Senior unsecured notes less unamortized discount and
debt issuance costs		208,039			207,780
Revolving credit facility		–			–
Mortgage loan obligations		15,258			15,745
Unamortized premium - mortgage loan obligations		47			75
Unamortized debt issuance costs - mortgage loan obligations		( 58	)		(74	)
Capital lease obligations		223			211
Total long-term debt and capital leases		223,509			223,737
Less current maturities		9,781			9,934
Long-term debt and capital leases, less current maturities	$	213,728		$	213,803

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Note 7 - Closures and Impairments Expense (Tables)

3 Months Ended

Aug. 30, 2016

Notes Tables

Closures and Impairment Expenses [Table Text Block]

	Thirteen weeks ended
	August 30, 2016			September 1, 2015
Property impairments	$	6,580		$	2,577
Closed restaurant lease reserves		17,728			604
Inventory write-off		2,754			–
Severance benefits		1, 760			18
Other closing expense		1,427			103
Gain on sale of surplus properties		( 57	)		(590	)
Closures and impairments, net	$	30,192		$	2,712

Future Lease Obligations Associated with Closed Properties [Table Text Block]

	Reserve for Lease Obligations
Balance at May 31, 2016	$	6,270
Closing expense including rent and other lease charges		17,728
Payments		( 1,393	)
Adjustments to deferred escalating minimum rent		9,283
Balance at August 30, 2016	$	31,888

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Note 8 - Employee Post-employment Benefits (Tables)

3 Months Ended

Aug. 30, 2016

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Pension Plans
	Thirteen weeks ended
	August 30, 2016			September 1, 2015
Service cost	$	6		$	230
Interest cost		420			599
Expected return on plan assets		( 91	)		( 103	)
Recognized actuarial loss		338			628
Net periodic benefit cost	$	673		$	1,354

	Postretirement Medical and Life Benefits
	Thirteen weeks ended
	August 30, 2016		September 1, 2015
Service cost	$	1	$	1
Interest cost		9		12
Recognized actuarial loss		17		32
Net periodic benefit cost	$	2 7	$	45

Schedule of Unpaid Employee Separation Obligations Included in Accrued Payroll and Related Costs [Table Text Block]

Balance at May 31, 2016	$	317
Employee severance and unused vacation accruals		2,020
Cash payments		( 2,068	)
Balance at August 30, 2016	$	269

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Note 10 - Share-based Employee Compensation (Tables)

3 Months Ended

Aug. 30, 2016

Notes Tables

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Service-based vesting:
Outstanding at May 31, 2016		2,066		$	7. 89
Granted		809			3.82
Cancellations and forfeitures		( 3	)		6.40
Expired		( 87	)		6.64
Outstanding at August 30, 2016		2,785		$	6.75		4.07	$	–
Exercisable at August 30, 2016		1,806		$	8.14		2.72	$	–

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

	Shares			Weighted Average Fair Value
Service-Based Vesting:
Unvested at May 31, 2016		564		$	6. 29
Granted		292			3.82
Vested		( 102	)		6.67
Cancellations and forfeitures		( 16	)		6.47
Unvested at August 30, 2016		738		$	5.25
Performance-Based Vesting:
Unvested at May 31, 2016		225		$	6.51
Cancellations and forfeitures		( 5	)		6.51
Unvested at August 30, 2016		220		$	6.51

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Note 12 - Fair Value Measurements (Tables)

3 Months Ended

Aug. 30, 2016

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Level		August 30, 2016			May 31, 2016
Deferred compensation plan – Assets		1	$	6,743		$	6,660
Deferred compensation plan – Liabilities		1		( 6,743	)		(6,660	)

Fair Value Measurements, Nonrecurring [Table Text Block]

	Fair Value Measurements
	Level		August 30, 2016
Long-lived assets held for use		2	$	1,195
Long-lived assets held for sale		2		695
Total			$	1,890

Schedule of Gains and Losses Recognized from Fair Value Measurements on Non-Recurring Basis [Table Text Block]

	Thirteen weeks ended
	August 30, 2016		September 1, 2015
Long-lived assets held for use	$	4,266	$	2,485
Long-lived assets held for sale		2,314		92
Property impairments	$	6,580	$	2,577

Fair Value, by Balance Sheet Grouping [Table Text Block]

	August 30, 2016				May 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt (Level 2)	$	223,286	$	218,762	$	223,526	$	223,212

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Note 13 - Supplemental Condensed Consolidating Financial Statements (Tables)

3 Months Ended

Aug. 30, 2016

Notes Tables

Condensed Balance Sheet [Table Text Block]

	Parent			Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	68,515		$	146	$	–		$	68,661
Accounts and other receivables		2, 625			4, 483		–			7,108
Inventories		13,653			5,005		–			18,658
Income tax receivable		170,031			–		( 165,310	)		4,721
Other current assets		12, 652			9, 840		–			22,49 2
Total current assets		267,476			19,474		( 165,310	)		121,6 40
Property and equipment, net		491,229			160,548		–			651,777
Investment in subsidiaries		8 2,482			–		( 82,482	)		–
Due from/(to) subsidiaries		8 1,389			216,770		( 298,159	)		–
Other assets		39,993			4,749		–			44,7 42
Total assets	$	962,569		$	401,541	$	( 545,951	)	$	818,159
Liabilities & Shareholders ’ Equity
Current liabilities:
Accounts payable	$	18,065		$	3,968	$	–		$	2 2,033
Accrued and other current liabilities		5 2,324			39, 834		–			92,158
Current maturities of long-term debt,
including capital leases		( 1,088	)		10,869		–			9, 781
Income tax payable		–			165,310		( 165,310	)		–
Total current liabilities		69,301			219,981		( 165,310	)		123,972
Long-term debt and capital leases,
less current maturities		209,350			4,378		–			213,728
Due to/(from) subsidiaries		216,770			8 1,389		( 298,159	)		–
Other deferred liabilities		97, 869			13, 311		–			111, 180
Total liabilities		593, 290			3 19,059		( 463,469	)		448,880
Shareholders ’ equity:
Common stock		602			–		–			602
Capital in excess of par value		7 6,772			–		–			7 6,772
Retained earnings		301,658			82,482		( 82,482	)		301,658
Accumulated other comprehensive loss		( 9,753	)		–		–			( 9,753	)
Total shareholders ’ equity		369,279			82,482		( 82,482	)		369,279
Total liabilities & shareholders ’ equity	$	962, 569		$	40 1,541	$	( 545,951	)	$	818,159

	Parent			Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	67,208		$	133	$	–		$	67,341
Accounts and other receivables		8,102			4,725		–			12,827
Inventories		15,401			6,194		–			21,595
Income tax receivable		167,065			–		(164,062	)		3,003
Other current assets		11,282			4,868		–			16,150
Total current assets		269,058			15,920		(164,062	)		120,916
Property and equipment, net		501,482			169,768		–			671,250
Investment in subsidiaries		98,929			–		(98,929	)		–
Due from/(to) subsidiaries		76,208			213,816		(290,024	)		–
Other assets		40,626			5,125		–			45,751
Total assets	$	986,303		$	404,629	$	(553,015	)	$	837,917
Liabilities & Shareholders ’ Equity
Current liabilities:
Accounts payable	$	17,405		$	4,736	$	–		$	22,141
Accrued and other current liabilities		35,674			29,957		–			65,631
Current maturities of long-term debt,
including capital leases		(1,067	)		11,001		–			9,934
Income tax payable		–			164,062		(164,062	)		–
Total current liabilities		52,012			209,756		(164,062	)		97,706
Long-term debt and capital leases,
less current maturities		209,058			4,745		–			213,803
Due to/(from) subsidiaries		213,816			76,208		(290,024	)		–
Other deferred liabilities		103,637			14,991		–			118,628
Total liabilities		578,523			305,700		(454,086	)		430,137
Shareholders ’ equity:
Common stock		601			–		–			601
Capital in excess of par value		75,938			–		–			75,938
Retained earnings		341,350			98,929		(98,929	)		341,350
Accumulated other comprehensive loss		(10,109	)		–		–			(10,109	)
Total shareholders ’ equity		407,780			98,929		(98,929	)		407,780
Total liabilities & shareholders ’ equity	$	986,303		$	404,629	$	(553,015	)	$	837,917

Condensed Income Statement [Table Text Block]

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	185,088		$	70,676		$	–		$	255,764
Franchise revenue		10			883			–			893
Total revenue		185,098			71,559			–			256,657
Operating costs and expenses:
Cost of goods sold		52,182			20,008			–			72,190
Payroll and related costs		63,575			27,032			–			90,607
Other restaurant operating costs		40,976			16,387			–			57,363
Depreciation and amortization		8,088			3,141			–			11,229
Selling, general, and administrative		19,386			12,199			–			31,585
Intercompany selling, general, and
administrative allocations		10,363			( 10,363	)		–			–
Closures and impairments, net		1 6,584			1 3,608			–			30,192
Equity in losses of subsidiaries		9,032			–			(9,032	)		–
Interest expense, net		4,582			295			–			4,877
Intercompany interest expense/(income)		2,953			( 2,953	)		–			–
Total operating costs and expenses		22 7,721			79,354			(9,032	)		298,043
Loss before income taxes		( 42,623	)		(7,795	)		9,032			( 41,386	)
(Benefit)/provision for income taxes		( 2,931	)		1,237			–			( 1,694	)
Net loss	$	( 39,692	)	$	(9,032	)	$	9,032		$	( 39,692	)
Other comprehensive income:
Pension liability reclassification		355			–			–			355
Total comprehensive loss	$	( 39,337	)	$	(9,032	)	$	9,032		$	( 39,337	)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	201,416		$	76,491		$	–		$	277,907
Franchise revenue		15			1,558			–			1,573
Total revenue		201,431			78,049			–			279,480
Operating costs and expenses:
Cost of goods sold		55,228			21,013			–			76,241
Payroll and related costs		67,341			27,994			–			95,335
Other restaurant operating costs		45,202			17,005			–			62,207
Depreciation and amortization		9,127			3,679			–			12,806
Selling, general, and administrative		20,589			8,807			–			29,396
Intercompany selling, general, and
administrative allocations		11,126			( 11,126	)		–			–
Closures and impairments, net		2,589			123			–			2,712
Equity in earnings of subsidiaries		( 11,966	)		–			11,966			–
Interest expense, net		4,598			1,402			–			6,000
Intercompany interest expense/(income)		2,975			( 2,975	)		–			–
Total operating costs and expenses		206,809			65,922			11,966			284,697
(Loss)/income before income taxes		( 5,378	)		12,127			( 11,966	)		( 5,217	)
(Benefit)/provision for income taxes		( 1,184	)		161			–			( 1,023	)
Net (loss)/income	$	( 4,194	)	$	11,966		$	( 11,966	)	$	( 4,194	)
Other comprehensive loss:
Pension liability reclassification, net of tax		( 44	)		–			–			( 44	)
Total comprehensive (loss)/income	$	( 4,238	)	$	11,966		$	( 11,966	)	$	( 4,238	)

Condensed Cash Flow Statement [Table Text Block]

	Parent			Guarantors			Eliminations			Consolidated
Net cash provided by operating activities	$	4,204		$	9,280		$	( 11,877	)	$	1, 607
Investing activities:
Purchases of property and equipment		(4,992	)		(1,366	)		–			( 6,358	)
Proceeds from disposal of assets		5,257			–			–			5,257
Other, net		1,322			–			–			1,322
Net cash provided/(used) by investing activities		1,587			(1,366	)		–			221
Financing activities:
Principal payments on long-term debt		11			(486	)		–			( 475	)
Stock repurchases		( 26	)		–			–			( 26	)
Payments for debt issuance costs		( 7	)		–			–			( 7	)
Intercompany dividend		–			(7,415	)		7,415			–
Other intercompany transactions		(4,462	)		–			4,462			–
Net cash used by financing activities		(4,484	)		(7,901	)		11,877			( 508	)
In crease in cash and cash equivalents		1,307			13			–			1,320
Cash and cash equivalents:
Beginning of fiscal year		67,208			133			–			67,341
End of quarter	$	68,515		$	146		$	–		$	6 8,661

	Parent			Guarantors			Eliminations			Consolidated
Net cash (used)/provided by operating activities	$	(6,213	)	$	22,659		$	(18,917	)	$	(2,471	)
Investing activities:
Purchases of property and equipment		( 7,138	)		( 2,804	)		–			( 9,942	)
Proceeds from disposal of assets		2,746			–			–			2,746
Other, net		209			–			–			209
Net cash used by investing activities		( 4,183	)		( 2,804	)		–			( 6,987	)
Financing activities:
Principal payments on long-term debt		11			( 8,912	)		–			( 8,901	)
Stock repurchases		( 9	)		–			–			( 9	)
Payments for debt issuance costs		( 25	)		–			–			( 25	)
Intercompany dividend		–			(10,946	)		10,946			–
Other intercompany transactions		(7,971	)		–			7,971			–
Net cash used by financing activities		(7,994	)		( 19,858	)		18,917			( 8,935	)
D ecrease in cash and cash equivalents		(18,390	)		( 3	)		–			(18,393	)
Cash and cash equivalents:
Beginning of fiscal year		75,034			297			–			75,331
End of quarter	$	56,644		$	294		$	–		$	56,938

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Note 1 - Basis of Presentation (Details Textual)		3 Months Ended	12 Months Ended
	Aug. 11, 2016	Aug. 30, 2016	May 31, 2016	Dec. 03, 2013
Ruby Tuesday [Member]
Number of Restaurants		547
Lime Fresh [Member]
Number of Restaurants		1
Number of Company-owned Restaurants Agreed During the Period to Sell			8
Number of Company-owned Restaurants Planned to Close		1
Number of Restaurants Closed	95	99
Number of Restaurants				49

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Note 2 - Loss Per Share - Weighted-Average Common and Dilutive Potential Common Shares Outstanding (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Aug. 30, 2016	Sep. 01, 2015
Net loss	$ (39,692)	$ (4,194)
Weighted average common shares outstanding (in shares)	59,790	61,344
Dilutive effect of stock options and restricted stock (in shares)
Weighted average common and dilutive potential common shares outstanding (in shares)	59,790	61,344
Basic net loss per share (in dollars per share)	$ (0.66)	$ (0.07)
Diluted net loss per share (in dollars per share)	$ (0.66)	$ (0.07)

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Note 2 - Loss Per Share - Antidilutive Shares Excluded from Computation of Diluted Earnings (Loss) Per Share (Details) - shares shares in Thousands	3 Months Ended
	Aug. 30, 2016	Sep. 01, 2015
Employee Stock Option [Member]
Antidilutive Securities (in shares)	2,393	2,813
Restricted Stock [Member]
Antidilutive Securities (in shares)	758	749
Antidilutive Securities (in shares)	3,151	3,562

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Note 3 - Franchise Programs (Details Textual) $ in Millions	3 Months Ended
	Aug. 30, 2016 USD ($)	Sep. 01, 2015 USD ($)
Ruby Tuesday [Member]
Number of Franchise Restaurants	68
Royalty Fee Percentage	4.00%
Operating Agreements Marketing and Purchase Fee Gross Sales Contribution Maximum	1.50%
Operating Agreements National Advertising Fund Gross Sales Contribution Maximum	1.50%
Operating Agreements Support Service Fee Gross Sales Contribution Maximum	3.00%
Development and Licensing Fee Income in Conjunction with New Openings	$ 0.2	$ 0.5

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Note 4 - Accounts and Other Receivables (Details Textual) $ in Thousands					3 Months Ended
	Aug. 11, 2016	Jun. 14, 2016	Jun. 01, 2016 USD ($)	May 31, 2016 USD ($)	Aug. 30, 2016 USD ($)	Sep. 01, 2015 USD ($)
Lime Fresh [Member] | Pre-amendment [Member]
Disposal Group, Including Discontinued Operation, Consideration				$ 6,000
Lime Fresh [Member] | Six Restaurants Meeting the Closing Requirements [Member]
Disposal Group, Including Discontinued Operation, Consideration				5,000
Lime Fresh [Member] | Buyer of Lime Fresh Restuarants [Member]
Proceeds from Sale of Property, Plant, and Equipment			$ 5,000
Lime Fresh [Member] | Buyer of Lime Fresh Brand [Member]
Disposal Group, Including Discontinued Operation, Consideration				$ 300	$ 100
Lime Fresh [Member]
Sale of Assets, Number of Buyers				2
Number of Company-owned Restaurants Agreed During the Period to Sell				8
Disposal Group, Including Discontinued Operation, Consideration				$ 5,300
Company-owned Restaurants Agreed to Sell, Number of Restaurants for Which Closing Requirements Were Satisfied				6
Sale of Assets, Amount to Be Received, Holdback Until Transfer of All Remaining Restaurants				$ 1,000	1,000
Sale of Assets, Number of Restaurants Remaining to Be Closed and Transferred to the Buyer				2
Number of Restaurants Closed				6
Number of Restaurants Sold		1
Disposal Group, Including Discontinued Operation, Consideration				$ 5,289	$ 140
Number of Restaurants Closed	95				99
Proceeds from Sale of Property, Plant, and Equipment					$ 5,257	$ 2,746

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Note 4 - Accounts and Other Receivable - Accounts Receivable, Current (Details) - USD ($) $ in Thousands	Aug. 30, 2016	May 31, 2016
Rebates [Member]
Receivables	$ 819	$ 1,001
Amounts due from franchisees	3,318	3,013
Third-party gift card sales	925	1,272
Receivables	7,108	12,827
Disposal Group, Including Discontinued Operation, Consideration	140	5,289
Other receivables	$ 1,906	$ 2,252

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Note 5 - Property, Equipment, and Assets Held for Sale (Details Textual) - USD ($)	3 Months Ended
	Aug. 30, 2016	Sep. 01, 2015	May 31, 2016
Disposal Group, Including Discontinued Operation, Assets, Current	$ 11,849,000		$ 4,642,000
Property, Plant and Equipment, Disposals	0	$ 2,100,000
Gain (Loss) on Disposition of Property Plant Equipment	100,000	600,000
Proceeds from Sale of Property Plant and Equipment, Net	$ 100,000	$ 2,700,000

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Note 5 - Property, Equipment, Assets Held for Sale, Operating Leases, and Sale-leaseback Transactions - Property and Equipment, Net (Details) - USD ($) $ in Thousands		Aug. 30, 2016	May 31, 2016
Land [Member]
Property, plant and equipment		$ 182,829	$ 209,930
Building [Member]
Property, plant and equipment		381,496	398,984
Building Improvements [Member]
Property, plant and equipment		294,500	303,032
Restaurant Equipment [Member]
Property, plant and equipment		216,542	222,646
Other Equipment [Member]
Property, plant and equipment		80,026	82,204
Other Capitalized Property Plant and Equipment [Member]
Property, plant and equipment	[1]	37,302	4,354
Construction in Progress and Other [Member]
Property, plant and equipment		2,239	3,325
Property, plant and equipment		1,194,934	1,224,475
Less accumulated depreciation		543,157	553,225
Property and equipment, net		$ 651,777	$ 671,250

[1] Surplus properties represent assets held for sale that are not classified as such in the Consolidated Balance Sheets as we have yet to conclude that we can sell these assets within the next 12 months. These assets primarily consist of parcels of land upon which we have no intention to build restaurants, closed properties which include a building, and liquor licenses not needed for operations.

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Note 6 - Long-term Debt and Capital Leases (Details Textual)			3 Months Ended		6 Months Ended
	Dec. 03, 2013 USD ($)	May 14, 2012 USD ($)	Jun. 06, 2017	Aug. 30, 2016 USD ($)	Mar. 07, 2017	May 31, 2016 USD ($)
Senior Notes [Member]
Debt Instrument, Face Amount		$ 250,000,000
Debt Instrument, Interest Rate, Stated Percentage		7.625%
Debt Instrument, Unamortized Discount		$ 3,700,000		$ 1,675,000		$ 1,771,000
Debt Instrument, Term		8 years
Debt Instrument, Cumulative Sinking Fund Payments				$ 0
Debt Instrument, Maturity Date				May 15, 2020
Debt Instrument Repurchased Amount Authorized				$ 20,000,000
Debt Instrument, Repurchase Amount				0
Mortgages [Member] | Minimum [Member]
Range of Loan Balances				$ 600,000
Debt Instrument, Interest Rate, Effective Percentage				7.60%
Mortgages [Member] | Maximum [Member]
Range of Loan Balances				$ 6,800,000
Debt Instrument, Interest Rate, Effective Percentage				10.17%
Mortgages [Member]
Secured Debt				$ 15,200,000
Long-term Debt and Capital Lease Obligations, Current				9,400,000
Rent and Other Line Item [Member]
Interest Payable, Current				5,000,000		1,000,000
Revolving Credit Facility [Member] | Federal Funds Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	0.50%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate	2.50%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate	3.50%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	1.00%
Revolving Credit Facility [Member] | Base Rate [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate	1.50%
Revolving Credit Facility [Member] | Base Rate [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate	2.50%
Revolving Credit Facility [Member] | Minimum [Member]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.40%
Revolving Credit Facility [Member] | Maximum [Member]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.75%
Revolving Credit Facility [Member] | Scenario, Forecast [Member]
Line of Credit Facility, Maximum Leverage Ratio			4.25		4.3
Line of Credit Facility, Minimum Fixed Charge Coverage Ratio			1.7		1.65
Revolving Credit Facility [Member]
Debt Instrument, Term	4 years
Line of Credit Facility, Current Borrowing Capacity	$ 50,000,000
Option to Increase Revolving Credit Facility Capacity	$ 35,000,000
Credit Facility Interest Rate, Floor	0.00%
Debt Instrument, Collateral Amount, Appraised Value	$ 101,400,000
Debt Instrument, Collateral Amount				77,800,000
Long-term Line of Credit				0
Line of Credit Facility, Remaining Borrowing Capacity				$ 38,500,000
Line of Credit Facility, Maximum Leverage Ratio				4.4
Line of Credit Facility, Minimum Fixed Charge Coverage Ratio				1.6
Sub-limit for Standby Letters of Credit [Member]
Line of Credit Facility, Current Borrowing Capacity	$ 25,000,000
Number of Restaurants	49
Secured Debt				$ 15,258,000		15,745,000
Long-term Debt and Capital Lease Obligations, Current				$ 9,781,000		$ 9,934,000

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Note 6 - Long-term Debt and Capital Leases - Long-Term Debt and Capital Lease Obligations (Details) - USD ($)	Aug. 30, 2016	May 31, 2016	May 14, 2012
Senior Notes [Member]
Senior unsecured notes	$ 212,546,000	$ 212,546,000
Unamortized discount	(1,675,000)	(1,771,000)	$ (3,700,000)
Unamortized debt issuance costs	(2,832,000)	(2,995,000)
Senior unsecured notes less unamortized discount and debt issuance costs	208,039,000	207,780,000
Unamortized debt issuance costs	(58,000)	(74,000)
Mortgage loan obligations	15,258,000	15,745,000
Unamortized premium - mortgage loan obligations	47,000	75,000
Capital lease obligations	223,000	211,000
Total long-term debt and capital leases	223,509,000	223,737,000
Less current maturities	9,781,000	9,934,000
Long-term debt and capital leases, less current maturities	$ 213,728,000	$ 213,803,000

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Note 7 - Closures and Impairments Expense (Details Textual) $ in Thousands		3 Months Ended
	Aug. 11, 2016	Aug. 30, 2016 USD ($)	Sep. 01, 2015 USD ($)	May 31, 2016 USD ($)
Closed Restaurant Lease Reserves, Inventory Write-off, Severance Benefits, and Other Closing Expenses [Member]
Closures and Impairments Expenses		$ 24,700
Rent and Other [Member]
Operating Lease Obligation		$ 27,900		$ 3,500
Number of Restaurants Closed	95	99
Closures and Impairments Expenses		$ 30,192	$ 2,712
Operating Lease Obligation		$ 31,888		$ 6,270

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Note 7 - Closures and Impairments Expense, Including Trademark Impairments - Closures and Impairments Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Aug. 30, 2016	Sep. 01, 2015
Property [Member] | Continuing Operations [Member]
Closures and Impairments Expenses	$ 6,580	$ 2,577
Continuing Operations [Member] | Other Closing Expense [Member]
Closures and Impairments Expenses	1,427	103
Continuing Operations [Member]
Closures and Impairments Expenses	30,192	2,712
Closed restaurant lease reserves	17,728	604
Inventory write-off	2,754
Severance Costs	1,760	18
Gain on sale of surplus properties	(57)	(590)
Closures and Impairments Expenses	30,192	2,712
Closed restaurant lease reserves	17,728
Inventory write-off	2,754
Severance Costs	$ 2,020

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Note 7 - Closures and Impairments Expense, Including Trademark Impairments - Future Liabilites Associated with Closed Properties (Details) $ in Thousands	3 Months Ended
	Aug. 30, 2016 USD ($)
Balance	$ 6,270
Closing expense including rent and other lease charges	17,728
Payments	(1,393)
Adjustments to deferred escalating minimum rent	9,283
Balance	$ 31,888

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Note 8 - Employee Post-employment Benefits (Details Textual) $ in Thousands		3 Months Ended
	Aug. 11, 2016	Aug. 30, 2016 USD ($)	Sep. 01, 2015 USD ($)	May 31, 2016 USD ($)
Pension Plan [Member] | Payroll and Related Costs [Member]
Defined Benefit Pension Plan Liabilities, Current		$ 2,500		$ 2,500
Pension Plan [Member] | Other Deferred Liabilities [Member]
Defined Benefit Pension Plan, Liabilities, Noncurrent		34,700		35,700
Pension Plan [Member]
Defined Benefit Plan, Amortization of Gains (Losses)		(338)	$ (628)
Post-retirement Medical and Life Benefits Plans [Member] | Payroll and Related Costs [Member]
Defined Benefit Pension Plan Liabilities, Current		100		100
Post-retirement Medical and Life Benefits Plans [Member] | Other Deferred Liabilities [Member]
Defined Benefit Pension Plan, Liabilities, Noncurrent		1,000		1,000
Retirement Plan [Member]
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year		100
Selling, General and Administrative Expense [Member] | Employee Severance [Member]
Closures and Impairments Expenses		300
Employee Severance [Member]
Employee-related Liabilities, Current		300		300
Closures and Impairments Expenses		1,700
Selling, General and Administrative Expenses [Member]
Defined Benefit Plan, Amortization of Gains (Losses)		400	700
Employee-related Liabilities, Current		$ 14,978		$ 14,561
Defined Benefit Pension Plans		3
Number of Restaurants Closed	95	99
Closures and Impairments Expenses		$ 30,192	$ 2,712

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Note 8 - Employee Post-employment Benefits - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands	3 Months Ended
	Aug. 30, 2016	Sep. 01, 2015
Pension Plan [Member]
Service cost	$ 6	$ 230
Interest cost	420	599
Expected return on plan assets	(91)	(103)
Recognized actuarial loss	338	628
Net periodic benefit cost	673	1,354
Postretirement Medical and Life Benefits [Member]
Service cost	1	1
Interest cost	9	12
Recognized actuarial loss	17	32
Net periodic benefit cost	$ 27	$ 45

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Note 8 - Employee Post-employment Benefits - Roll Forward of Employee Separation Obligations (Details) $ in Thousands	3 Months Ended
	Aug. 30, 2016 USD ($)
Employee Severance [Member]
Balance	$ 317
Balance	269
Severance Costs	2,020
Cash payments	$ (2,068)

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Note 9 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Aug. 30, 2016	Sep. 01, 2015	May 31, 2016
Reasonably Possible Amounts Will Change Within Next Twelve Months [Member]
Unrecognized Tax Benefits	$ 400
Unrecognized Tax Benefit Reclassified Against Deferred Tax Assets	3,700		$ 3,700
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued	400		400
Deferred Tax Assets, Valuation Allowance	106,200		89,900
Income Tax Expense (Benefit)	(1,694)	$ (1,023)
Deferred Tax Assets, Operating Loss Carryforwards, Domestic	16,300
Unrecognized Tax Benefits	4,600		4,500
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	$ 2,400		$ 2,300

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Note 10 - Share-based Employee Compensation (Details Textual) $ / shares in Units, $ in Millions		3 Months Ended		12 Months Ended
	May 31, 2016 USD ($) shares	Aug. 30, 2016 USD ($) $ / shares shares	Sep. 01, 2015 USD ($)	May 31, 2016 USD ($) shares
SIP and 1996 SIP [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		4,444,000
SIP and 1996 SIP [Member] | Restricted Stock Service-based [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term		7 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		809,000
SIP and 1996 SIP [Member] | Restricted Stock Units Service-based [Member] | Cliff Vest [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Number Of Annual Installments		3
SIP and 1996 SIP [Member] | Restricted Stock Units Service-based [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		286,000
SIP and 1996 SIP [Member] | Stock Options Performance-based [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		571,000
SIP and 1996 SIP [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term		7 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		6,726,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number		2,282,000
Employee Stock Option [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $	$ 1.1			$ 1.1
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 328 days
Restricted Stock Service-based [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		292,000
Restricted Stock Units (RSUs) [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $		$ 2.5
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		1 year 219 days
Stock Options Performance-based [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term		4 years 25 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number		2,785,000
Other Deferred Liabilities [Member]
Share-based Compensation Arrangement by Share-based Payment Award Accelerated Compensation Cost | $		$ 0.4		$ 0.2
Preferred Stock, Shares Issued	0	0		0
Preferred Stock, Shares Authorized		250,000
Preferred Stock, Par or Stated Value Per Share | $ / shares		$ 0.01
Share-based Compensation Arrangement by Share-based Payment Award Accelerated Compensation Cost | $		$ 0.9	$ 0.3

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Note 10 - Share-based Employee Compensation - Summary of Stock Option Activity (Details) shares in Thousands	3 Months Ended
	Aug. 30, 2016 $ / shares shares
Stock Options Services-Based [Member]
Outstanding (in shares) | shares	2,066
Outstanding (in dollars per share) | $ / shares	$ 7.89
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term
Granted (in shares) | shares	809
Granted (in dollars per share) | $ / shares	$ 3.82
Cancellations and forfeitures (in shares) | shares	(3)
Cancellations and forfeitures (in dollars per share) | $ / shares	$ 6.40
Expired (in shares) | shares	(87)
Expired (in dollars per share) | $ / shares	$ 6.64
Exercisable at August 30, 2016 (in shares) | shares	1,806
Exercisable at August 30, 2016 (in dollars per share) | $ / shares	$ 8.14
Exercisable at August 30, 2016	2 years 262 days
Stock Options Performance-based [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term	4 years 25 days
Outstanding (in shares) | shares	2,785
Outstanding (in dollars per share) | $ / shares	$ 6.75

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Note 10 - Share-based Employee Compensation - Summary of Restricted Stock Activity (Details) shares in Thousands	3 Months Ended
	Aug. 30, 2016 $ / shares shares
Restricted Stock Service-based [Member]
Unvested (in shares) | shares	564
Unvested (in dollars per share) | $ / shares	$ 6.29
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares	292
Granted (in dollars per share) | $ / shares	$ 3.82
Vested (in shares) | shares	(102)
Vested (in dollars per share) | $ / shares	$ 6.67
Cancellations and forfeitures (in shares) | shares	(16)
Cancellations and forfeitures (in dollars per share) | $ / shares	$ 6.47
Unvested (in shares) | shares	738
Unvested (in dollars per share) | $ / shares	$ 5.25
Restricted Stock Performance-based [Member]
Unvested (in shares) | shares	225
Unvested (in dollars per share) | $ / shares	$ 6.51
Cancellations and forfeitures (in shares) | shares	(5)
Cancellations and forfeitures (in dollars per share) | $ / shares	$ 6.51
Unvested (in shares) | shares	220
Unvested (in dollars per share) | $ / shares	$ 6.51

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Note 12 - Fair Value Measurements - Fair Values of Financial Assets and Liabilities Measured on a Recurring Basis (Details) - Fair Value, Inputs, Level 1 [Member] - USD ($) $ in Thousands	Aug. 30, 2016	May 31, 2016
Deferred compensation plan – Assets	$ 6,743	$ 6,660
Deferred compensation plan – Liabilities	$ (6,743)	$ (6,660)

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Note 12 - Fair Value Measurements - Fair Values Financial Assets and Liabilities Measured on a Non-recurring Basis (Details) $ in Thousands	Aug. 30, 2016 USD ($)
Fair Value, Inputs, Level 2 [Member] | Assets Held for Use [Member]
Assets, Fair Value Disclosure, Nonrecurring	$ 1,195
Fair Value, Inputs, Level 2 [Member] | Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Assets, Fair Value Disclosure, Nonrecurring	695
Assets, Fair Value Disclosure, Nonrecurring	$ 1,890

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Note 12 - Fair Value Measurements - Losses Recognized from Fair Value Measurement on Non-recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended
	Aug. 30, 2016	Sep. 01, 2015
Closure and Impairments [Member]
Long-lived assets held for use	$ 4,266	$ 2,485
Long-lived assets held for sale	2,314	92
Property impairments	6,580	2,577
Property impairments	$ 6,253	$ 2,278

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Note 12 - Fair Value Measurements - Carrying Amounts and Fair Values of Other Financial Instruments Not Measured on a Recurring Basis (Details) - Fair Value, Inputs, Level 2 [Member] - USD ($) $ in Thousands	Aug. 30, 2016	May 31, 2016
Long-term debt	$ 223,286	$ 223,526
Long-term debt	$ 218,762	$ 223,212

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Note 13 - Supplemental Condensed Consolidating Financial Statements - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Thousands	Aug. 30, 2016	May 31, 2016	Sep. 01, 2015	Jun. 02, 2015
Parent Company [Member]
Current assets:
Cash and cash equivalents	$ 68,515	$ 67,208	$ 56,644	$ 75,034
Accounts and other receivables	2,625	8,102
Inventories	13,653	15,401
Income tax receivable	170,031	167,065
Other current assets	12,652	11,282
Total current assets	267,476	269,058
Property and equipment, net	491,229	501,482
Investment in subsidiaries	82,482	98,929
Due from/(to) subsidiaries	81,389	76,208
Other assets	39,993	40,626
Total assets	962,569	986,303
Current liabilities:
Accounts payable	18,065	17,405
Accrued and other current liabilities	52,324	35,674
Long-term Debt and Capital Lease Obligations, Current	(1,088)	(1,067)
Income tax payable
Total current liabilities	69,301	52,012
Long-term debt and capital leases, less current maturities	209,350	209,058
Due to/(from) subsidiaries	216,770	213,816
Other deferred liabilities	97,869	103,637
Total liabilities	593,290	578,523
Shareholders’ equity:
Common stock	602	601
Capital in excess of par value	76,772	75,938
Retained earnings	301,658	341,350
Accumulated other comprehensive loss	(9,753)	(10,109)
Total shareholders’ equity	369,279	407,780
Total liabilities & shareholders’ equity	962,569	986,303
Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents	146	133	294	297
Accounts and other receivables	4,483	4,725
Inventories	5,005	6,194
Income tax receivable
Other current assets	9,840	4,868
Total current assets	19,474	15,920
Property and equipment, net	160,548	169,768
Investment in subsidiaries
Due from/(to) subsidiaries	216,770	213,816
Other assets	4,749	5,125
Total assets	401,541	404,629
Current liabilities:
Accounts payable	3,968	4,736
Accrued and other current liabilities	39,834	29,957
Long-term Debt and Capital Lease Obligations, Current	10,869	11,001
Income tax payable	165,310	164,062
Total current liabilities	219,981	209,756
Long-term debt and capital leases, less current maturities	4,378	4,745
Due to/(from) subsidiaries	81,389	76,208
Other deferred liabilities	13,311	14,991
Total liabilities	319,059	305,700
Shareholders’ equity:
Common stock
Capital in excess of par value
Retained earnings	82,482	98,929
Accumulated other comprehensive loss
Total shareholders’ equity	82,482	98,929
Total liabilities & shareholders’ equity	401,541	404,629
Consolidation, Eliminations [Member]
Current assets:
Cash and cash equivalents
Accounts and other receivables
Inventories
Income tax receivable	(165,310)	(164,062)
Other current assets
Total current assets	(165,310)	(164,062)
Property and equipment, net
Investment in subsidiaries	(82,482)	(98,929)
Due from/(to) subsidiaries	(298,159)	(290,024)
Other assets
Total assets	(545,951)	(553,015)
Current liabilities:
Accounts payable
Accrued and other current liabilities
Long-term Debt and Capital Lease Obligations, Current
Income tax payable	(165,310)	(164,062)
Total current liabilities	(165,310)	(164,062)
Long-term debt and capital leases, less current maturities
Due to/(from) subsidiaries	(298,159)	(290,024)
Other deferred liabilities
Total liabilities	(463,469)	(454,086)
Shareholders’ equity:
Common stock
Capital in excess of par value
Retained earnings	(82,482)	(98,929)
Accumulated other comprehensive loss
Total shareholders’ equity	(82,482)	(98,929)
Total liabilities & shareholders’ equity	(545,951)	(553,015)
Cash and cash equivalents	68,661	67,341	$ 56,938	$ 75,331
Accounts and other receivables	7,108	12,827
Inventories	18,658	21,595
Income tax receivable	4,721	3,003
Other current assets	22,492	16,150
Total current assets	121,640	120,916
Property and equipment, net	651,777	671,250
Investment in subsidiaries
Due from/(to) subsidiaries
Other assets	44,742	45,751
Total assets	818,159	837,917
Accounts payable	22,033	22,141
Accrued and other current liabilities	92,158	65,631
Long-term Debt and Capital Lease Obligations, Current	9,781	9,934
Income tax payable
Total current liabilities	123,972	97,706
Long-term debt and capital leases, less current maturities	213,728	213,803
Due to/(from) subsidiaries
Other deferred liabilities	111,180	118,628
Total liabilities	448,880	430,137
Common stock	602	601
Capital in excess of par value	76,772	75,938
Retained earnings	301,658	341,350
Accumulated other comprehensive loss	(9,753)	(10,109)
Total shareholders’ equity	369,279	407,780
Total liabilities & shareholders’ equity	$ 818,159	$ 837,917

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Note 13 - Supplemental Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Operations and Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended
	Aug. 30, 2016	Sep. 01, 2015
Parent Company [Member]
Revenue:
Restaurant sales and operating revenue	$ 185,088	$ 201,416
Franchise revenue	10	15
Total revenue	185,098	201,431
Operating costs and expenses:
Cost of goods sold	52,182	55,228
Payroll and related costs	63,575	67,341
Other restaurant operating costs	40,976	45,202
Depreciation and amortization	8,088	9,127
Selling, general, and administrative	19,386	20,589
Intercompany selling, general, and administrative allocations	10,363	11,126
Closures and Impairments Expenses	16,584	2,589
Equity in losses of subsidiaries	9,032	11,966
Interest expense, net	4,582	4,598
Intercompany interest expense/(income)	2,953	2,975
Total operating costs and expenses	227,721	206,809
Loss before income taxes	(42,623)	(5,378)
Income Tax Expense (Benefit)	(2,931)	(1,184)
Net loss	(39,692)	(4,194)
Equity in earnings of subsidiaries	(9,032)	(11,966)
(Loss)/income	(42,623)	(5,378)
Other comprehensive income:
Pension liability reclassification	355	(44)
Total comprehensive loss	(39,337)	(4,238)
Guarantor Subsidiaries [Member]
Revenue:
Restaurant sales and operating revenue	70,676	76,491
Franchise revenue	883	1,558
Total revenue	71,559	78,049
Operating costs and expenses:
Cost of goods sold	20,008	21,013
Payroll and related costs	27,032	27,994
Other restaurant operating costs	16,387	17,005
Depreciation and amortization	3,141	3,679
Selling, general, and administrative	12,199	8,807
Intercompany selling, general, and administrative allocations	(10,363)	(11,126)
Closures and Impairments Expenses	13,608	123
Equity in losses of subsidiaries
Interest expense, net	295	1,402
Intercompany interest expense/(income)	(2,953)	(2,975)
Total operating costs and expenses	79,354	65,922
Loss before income taxes	(7,795)	12,127
Income Tax Expense (Benefit)	1,237	161
Net loss	(9,032)	11,966
Equity in earnings of subsidiaries
(Loss)/income	(7,795)	12,127
Other comprehensive income:
Pension liability reclassification
Total comprehensive loss	(9,032)	11,966
Consolidation, Eliminations [Member]
Revenue:
Restaurant sales and operating revenue
Franchise revenue
Total revenue
Operating costs and expenses:
Cost of goods sold
Payroll and related costs
Other restaurant operating costs
Depreciation and amortization
Selling, general, and administrative
Intercompany selling, general, and administrative allocations
Closures and Impairments Expenses
Equity in losses of subsidiaries	(9,032)	(11,966)
Interest expense, net
Intercompany interest expense/(income)
Total operating costs and expenses	(9,032)	11,966
Loss before income taxes	9,032	(11,966)
Income Tax Expense (Benefit)
Net loss	9,032	(11,966)
Equity in earnings of subsidiaries	9,032	11,966
(Loss)/income	9,032	(11,966)
Other comprehensive income:
Pension liability reclassification
Total comprehensive loss	9,032	(11,966)
Restaurant sales and operating revenue	255,764	277,907
Franchise revenue	893	1,573
Total revenue	256,657	279,480
Cost of goods sold	72,190	76,241
Payroll and related costs	90,607	95,335
Other restaurant operating costs	57,363	62,207
Depreciation and amortization	11,229	12,806
Selling, general, and administrative	31,585	29,396
Intercompany selling, general, and administrative allocations
Closures and Impairments Expenses	30,192	2,712
Equity in losses of subsidiaries
Interest expense, net	4,877	6,000
Intercompany interest expense/(income)
Total operating costs and expenses	298,043	284,697
Loss before income taxes	(41,386)	(5,217)
Income Tax Expense (Benefit)	(1,694)	(1,023)
Net loss	(39,692)	(4,194)
Equity in earnings of subsidiaries
(Loss)/income	(41,386)	(5,217)
Pension liability reclassification	355	(44)
Total comprehensive loss	$ (39,337)	$ (4,238)

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Note 13 - Supplemental Condensed Consolidating Financial Statement - Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended
	Aug. 30, 2016	Sep. 01, 2015
Parent Company [Member]
Net cash provided by operating activities	$ 4,204	$ (6,213)
Investing activities:
Purchases of property and equipment	(4,992)	(7,138)
Proceeds from Sale of Property, Plant, and Equipment	5,257	2,746
Other, net	1,322	209
Net cash provided/(used) by investing activities	1,587	(4,183)
Financing activities:
Principal payments on long-term debt	11	11
Stock repurchases	(26)	(9)
Payments for debt issuance costs	(7)	(25)
Intercompany dividend
Other intercompany transactions	(4,462)	(7,971)
Net cash used by financing activities	(4,484)	(7,994)
Increase in cash and cash equivalents	1,307	(18,390)
Beginning of fiscal year	67,208	75,034
End of quarter	68,515	56,644
Net cash provided by operating activities	4,204	(6,213)
Guarantor Subsidiaries [Member]
Net cash provided by operating activities	9,280	22,659
Investing activities:
Purchases of property and equipment	(1,366)	(2,804)
Proceeds from Sale of Property, Plant, and Equipment
Other, net
Net cash provided/(used) by investing activities	(1,366)	(2,804)
Financing activities:
Principal payments on long-term debt	(486)	(8,912)
Stock repurchases
Payments for debt issuance costs
Intercompany dividend	(7,415)	(10,946)
Other intercompany transactions
Net cash used by financing activities	(7,901)	(19,858)
Increase in cash and cash equivalents	13	(3)
Beginning of fiscal year	133	297
End of quarter	146	294
Net cash provided by operating activities	9,280	22,659
Consolidation, Eliminations [Member]
Net cash provided by operating activities	(11,877)	(18,917)
Investing activities:
Purchases of property and equipment
Proceeds from Sale of Property, Plant, and Equipment
Other, net
Net cash provided/(used) by investing activities
Financing activities:
Principal payments on long-term debt
Stock repurchases
Payments for debt issuance costs
Intercompany dividend	7,415	10,946
Other intercompany transactions	4,462	7,971
Net cash used by financing activities	11,877	18,917
Increase in cash and cash equivalents
Beginning of fiscal year
End of quarter
Net cash provided by operating activities	(11,877)	(18,917)
Net cash provided by operating activities	1,607	(2,471)
Purchases of property and equipment	(6,358)	(9,942)
Proceeds from Sale of Property, Plant, and Equipment	5,257	2,746
Other, net	1,322	209
Net cash provided/(used) by investing activities	221	(6,987)
Principal payments on long-term debt	(475)	(8,901)
Stock repurchases	(26)	(9)
Payments for debt issuance costs	(7)	(25)
Intercompany dividend
Other intercompany transactions
Net cash used by financing activities	(508)	(8,935)
Increase in cash and cash equivalents	1,320	(18,393)
Beginning of fiscal year	67,341	75,331
End of quarter	68,661	56,938
Net cash provided by operating activities	$ 1,607	$ (2,471)

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Note 15 - Subsequent Events (Details Textual) - USD ($)			1 Months Ended	3 Months Ended
	Sep. 22, 2016	Sep. 13, 2016	Oct. 07, 2016	Aug. 30, 2016	May 31, 2016
Former Chairman of the Board of Directors, President, and Chief Executive Officer [Member] | Subsequent Event [Member]
Severance Costs		$ 0
Subsequent Event [Member]
Proceeds from Sale of Buildings	$ 2,800,000
Operating Lease Obligations, Amount Settled During Period			$ 3,100,000
One Office Building at the Restaurant Support Center [Member]
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment, Current				$ 6,000,000
Severance Costs				2,020,000
Operating Lease Obligation				$ 31,888,000	$ 6,270,000