This summary is based on the first quarter fiscal 2009 earnings call conducted by Ruby Tuesday Inc. (RT: chart) on October 8, 2008.

Management:

- Chairman of the Board, President, Chief Executive Officer: Samuel E. Beall
- Chief Financial Officer, Senior Vice President: Marguerite N. Duffy
- Senior Vice President, Marketing: Mark Young
- Executive Vice President: Kimberly M. Grant
- Vice President, Finance: Steve Rockwell

Key Investors Issues

- Earnings of $285 000 or 1 cent as share, fell 97% from $11.1 million or 21 cents in 2007.
- Revenue dropped 6.6% to $324 million.

First Quarter Highlights

The firm reported earnings of $285 000 or 1 cent as share, down from $11.1 million or 21 cents in the prior year on weaker margins and revenue decreasing by 6.6%.

- Revenue dropped 6.6% from $347 million in the prior year to $324 million driven by the 10.8% decline in same-restaurant sales, offset by an average of 5% more restaurants in operation, largely reflecting the acquisition of 25 franchise restaurants.
- Restaurant level margins were 16.6% compared to 21.4% in the prior year with higher food costs due to higher quality menu items, as well as better pricing.
- Labor costs were higher due to increases in minimum wage in several states and higher management labor because of a loss of leveraging with lower sales volumes.

Other operating expense line was 240 basis points higher due to higher utilities, higher rent from leased restaurants purchased from franchisees, increased impairment charges, and a loss of leverage on certain relatively fixed costs.

- SG&A costs decreased 50 basis points as a percent of operating revenue principally because of lower advertising expenses.
- Equity and earnings of franchisees was higher than prior year, due primarily to providing fee relief to several of franchise partnerships.
- Ruby ended the quarter with book debt of $565 million, down $40 million from the end of the fiscal year, and total debt, including operating leases, guarantees, and letters of credit of $857 million.
- With the reimaging completed and new unit development effectively on hold, capital expenditures were only $6 million.

Update on Strategies and Initiatives:

– The firm implemented a new menu design that has more personality than earlier ones, offering much greater value to the guest.
- Price value is the key in this environment, price more so than value, and the firm plans on promoting its price and that value more aggressively in the coming months.

With all of the recent initiatives in place, completed, including the reimaging and renewed emphasis on price value, the firm believes it is very well-positioned to communicate its value to guests.

- The firm also plans on increasing television advertising more than originally planned in the back half of the year to help drive guests and is also investing in a stronger sales building culture.
- The most important focus though is to continue to strengthen the balance sheet by paying down significant levels of debt from internally generated cash flow and managing costs.

Fiscal 2009 Outlook:

– The firm expects to open two additional company-operated restaurants later in the year and anticipate closing 10 locations with lease expirations at this time.
- For the year, it expects same-restaurant sales to be down in the mid-single-digit range with sequential improvement throughout the year.
- EPS is expected to be in the 30 cents to 35 cents range and restaurant operating margins are expected to be down as higher labor and other operating expenses reflecting lost leverage from the lower sales are partially offset by lower food costs.

Key questions and answers from the first quarter earnings call conducted by Ruby Tuesday Inc. (RT: chart) on October 8, 2008.

Steven Rees (J.P. Morgan): How much wiggle room do you have in terms of same-store sales being down worse than mid-single for the year?

Samuel E. Beall: They are worse right now. We did say we expect them to get better throughout the year. We hope that October and November are stronger and the third and fourth are stronger.

Steven Rees (J.P. Morgan): On restaurant closures, how many if any units are out there that are losing money?

Samuel E. Beall: We have as far as negative cash flow losers, last quarter it was about 49 or 50, something like that. It is comparable in that area but the bigger question I think, is we are going through our entire real estate portfolio.

Steven Rees (J.P. Morgan): On the food costs up only 30 basis points, can you just review your contracts, where you stand today?

Samuel E. Beall: We have done an outstanding job picking away at every kind of food item we can and cutting costs in commodities and we have been lucky on some of our contracts.

Fortunate for all of us, commodities have got to come down in this market. They always have when this situation happens and I expect them to, although we are not forecasting that in our models.