Ruth’s Hospitality Group, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results

– Fourth Quarter GAAP EPS of $0.49 –

– Full Year GAAP EPS of $1.38 –

– Company Announces 18% Increase in Quarterly Dividend to $0.13 per
Share –

WINTER PARK, Fla.–(BUSINESS WIRE)–Ruth’s Hospitality Group, Inc. (the “Company”) (NASDAQ:RUTH) today
reported unaudited financial results for its 13-week fourth quarter and
52-week full year ended December 30, 2018.

Highlights for the 13-week fourth quarter of 2018 compared to the
14-week fourth quarter of 2017 were as follows:

  • Restaurant sales in the 13-week fourth quarter of 2018 increased 2.3%
    to $120.0 million compared to $117.4 million in the 14-week fourth
    quarter of 2017. Average unit weekly sales were $117.8 thousand in the
    fourth quarter of 2018, an increase of 0.4% compared to $117.4
    thousand in the fourth quarter of 2017.
  • Net income in the fourth quarter of 2018 was $14.9 million, or $0.49
    per diluted share, compared to net income of $9.6 million, or $0.31
    per diluted share, in the fourth quarter of 2017.

    • Net income in the fourth quarter of 2018 included $0.3 million in
      acquisition-related expenses associated with the acquisition of
      the six restaurants from our Hawaiian franchisee. Net income in
      the fourth quarter of 2017 included a $3.9 million non-cash charge
      related to the impairment of assets at one restaurant location,
      $0.6 million in acquisition-related expenses associated with the
      acquisition of our Hawaiian franchisee, and a discrete income tax
      charge of $1.2 million primarily related to the reduction of
      deferred tax assets from the Tax Cuts and Jobs Act.
    • Excluding these adjustments, non-GAAP diluted earnings per common
      share were $0.50 in the 13-week fourth quarter of 2018, compared
      to $0.44 in the 14-week fourth quarter of 2017. The Company
      believes that non-GAAP diluted earnings per common share provides
      a useful alternative measure of financial performance to improve
      comparability of diluted earnings per common share between
      periods. Investors are advised to see the attached Reconciliation
      of non-GAAP Financial Measure table for additional information.
  • During the fourth quarter of 2018, the Company returned $28.9 million
    through its dividend program, debt repayment and the repurchase of 464
    thousand shares of common stock for $12.6 million.
  • One Company-owned Ruth’s Chris Steak House restaurant, one new
    franchised restaurant and one restaurant operating under a contractual
    agreement opened in the fourth quarter.

Cheryl Henry, President and Chief Executive Officer of Ruth’s
Hospitality Group, Inc., stated, “I’m proud of all that our team
accomplished in both the fourth quarter and the full year. For the full
year, we grew revenue by 9%, expanded restaurant level margins to the
highest levels in over 10 years, successfully integrated our six
Hawaiian franchise locations, and opened 3 new Company-operated and 2
new franchise restaurants.”

Henry added, “In addition, 2018 marked the 9th consecutive year of
comparable restaurant sales and earnings growth. This success has been
driven by our intense focus on operational excellence, and I’d like to
thank all of our team members and franchisees for their incredible work
each and every day.”

Review of Fourth Quarter 2018 Operating Results

Total revenues in the 13-week fourth quarter of 2018 were $127.2
million, an increase of 2.5% compared to $124.1 million in the 14-week
fourth quarter of 2017.

Company-owned Sales

  • Comparable restaurant sales at Company-owned restaurants decreased
    0.1% compared to the fourth quarter of 2017, which consisted of a
    traffic decrease of 2.5%, as measured by entrees, and an average check
    increase of 2.5%. Comparable restaurant sales and traffic were
    negatively affected by approximately 150 basis points due to the shift
    of the New Year’s Eve holiday into 2019.
  • 78 Company-owned Ruth’s Chris Steak House restaurants were open at the
    end of the fourth quarter of 2018, compared to 77 Ruth’s Chris Steak
    House restaurants at the end of the fourth quarter of 2017. Total
    operating weeks for the fourth quarter of 2018 increased to 1,019 from
    1,000 in the fourth quarter of 2017.

Franchise Income

  • Franchise income in the fourth quarter of 2018 was $5.0 million, an
    increase of 7.1% compared to $4.7 million in the fourth quarter of
    2017. The increase in franchise income was driven by a 1.1% increase
    in comparable franchise restaurant sales, the impact of the changes
    related to the implementation of the revenue recognition standard of
    $0.3 million, partially offset by the loss of $0.3 million of
    franchise income related to the acquisition of our Hawaiian franchise
    restaurants.
  • 75 franchisee-owned restaurants were open at the end of the fourth
    quarter of 2018 compared to 76 at the end of the fourth quarter of
    2017.

Operating Expenses

  • Food and beverage costs, as a percentage of restaurant sales,
    decreased 160 basis points to 27.7%, primarily driven by a 6.4%
    decrease in total beef costs, as well as an increase in average check
    of 2.5%.
  • Restaurant operating expenses, as a percentage of restaurant sales,
    increased 110 basis points to 45.8%. The increase in restaurant
    operating expenses as a percentage of restaurant sales was primarily
    due to the loss of sales leverage from the extra week in the fourth
    quarter of 2017 as well an increase in occupancy related expenses.
  • Marketing and advertising costs, as a percentage of total revenues,
    increased 80 basis points to 3.7%. The increase in marketing and
    advertising costs was primarily due to the partial re-investment of
    tax savings back into the business.
  • General and administrative expenses, as a percentage of total
    revenues, increased 40 basis points to 8.0%. The increase as a
    percentage of total revenues was primarily driven by the loss of sales
    leverage from the extra week in the fourth quarter of 2017 as well as
    an increase in performance-based compensation and costs related to the
    integration of the Hawaiian restaurants.
  • Pre-opening costs were $0.6 million compared to $0.5 million in the
    fourth quarter of 2017.
  • Income tax expense declined from $6.0 million in the fourth quarter of
    2017 to $3.4 million largely as a result of the enactment of the Tax
    Cuts and Jobs Act.

Highlights for the 52-week Fiscal Year 2018 Compared to the 53-week
Fiscal Year 2017 were as follows:

  • Restaurant sales in the 52-week fiscal year 2018 increased 9.5% to
    $427.4 million compared to $390.4 million in the 53-week fiscal year
    2017. Average unit weekly sales were $106.1 thousand in 2018, an
    increase of 1.0% compared to $105.1 thousand in 2017.
  • Net income in 2018 was $41.7 million, or $1.38 per diluted share,
    compared to net income of $30.1 million, or $0.97 per diluted share in
    2017.

    • Income from continuing operations in 2018 was $41.6 million, or
      $1.37 per diluted share, compared to income from continuing
      operations of $30.2 million, or $0.98 per diluted share, in 2017.
    • Net income in 2018 included $1.5 million in acquisition-related
      expenses associated with the acquisition of our Hawaiian
      franchisee and a $0.7 million benefit related to other discrete
      income tax items. Net income in 2017 included a $3.9 million
      non-cash charge related to the impairment of assets at one
      restaurant location, $0.6 million in acquisition-related expenses
      associated with the acquisition of our Hawaiian franchisee, and a
      discrete income tax charge of $1.2 million primarily related to
      the reduction of deferred tax assets from the Tax Cuts and Jobs
      Act.
    • Excluding these adjustments, as well as the results from
      discontinued operations, non-GAAP diluted earnings per common
      share were $1.39 in 2018, compared to $1.10 in 2017. The Company
      believes that non-GAAP diluted earnings per common share provides
      a useful alternative measure of financial performance to improve
      comparability of diluted earnings per common share between
      periods. Investors are advised to see the attached Reconciliation
      of non-GAAP Financial Measure table for additional information.
  • During the year, the Company returned $41.1 million through its
    dividend program, debt repayment and the repurchase of 689 thousand
    shares of common stock for $18.5 million.

Review of Fiscal Year 2018 Operating Results

Total revenues in the 52-week fiscal year 2018 were $452.3 million, an
increase of 9.0% to compared to $414.8 million in the 53-week year 2017.

Company-owned Sales

  • For 2018, Company-owned comparable restaurant sales increased 1.4% on
    a comparable 52-week basis, which consisted of an average check
    increase of 1.7%, and 0.3% decrease in traffic counts. Comparable
    restaurant sales and traffic were negatively affected by approximately
    50 basis points due to the shift of the New Year’s Eve holiday into
    2019.
  • Total operating weeks for 2018 increased to 4,027 from 3,715 in 2017.
    Total operating weeks exclude discontinued operations.

Franchise Income

  • Franchise income in 2018 was up 2.1% to $17.9 million compared to
    $17.5 million in 2017. The increase in franchise income was driven by
    a 1.0% increase in comparable restaurant sales, as well as an increase
    of $1.5 million related to the new revenue recognition standard,
    partially offset by the loss of $1.6 million of franchise income
    related to the acquisition of our Hawaiian franchise restaurants.

Operating Expenses

  • Food and beverage costs, as a percentage of restaurant sales,
    decreased 170 basis points to 28.1%, primarily due to a decrease in
    total beef costs of 8.4% and an increase in average check of 1.7%.
  • Restaurant operating expenses, as a percentage of restaurant sales,
    increased 80 basis points to 48.3%. The increase in restaurant
    operating expenses as a percentage of restaurant sales was primarily
    due to the partial re-investment of tax savings back into the business
    as well an increase in occupancy related expenses.
  • Marketing and advertising costs, as a percentage of total revenues,
    increased 60 basis points to 3.7%. The increase in marketing and
    advertising costs was primarily due to the partial re-investment of
    tax savings back into the business, as well as the impact of the
    changes related to the implementation of the new revenue recognition
    standard.
  • General and administrative expenses, as a percentage of total
    revenues, increased 35 basis points to 8.2%. The increase, as a
    percentage of total revenues, was primarily driven by increased
    performance-based compensation of $3.5 million and $0.9 million of
    additional costs related to the integration of the Hawaiian
    restaurants.
  • Pre-opening costs were $1.9 million in 2018, compared to $2.0 million
    for full year 2017.

Development Update

The Company opened two new restaurants in the fourth quarter, one in
Paramus, NJ and one in Reno, NV that operates under a management
agreement.

The Company has signed a lease for a new Company-owned restaurant
location in Somerville, MA which will open in late 2019. With that,
there are now four leases signed for new Company-owned restaurants; one
in Columbus, OH, one in Washington DC, one in Somerville, MA and one in
Oklahoma City, OK. The Columbus, Washington DC and Somerville
restaurants are expected to open in the second half of 2019, while
Oklahoma City is expected to open in 2020.

Franchise partners opened a new restaurant in Markham, Ontario in the
fourth quarter. For 2019, our franchise partners are currently scheduled
to open two new restaurants. The first is expected to open in Chongqing,
China in the first half of 2019 and another is expected to open in St.
George, UT during the second half of the year.

Lastly, the Company closed one restaurant in Washington DC late in the
fourth quarter of 2018 which was at the end of its lease term.

Share Repurchase and Debt

During the fourth quarter, the Company repurchased approximately 464
thousand shares for $12.6 million, at a $27.12 average price.

For the full year, the Company repurchased approximately 689 thousand
shares for $18.5 million, at an average price of $26.91. The Company
ended the year with approximately $32.1 million remaining under its
share repurchase authorization. Since the beginning of 2014, the Company
has repurchased an aggregate of 7.4 million shares for approximately
$126.7 million under the current and previous share repurchase programs.

At the end of 2018, the Company had $41.0 million in debt outstanding
under its senior credit facility, with an additional $44.8 million of
availability.

Quarterly Cash Dividend

Subsequent to the end of the quarter, the Company’s Board of Directors
approved the payment of a quarterly cash dividend to shareholders of
$0.13 per share. The dividend will be paid on March 21, 2019 to
shareholders of record as of the close of business on March 7, 2019, and
represents a 18% increase from the quarterly cash dividend paid in March
of 2018.

Financial Outlook

Based on current information, Ruth’s Hospitality Group, Inc. is
providing its full year 2019 outlook based on a 52 week year ending
December 29, 2019, as follows:

  • Food and beverage costs of 28.0% to 30.0% of restaurant sales
  • Restaurant operating expenses of 48.0% to 50.0% of restaurant sales
  • Marketing and advertising costs of 3.4% to 3.6% of total revenue
  • General and administrative expenses of $35 million to $36 million
  • Effective tax rate of 17% to 19%, excluding discrete income tax items
  • Capital expenditures of $30 million to $32 million resulting in
    depreciation expense of $19.5 million to $21.5 million.
  • Fully diluted shares outstanding of 30.0 million to 30.5 million
    (exclusive of any future share repurchases under the Company’s share
    repurchase program)

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

Conference Call

The Company will host a conference call to discuss fourth quarter 2018
and full year 2018 financial results today at 8:30 AM Eastern Time.
Hosting the call will be Cheryl Henry, President and Chief Executive
Officer, and Arne G. Haak, Executive Vice President and Chief Financial
Officer.

The conference call can be accessed live over the phone by dialing
323-794-2588. A replay will be available one hour after the call and can
be accessed by dialing 412-317-6671; the password is 3782165. The replay
will be available until Friday, March 1, 2019. The call will also be
webcast live from the Company’s website at www.rhgi.com
under the Investor Relations section.

About Ruth’s Hospitality Group, Inc.

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

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

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” that reflect,
when made, the Company’s expectations or beliefs concerning future
events that involve risks and uncertainties. Forward-looking statements
frequently are identified by the words “believe,” “anticipate,”
“expect,” “estimate,” “intend,” “project,” “targeting,” “will be,” “will
continue,” “will likely result,” or other similar words and phrases.
Similarly, statements herein that describe the Company’s objectives,
plans or goals, including with respect to new restaurant openings,
capital expenditures, strategy, financial outlook, our effective tax
rate and the impact of healthcare inflation, recent accounting
pronouncements and tax reform legislation, also are forward-looking
statements. Actual results could differ materially from those projected,
implied or anticipated by the Company’s forward-looking statements. Some
of the factors that could cause actual results to differ include:
reductions in the availability of, or increases in the cost of, USDA
Prime grade beef, fish and other food items; changes in economic
conditions and general trends; the loss of key management personnel; the
effect of market volatility on the Company’s stock price; health
concerns about beef or other food products; the effect of competition in
the restaurant industry; changes in consumer preferences or
discretionary spending; labor shortages or increases in labor costs; the
impact of federal, state or local government regulations relating to
income taxes, unclaimed property, Company employees, the sale or
preparation of food, the sale of alcoholic beverages and the opening of
new restaurants; harmful actions taken by the Company’s franchisees; a
material failure, interruption or security breach of the Company’s
information technology network; the Company’s indemnification
obligations in connection with its sale of the Mitchell’s Restaurants;
the Company’s ability to protect its name and logo and other proprietary
information; an impairment in the financial statement carrying value of
our goodwill, other intangible assets or property; the impact of
litigation; the restrictions imposed by the Company’s credit agreement;
and changes in, or the discontinuation of, the Company’s quarterly cash
dividend payments or share repurchase program. For a discussion of these
and other risks and uncertainties that could cause actual results to
differ from those contained in the forward-looking statements, see “Risk
Factors” in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2017, which is available on the SEC’s website at www.sec.gov.
All forward-looking statements are qualified in their entirety by this
cautionary statement, and the Company undertakes no obligation to revise
or update this press release to reflect events or circumstances after
the date hereof. You should not assume that material events subsequent
to the date of this press release have not occurred.

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

 
RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income – Preliminary and
Unaudited
(Amounts in thousands, except share and per share data)
       
 

13 Weeks
Ended

14 Weeks
Ended

52 Weeks
Ended

53 Weeks
Ended

December 30, December 31, December 30, December 31,
  2018     2017     2018     2017  
 
Revenues:
Restaurant sales $ 120,043 $ 117,392 $ 427,433 $ 390,434
Franchise income 5,014 4,680 17,919 17,545
Other operating income   2,102     2,031       6,982     6,844  
Total revenues 127,159 124,103 452,334 414,823
Costs and expenses:
Food and beverage costs 33,219 34,349 120,112 116,361
Restaurant operating expenses 54,930 52,398 206,258 185,444
Marketing and advertising 4,709 3,668 16,639 12,724
General and administrative costs 10,195 9,433 37,253 32,700
Depreciation and amortization expenses 4,776 3,906 18,538 14,995
Pre-opening costs 617 539 1,875 2,013
Loss on impairment       3,904           3,904  
Total costs and expenses 108,446 108,197 400,675 368,141
Operating income 18,713 15,906 51,659 46,682
Other income (expense):
Interest expense, net (486 ) (300 ) (1,739 ) (821 )
Other   (42 )   19       (73 )   53  
Income from continuing operations before income tax expense 18,185 15,625 49,847 45,914
Income tax expense   3,375     6,036       8,247     15,669  
Income from continuing operations 14,810 9,589 41,600 30,245
Income (loss) from discontinued operations, net of income taxes   50     (8 )     80     (108 )
Net income $ 14,860   $ 9,581     $ 41,680   $ 30,137  
Basic earnings per common share:
Continuing operations $ 0.50 $ 0.32 $ 1.40 $ 1.00
Discontinued operations             0.01     (0.01 )
Basic earnings per share $ 0.50   $ 0.32     $ 1.41   $ 0.99  
Diluted earnings per common share:
Continuing operations $ 0.49 $ 0.31 $ 1.37 $ 0.98
Discontinued operations             0.01     (0.01 )
Diluted earnings per share $ 0.49   $ 0.31     $ 1.38   $ 0.97  
Shares used in computing net income per common share:
Basic 29,513,678 29,947,096 29,659,461 30,346,999
Diluted 30,071,992 30,571,801 30,273,841 30,916,364
Dividends declared per common share $ 0.11 $ 0.09 $ 0.44 $ 0.36
 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE

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

 
Reconciliation of Non-GAAP Financial Measure – Unaudited
(Amounts in thousands, except share data)
       
 

13 Weeks
Ended

14 Weeks
Ended

52 Weeks
Ended

53 Weeks
Ended

December 30, December 31, December 30, December 31,
  2018     2017     2018     2017  
GAAP Net income $ 14,860 $ 9,581 $ 41,680 $ 30,137
GAAP Income tax expense 3,375 6,036 8,247 15,669
GAAP (Income) loss from discontinued operations   (50 )   8     (80 )   108  
GAAP Income from continuing operations before income tax expense 18,185 15,625 49,847 45,914
Adjustments:
Loss on impairment 3,904 3,904
Hawaii acquisition costs   250     619     1,525     619  
Adjusted net income from continuing operations before income taxes 18,435 20,148 51,372 50,437
Adjusted income tax expense (1) (3,436 ) (7,755 ) (8,621 ) (17,388 )
Impact of excluding certain discrete income tax items       1,160     (711 )   913  
Non-GAAP net income $ 14,999   $ 13,553   $ 42,040   $ 33,962  
       
GAAP diluted earnings per common share $ 0.49   $ 0.31   $ 1.38   $ 0.97  
       
Non-GAAP diluted earnings per common share $ 0.50   $ 0.44   $ 1.39   $ 1.10  
 
Weighted-average number of common shares outstanding – diluted 30,071,992 30,571,801 30,273,841 30,916,364
 
(1) Adjusted income tax expense is calculated by multiplying the
Non-GAAP adjustments by our marginal federal and state income tax
rates and adding or subtracting the result to/from our GAAP income
tax expense.
 

Contacts

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

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