Ruby Tuesday, Inc. (RT)

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Ruby Tuesday, Inc. (RUBY)

F4Q10 (Qtr End 06/01/2010) Earnings Call

July 22, 2010 4:30 pm ET

Executives

Greg Ashley - VP of Finance

Sandy Beall - Chairman and CEO

Margie Duffy - Chief Financial Officer

Mark Young - SVP and Chief Marketing Officer

Kimberly Grant - EVP

Analysts

Jason Belcher - Wells Fargo Securities

Brad Ludington - KeyBanc Capital Markets

Robert Derrington - Morgan Keegan

Howard Penney - Hedgeye Risk Management

Keith Siegner - Credit Suisse

Brian Innes - Telsey Advisory Group

Chris O'Cull - SunTrust

Presentation

Operator

Greetings and welcome to the Ruby Tuesday Incorporated fourth quarter and fiscal year 2010 earnings call. (Operator Instructions) It is now my pleasure to introduce your host, Greg Ashley, Vice President of Finance for Ruby Tuesday.

Greg Ashley

Thanks all of you for joining us this evening. With me today are Sandy Beall, Ruby Tuesday's Chairman and CEO; Margie Duffy, Chief Financial Officer; Mark Young, our Senior Vice President and Chief Marketing Officer; and Kimberly Grant, our Executive Vice President.

I'd like to remind you that there are likely to be forward-looking statements in our comments and I refer you to the note regarding forward-looking information in our press release and the most recently filed Form 10-Q. We plan to release first quarter of fiscal '11 earnings in early October.

Our fourth quarter earnings were released today after the market closed. A copy of our press release can be found on the Investor Relations section of our website at rubytuesday.com and is also available on Business Wire, First Call and other wire services.

Our format today includes an overview of our fourth quarter and fiscal 2010 financial results, our fiscal 2011 outlook and a review of our plans and strategies. At the conclusion of our prepared remarks, we will open up the line for questions.

I will now turn the call over to Sandy.

Sandy Beall

Thank you, Greg, and thanks everyone for listening in on this afternoon. We remain very encouraged about momentum we're experiencing throughout our business. Our fourth quarter was the best sales quarter in the last four years. Additionally, our net income for the quarter was up 45% over the prior year.

I'm really very proud of the way our teams have been teed to respond to the economic challenges out there, and it's enabled us to move definitely in the right direction. A solid year for Ruby Tuesday.

Our key objective as we began our year, number one was to get customers in seats to increase traffic and sales, number two to maximize cash flow and reduce our debt, number three to focus strength in our brands through continually providing a high-quality casual dining experience with compelling value for every guest.

I'd like to briefly touch on our performance in these areas. First, getting guest in seats. Our same-restaurant sales for the year were only down 1.3%, beating Knapp-Track, the industry benchmark, on a one-year basis by almost 3 points. And the results were better than last year's same-restaurant sales of down 7.9%.

Our same-restaurant sales showed sequential quarterly improvement throughout the year, 3.1% down than 1.7% down in second quarter, only 0.7% down in the third and then positive in the fourth quarter 0.3%. And that gives us six quarters of sequential improvement.

On a two-year basis for fiscal '10, our quarterly same-store sales have improved from 13.9% down, 12.5% to down 7.5%, to only down 2.9% for the fourth quarter on a two-year basis. So we definitely have very positive momentum there and we're very proud of that.

Our second goal was to maximize cash flow and reduce our debt. Our debt paydown for the year exceeded our expectations as we paid down $204 million of debt, including $33 million in the fourth quarter. These are both notable accomplishments for sure.

Our CapEx needs over the next few years continue to be relatively low, approximately $25 million per year. That's up from $20 million last year, but include some new spending that Margie will go over.

Our third goal was to further strengthen our brand through high-quality casual dining. We believe the consistent focus over the last several years on the brand strategies, uncompromising freshness in quality, gracious hospitality, a fresh new look and compelling value has provided a very strong foundation to build upon and has positioned us well for the future.

We are successfully getting people into seeing the new Ruby Tuesday, and they're coming back as a result of our innovating product offerings and promotions that enhance and differentiate the brand, also offering incremental sales opportunities and increased value.

We refer to these innovating and enhanced product offerings as game-changers. Some examples. Our Tuesday night & Lobster dinner, $13.99. The rollout of actually lobster dishes in the Barboro section of casual dining, we have five lobster dishes; a great notion, just those items alone. We introduced our four-course Sunday brunch as well as our after 9 p.m. giving a mini-burger. These new offerings are driving our momentum forward as a brand.

We're especially excited about some of our upcoming game-changers which Mark will outline later in the call. Our guest satisfaction index, top box score, which is a measure of our guests who rated the overall experience of 5 on a 1-to-5 scale, are an all-time highs.

The continued improvement in our sales, operations and balance sheet has allowed us to begin developing longer-term strategies to improve our return on assets and create additional value. We've focused significant time at our last two Board meetings, discussing ways to drive our business in a low-risk high-return fashion.

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