Ruby Tuesday Reports First Quarter Fiscal 2012 Results, Repurchases 2 Million Shares of Its Common Stock, and Reiterates Fiscal Year 2012 Free Cash Flow Guidance

Ruby Tuesday, Inc. (NYSE: RT) today reported financial results for the fiscal first quarter ended August 30, 2011.

“As we began FY12, we outlined the following primary goals for the year which are key in getting our sales and earnings back to stronger levels and building shareholder value”

Results for the first quarter of 2012 compared to the first quarter of 2011 include:

• Same-restaurant sales decreased 4.1% at Company-owned Ruby Tuesday restaurants, inclusive of approximately 40 basis points of adverse impact from Hurricane Irene
• Net income of $3.1 million compared to prior-year net income of $12.4 million, which included $1.7 million of accounting gains realized from franchise partner acquisitions
• Diluted earnings per share of $0.05 compared to diluted earnings per share of $0.19 for the prior year, which included $0.02 per share from the accounting gains noted above

Sandy Beall, Founder, Chairman, and CEO, commented on the quarterly results, saying, “We anticipated our first quarter would be challenging, and while our earnings results were within our guidance of $0.03-$0.06 cents per share, we are disappointed with our sales results for the quarter which were below our expectations. We continue to operate in an aggressive competitive promotional environment with very heavy advertising levels and we expect these competitive marketing trends to continue given the soft economy and low consumer confidence. To address these sales issues, we have several initiatives in test that are designed to position our brand favorably with the consumer and help us increase our same-restaurant sales.”

Other highlights from our first quarter results include:

• Same-restaurant sales for domestic franchise restaurants decreased by 3.7%
• Total revenue increased 9.1% from the prior-year period primarily due to the fiscal 2011 franchise partnership acquisitions
• Sales at domestic and international franchise Ruby Tuesday restaurants (which is the basis for determining royalty fees included in franchise revenue on the Company’s statement of operations) totaled $43.6 million and $91.1 million for the first quarter of fiscal 2012 and 2011, respectively, with the decline primarily driven by the franchise partnership acquisitions
• Continued progress on conversion strategy by opening Marlin & Ray’s seafood concept conversions in Manassas, VA on June 1^st and in Atlanta, GA on August 24^th
• The Company did not open any new Ruby Tuesday restaurants, permanently closed two restaurants, and temporarily closed two restaurants in anticipation of conversion to other concepts
• Domestic and international franchisees opened two new Ruby Tuesday restaurants and closed three Ruby Tuesday restaurants
• The Company repurchased 2 million shares of its common stock at an average price of $9.22 per share. As of the end of the first quarter, 5.9 million shares remained authorized for repurchase under the Company’s share repurchase program.
• Total capital expenditures were $8.4 million
• Book debt to EBITDA ratio of 2.85, which excludes the pro forma EBITDA impact from the franchise partnership acquisitions, represents an increase over the prior-year ratio of 2.08 primarily due to the assumption of debt from the franchise partnership acquisitions during fiscal 2011

Mr. Beall added, “As we began FY12, we outlined the following primary goals for the year which are key in getting our sales and earnings back to stronger levels and building shareholder value:

• Increasing Our Same-Restaurant Sales – We continue to focus on new product offerings designed to provide momentum for our brand, including our Seafood Festival limited-time offer starting at $9.99. Additionally, we are in the process of testing two new promotions providing both high quality and high value. We have a new test menu which includes our Fresh Endless Garden Bar and fresh-baked garlic cheese biscuits complimentary for over 40 entrees with a starting price of $8.99. Additionally, our new limited-time lunch offer of soup, salad bowl, and garlic cheese biscuits starting at $5.99 - $6.99 continues to perform well in our test markets. New compelling value offerings such as these, which are being communicated through television, in addition to our continued focus on improving the overall guest experience, are designed to increase our traffic and sales.
• Lowering Our Costs and Enhancing Our Margins – We continually seek opportunities to lower our cost of doing business without impacting the overall guest experience and have recently engaged an enterprise improvement consulting firm to assist us in an in-depth strategic study on cost reduction
• Maximizing Our Strong Free Cash Flow – We remain focused on maximizing our free cash flow levels in this difficult environment, and believe our sales building and margin improvement goals noted above will be key facilitators for success. Additionally, we have identified certain non-critical capital expenditures originally planned for this year totaling approximately $10 million that we are deferring, at no dilution to our long-term conversion and inline growth strategies, in order to maximize our free cash flow for fiscal 2012. We are going to explore alternatives to potentially monetize a portion of our real estate portfolio and utilize the proceeds, in tandem with our free cash flow, primarily for opportunistic share repurchases and/or to repay some of our higher interest rate third-party debt.”

Fiscal Year 2012 Guidance

• Same-Restaurant Sales – We estimate same-restaurant sales for Company-owned restaurants will be in the range of flat to down 2.0% for the year, with our second quarter same-restaurant sales estimated to be in the range of down 2.0%-3.0% due to headwinds from the current competitive environment coupled with more difficult sales comparisons to lap from the prior year, and reflecting a two-year trend improvement over the first quarter
• Company-Owned and Licensed Restaurant Development – We expect to close three to five Company-owned restaurants (excluding conversions), convert six to eight Company-owned restaurants to other high-quality casual dining concepts, open one new restaurant, and open six to eight Lime Fresh Mexican restaurants
• Franchise Restaurant Development – We estimate our franchisees will close 14-16 restaurants, up to 14 of which will be international, and open seven to nine restaurants, up to six of which will be international
• Restaurant Operating Margins – Margins are anticipated to decline slightly with the negative impact of lower same-restaurant sales largely offset by fixed cost leverage from the 53^rd week and cost savings initiatives. We have some food cost exposure in the back half of the year but plan on partially offsetting this exposure with freight savings.
• Depreciation – Estimated to be in the $66-$68 million range
• Selling, General, and Administrative Expenses – Estimated to be up approximately 13%-16% from a year earlier primarily due to incremental advertising expense and the loss of fee income from acquired franchise partnerships which historically offset selling, general, and administrative expenses
• Other Expenses – Interest expense is estimated to be $16-$18 million and the effective tax rate is estimated to be 10%-15%
• Diluted Earnings Per Share for the year are estimated to be in the $0.60-$0.75 range, with our second quarter estimated to be a net loss of $0.04 to $0.08 per share due to lower same-restaurant sales and year-over-year increases in advertising and interest expense. Fully-diluted weighted average shares outstanding are estimated to be approximately 62-63 million for the year.
• Capital Expenditures for the year are estimated to be $33-$37 million
• Free Cash Flow for the year is estimated to be $90-$100 million

In closing, Mr. Beall said, “While we anticipate the remainder of Fiscal 2012 to be a challenging operating environment, we are confident that our plans and strategies to increase our same-restaurant sales, lower our costs and enhance our margins, and maximize our free cash flow will result in a stronger Ruby Tuesday and will position us over the long term to increase shareholder value through both sales and earnings growth.”

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