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Ruth's Hospitality Group, Inc. Reports Second Quarter 2018 Financial Results

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– Total Revenues Increased 9.6% –

– Earnings Per Share Up 28.1% –

Ruth's Hospitality Group, Inc. (the "Company") (NASDAQ:RUTH) today
reported unaudited financial results for its second quarter ended July
1, 2018.

Highlights for the second quarter of 2018 were as follows:

  • Restaurant sales in the second quarter of 2018 increased 10.0% to
    $103.5 million compared to $94.1 million in the second quarter of 2017.
  • The Company reported net income of $9.6 million, or $0.32 per diluted
    share, in the second quarter of 2018, compared to net income of $7.8
    million, or $0.25 per diluted share, in the second quarter of 2017.
    • Income from continuing operations in the second quarter of 2018
      was $9.6 million, or $0.32 per diluted share, compared to income
      from continuing operations of $7.8 million, or $0.25 per diluted
      share, in the second quarter of 2017.
    • Net income in the second quarter of 2018 included a $0.3 million
      income tax benefit related to the impact of discrete income tax
      items.
    • Net income in the second quarter of 2018 also included $0.4
      million in deal-related expenses associated with the acquisition
      of the six restaurants of our Hawaiian franchisee.
    • Excluding these adjustments, as well as the results from
      discontinued operations, non-GAAP diluted earnings per common
      share were $0.32 in the second quarter of 2018, compared to $0.25
      in the second quarter of 2017. The Company believes that non-GAAP
      diluted earnings per common share provides a useful alternative
      measure of financial performance. Investors are advised to see the
      attached Reconciliation of non-GAAP Financial Measure table for
      additional information.

Michael P. O'Donnell, Chairman and Chief Executive Officer of Ruth's
Hospitality Group, Inc., noted, "I am pleased with our second quarter
results, which reflect the strength and consistency of our business.
Financial results included revenue growth of 9.6%, comparable restaurant
sales growth of 1.3%, and restaurant level margin expansion. Our
Hawaiian restaurants are steadily achieving sales and profits ahead of
our expectations, and we are in the final stages of a successful
integration."

O'Donnell continued, "I am incredibly proud of the team we have
assembled here at Ruth's Hospitality Group and of our many
accomplishments over the last 10 years. The Company is well-positioned
for continued success, due in large part to initiatives designed and
implemented by Cheryl Henry, our new Chief Executive Officer. I remain
extremely confident in the future of the Company, and look forward to
supporting Cheryl in my new role as Executive Chairman."

Review of Second Quarter 2018 Operating Results

Total revenues in the second quarter of 2018 were $109.6 million, an
increase of 9.6% compared to $100.0 million in the second quarter of
2017.

Company-owned Sales

  • Calendar comparable restaurant sales at Company-owned restaurants
    increased 1.3%, which consisted of a traffic decrease of 0.1%, as
    measured by entrees, and an average check increase of 1.4%.
    • The calendar shift of Easter from the second quarter of 2017 into
      the first quarter of 2018 negatively impacted second quarter 2018
      comparable restaurant traffic and sales by approximately 70 basis
      points.
  • Fiscal average unit weekly sales were $103.4 thousand in the second
    quarter of 2018, compared to $103.5 thousand in the second quarter of
    2017.
  • 77 Company-owned Ruth's Chris Steak House restaurants were open at the
    end of the second quarter of 2018, compared to 70 Ruth's Chris Steak
    House restaurants at the end of the second quarter of 2017. Total
    operating weeks for the second quarter of 2018 increased to 1,001 from
    910 in the second quarter of 2017.

Franchise Income

  • Franchise income in the second quarter of 2018 was $4.5 million, an
    increase of 4.7% compared to $4.3 million in the second quarter of
    2017. The increase in franchise income was driven by a 1.3% increase
    in comparable franchise restaurant sales as well as the impact of the
    new revenue recognition standard, partially offset by the acquisition
    of the Hawaii restaurant locations.
  • 75 franchisee-owned restaurants were open at the end of the second
    quarter of 2018 compared to 81 at the end of the second quarter of
    2017.

Operating Expenses

  • Food and beverage costs, as a percentage of restaurant sales,
    decreased 180 basis points to 28.1%, primarily driven by a 10%
    decrease in total beef costs, as well as by an increase in average
    check of 1.4%.
  • Restaurant operating expenses, as a percentage of restaurant sales,
    increased 50 basis points to 48.3%. The increase in restaurant
    operating expenses as a percentage of restaurant sales was primarily
    due to an increase in occupancy related expenses.
  • General and administrative expenses, as a percentage of total
    revenues, increased 40 basis points to 8.5%. The increase as a
    percentage of total revenues was primarily driven by additional costs
    related to the integration of the recently acquired Hawaiian
    restaurants.
  • Marketing and advertising costs, as a percentage of total revenues,
    increased 80 basis points. The increase in marketing and advertising
    costs in the second quarter of fiscal year 2018 was primarily
    attributable to a planned increase in advertising spending, in
    addition to the reclassification of certain administrative support
    costs that have been historically charged to general and
    administrative costs.
  • Pre-opening costs in the second quarter of 2018 were $0.3 million
    compared to $0.2 million in the second quarter of 2017, driven by the
    timing of new restaurant openings.
  • Income tax expenses declined from $3.6 million in the second quarter
    of 2017 to $1.8 million largely as a result of the enactment of the
    Tax Cuts and Jobs Act.

Development Update

The Company expects to open two new restaurants during the balance of
2018. The first in Jersey City, NJ in the third quarter and another in
Paramus, NJ in the fourth quarter. Additionally, a restaurant operating
under a management agreement in Reno, NV is expected to open early in
the first quarter of 2019.

Franchise partners opened one new restaurant and expect to open another
new restaurant in 2018. The first in Fort Wayne, IN opened during the
second quarter on May 7th, and another in Markham, Ontario is
expected to open in the fourth quarter.

Share Repurchase and Debt

The Company repurchased 224,605 shares during the second quarter of
2018, for approximately $5.9 million or $26.46 per share. At the end of
the quarter, the Company had approximately $44.7 million remaining under
its share repurchase authorization.

At the end of the second quarter of 2018, the Company had $50 million in
debt outstanding under that facility, with an additional $35.8 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
$0.11 per share. The dividend will be paid on September 6, 2018 to
shareholders of record as of the close of business on August 23, 2018,
and represents a 22% increase from the quarterly cash dividend paid in
August of 2017.

Financial Outlook

Based on current information, Ruth's Hospitality Group, Inc. is revising
its full year 2018 outlook based on a 52 week year ending December 30,
2018, as follows:

  • Food and beverage costs of 28.0% to 30.0% of restaurant sales
  • Restaurant operating expenses of 47.0% to 49.0% of restaurant sales
  • Marketing and advertising costs of 3.8% to 4.0% of total revenue
  • General and administrative expenses of $33 million to $35 million,
    exclusive of the integration costs related to the acquisition of the
    Hawaiian restaurants
  • Effective tax rate of 17% to 19%, excluding discreet income tax items
  • Capital expenditures of $30 million to $32 million
  • Fully diluted shares outstanding of 30.5 million to 31.0 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 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 second quarter 2018
financial results today at 8:30 AM Eastern Time. Hosting the call will
be Michael P. O'Donnell, Chairman and Chief Executive Officer, Arne G.
Haak, Executive Vice President and Chief Financial Officer and Cheryl
Henry, President and Chief Operating Officer.

The conference call can be accessed live over the phone by dialing
323-794-2093. A replay will be available one hour after the call and can
be accessed by dialing 412-317-6671; the password is 8635792. The replay
will be available until Friday, August 17, 2018. 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,
strategy, financial outlook, capital expenditures, our effective tax
rate and the expected impact and timing of integration of the Hawaii
franchisee 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 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; repeal or reduction of the federal FICA
tip credit; the impact of recent tax legislation and accounting policy
changes; unexpected expenses incurred as a result of the 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 the Company's goodwill, other intangible
assets or property; the impact of litigation; the restrictions imposed
by the Company's Credit Agreement; changes in, or the discontinuation
of, the Company's quarterly cash dividend payments or share repurchase
program; unanticipated costs associated with the Hawaii franchisee
acquisition; and the Company's inability to successfully integrate the
Hawaii franchisee restaurants into its operations. 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 26 Weeks Ended
July 1, June 25, July 1, June 25,
2018 2017 2018 2017
 
Revenues:
Restaurant sales $ 103,538 $ 94,145 $ 213,902 $ 193,600
Franchise income 4,457 4,257 8,874 8,647
Other operating income   1,640     1,613       3,384     3,306  
Total revenues 109,635 100,015 226,160 205,553
Costs and expenses:
Food and beverage costs 29,049 28,114 60,454 56,693
Restaurant operating expenses 50,022 45,005 101,702 90,452
Marketing and advertising 4,640 3,412 8,117 5,859
General and administrative costs 9,274 8,035 18,248 16,171
Depreciation and amortization expenses 4,673 3,731 9,134 7,236
Pre-opening costs   272     173       412     1,352  
Total costs and expenses 97,930 88,470 198,067 177,763
Operating income 11,705 11,545 28,093 27,790
Other income (expense):
Interest expense, net (403 ) (144 ) (783 ) (324 )
Other   22     14       34     39  
Income from continuing operations before income tax expense 11,324 11,415 27,344 27,505
Income tax expense   1,763     3,611       4,147     8,616  
Income from continuing operations 9,561 7,804 23,197 18,889
Income (loss) from discontinued operations, net of income taxes   12     7       22     (30 )
Net income $ 9,573   $ 7,811     $ 23,219   $ 18,859  
Basic earnings per common share:
Continuing operations $ 0.32 $ 0.26 $ 0.78 $ 0.62
Discontinued operations   -     -       -     -  
Basic earnings per share $ 0.32   $ 0.26     $ 0.78   $ 0.62  
Diluted earnings per common share:
Continuing operations $ 0.32 $ 0.25 $ 0.76 $ 0.60
Discontinued operations   -     -       -     -  
Diluted earnings per share $ 0.32   $ 0.25     $ 0.76   $ 0.60  
Shares used in computing net income per common share:
Basic 29,713,825 30,548,258 29,701,847 30,561,741
Diluted 30,375,306 31,264,266 30,377,194 31,255,441
Dividends declared per common share $ 0.11 $ 0.09 $ 0.22 $ 0.18
 

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 and
restaurant closing costs, the impact of certain discrete income tax
items and the impact of acquisition related costs 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 26 Weeks Ended
July 1, June 25,

 

July 1, June 25,
2018 2017 2018 2017
GAAP Net income $ 9,573 $ 7,811 $ 23,219 $ 18,859
GAAP Income tax expense 1,763 3,611 4,147 8,616
GAAP (Income) loss from discontinued operations   (12 )   (7 )   (22 )   30  
GAAP Income from continuing operations before income tax expense 11,324 11,415 27,344 27,505
Adjustments:
Hawaii acquisition costs   409     -     861     -  
Adjusted net income from continuing operations before income taxes 11,733 11,415 28,205 27,505
Adjusted income tax expense (1) (1,863 ) (3,611 ) (4,355 ) (8,616 )
Impact of excluding certain discrete income tax items   (273 )   -     (631 )   (247 )
Non-GAAP net income $ 9,597   $ 7,804   $ 23,219   $ 18,642  
       
GAAP diluted earnings per common share $ 0.32   $ 0.25   $ 0.76   $ 0.60  
       
Non-GAAP diluted earnings per common share $ 0.32   $ 0.25   $ 0.76   $ 0.60  
 
Weighted-average number of common shares outstanding - diluted 30,375,306 31,264,266 30,377,194 31,255,441
 
(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.
 

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