Ruth's Hospitality Group Inc (RUTH) 2007 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to today's Ruth's Chris Steak House, Inc. Third Quarter 2007 Conference Call. At this time all participants are in a listen-only mode.

Following the presentation we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. As a reminder, today's conference is being recorded. And now, I would like to turn the conference over to Mr. Tom Pennison, Chief Financial Officer. Please go ahead, sir.

Thank you, Katie. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements. These statements are not guarantees of future performance and, therefore, undue reliance should not be put upon them. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating results and financial condition. I'd like to start by thanking you all for joining us this morning, and welcome to our third-quarter call.

Since there's clearly a lot of ground to cover this morning, particularly with the acquisition we announced yesterday, we thought that, in the interest of time, I would first briefly review our financial results for the third quarter, and then both Craig and I will discuss the acquisition.

As described in our earnings release for the third quarter ended September 30, 2007, we generated solid top-line performance, with total revenue increasing 20.5% to $70.2 million from $58.3 million in last year's third quarter. During the quarter, we benefited from improved food-and-beverage costs, as well as significant leverage from our G&A expense.

Despite the slight decrease in comparable sales, reflecting the continuation of recent trends with the challenging consumer environment, operating income grew by 18.9% and maintained our operating-income margins year-over-year, adjusting for the benefit of net insurance proceeds we received in the prior-year quarter. Additionally, our diluted earnings per share of $0.08 was on par with prior year if you exclude the $0.02 impact of the insurance proceeds.

The primary component of our revenue growth for the period came from Company-owned restaurant sales, which grew 20.9% to $67 million, from $55.5 million in the third quarter of 2006. Generating that return was a 20.9% increase in Company restaurant-operating weeks, including an additional eight restaurants in operation year-over-year.

Average weekly sales for all Company-owned locations increased modestly to $94,312 in the third quarter, from $94,295 in the same period last year. We were pleased with the continued progress of our seven restaurants from the Moran acquisition last year, whose current average weekly volumes continue to exceed the comparable restaurant base.

Five of these seven restaurants will join the comp base in the fourth quarter of this year, with the remaining two in the first quarter of 2008. The formerly franchised restaurants from our more recent acquisition last quarter will join the comp base in the fourth quarter of 2008.

Company-owned restaurant sales in the comp base decreased 0.4%. Comparable sales consisted of an average check increase of 3.2%, driven by non-entree increases in our bar-and-lounge traffic, menu-selection shifts, as well as year-over-year effective menu pricing of approximately 1.9%. This increase was offset in full by an entree reduction of 3.6%.

Please note also that our comparable restaurant sales lapped last year's third quarter of 4.3% in an accumulative three-year growth from 2004 to 2006 of 25.5% growth in the third-quarter period.

Franchise income increased $200,000, or 7.4%, to $2.9 million. The increase is primarily due to the impact of non-new-franchise-owned restaurants opened year-over-year, and was partially offset by the acquisition of seven franchise-owned restaurants in the second half of 2006 and three franchise-owned restaurants by the Company in the most recently completed quarter of 2007, as well as a decrease in comparable franchise-owned restaurant sales of 0.5%.

Food-and-beverage costs were $21.5 million, compared to $18.3 million in the third quarter of 2006. As a percentage of restaurant sales, food-and-beverage costs decreased 100 basis points to 32% from 33% in the prior-year period. Modestly favorable beef and seafood costs, mixed shifts, and a combined 1.9% price increase offset higher lobster, produce, and dairy costs during the period. As a reminder, we continue to have 50% of our entire meat purchase contracted for 2007 and still expect to be at or below the 2006 percentage on an annual basis.

Restaurant operating expenses were $33.6 million in the third quarter, compared to $26.8 million in the prior-year period. These operating expenses as a percentage of restaurant sales increased 170 basis points to 50.1%, from 48.4% in the prior year.

This increase was primarily due to higher labor costs, particularly in management staffing related to restaurants scheduled to open in the fourth quarter of 2007, and to a lesser extent, health insurance costs related to higher-than-average claim experienced in the quarter under our self-funded medical plan.

Addition fixed-occupancy costs related to new restaurants also impacted the quarter. Marketing and advertising costs were $1.9 million, compared to $1.7 million, or 2.5% of total revenues, compared to 3.2% of total revenue last year.

The percentage decrease was predominantly due to a move away from television in select markets in the third quarter versus the prior year, as well as timing of expenditures in the fiscal 2007 marketing plan, which were more evenly distributed throughout the year. As communicated before, we expect marketing advertising not to exceed 3% of total revenue for the full year.

General and administrative costs increased 3.7% to $5.6 million, compared to $5.4 million during the prior year. G&A costs as a percentage of total revenue decreased by 120 basis points to 8% as a result of leverage from strong revenue gains, unfortunately reduced levels of incentive compensation and, to a lesser extent, reduced professional fees associated with SOX compliance, of which some are just timing between the third and fourth quarters.

This decrease was offset by additional costs associated with increased franchise support and development costs, as well as higher stock-option compensation under FAS 123R. Going forward, G&A is expected to rise at less than half the rate of revenue growth, and margin improvement should play a large role in our EPS growth, including the acquisition, which we'll talk about in a moment.

Depreciation and amortization increased to $3 million in the third quarter, compared to $2.2 million last year, and on a percentage basis, approximately 50 basis points to 4.3% of revenue. This increase is due primarily to the addition of new Company-owned restaurants and seven acquired restaurants in 2006, as well as investments in remodeling activities at our existing Company-owned restaurants and the corporate headquarters.

For the third quarter of 2007, pre-opening costs were $800,000 versus $400,000 last year. While we did not open any Company restaurants during the period, preparations and costs were under way for the three restaurants we intend to open in the fourth quarter, including two that have opened as of today.

Similar to what we have described before, we plan approximately $500,000 of pre-opening costs per Company-owned restaurant. Although the timing of certain of these costs can be up to 90 to 120 days before a scheduled opening, and, therefore, may be in preceding quarters. These costs also include non-cash lease-cost expense during the construction period.

Operating income was $3.9 million, compared to $4.2 million last year -- although, as noted before, last year included $900,000 in net insurance proceeds. As I noted, excluding these non-recurring items, operating income grew 18.9% and was essentially flat as a percentage of total revenue and margin.

Interest expense increased to $1.5 million from $700,000 last year. This increase was primarily due to additional borrowings year-over-year for the acquired franchise restaurants, as well as the purchase of our corporate office. Additionally, higher interest rates impacted the cost as well. Related to our interest expense, our total debt, as of the end of the quarter, was $95.3 million, representing a debt-to-EBITDA ratio of approximately 1.85 times.

Net income available to common shareholders for the quarter was $1.8 million, or $0.08 per diluted share, compared to net income of $2.3 million, or $0.10 per diluted share in the prior year. Excluding the non-reocurring insurance gain from last year, diluted earnings per share was $0.08 in both periods.

With regard to 2007 guidance, taking our year-to-date results into consideration, the Company estimates that comparable restaurant sales will increase approximately 0.5% to 1.5%. System-wide restaurant operating weeks will grow by greater than 20% this year, resulting in year-over-year increases, as we've seen, and pre-opening expenses, and higher operating costs.

The Company anticipates the opening of seven Company-owned and nine franchise restaurants, of which six Company-owned and eight franchised locations, respectively, have opened through November 6th. This is one extra franchise location versus our release yesterday. All I can say is we kind of lost count with our recent growth on that side.

As previously noted, we expect annual food-and-beverage costs as a percentage of restaurant sales to be between 31.8% and 32.2%, representing a 10 to 15 basis-point reduction versus fiscal 2006. As noted, annual market and advertising expenses as a percentage of total revenue are expected not to exceed 3%. And at this time, our Company's effective tax rate remains unchanged from prior quarters, at 32.3%

Inclusive of year-to-date financial results, the Company expects fiscal year 2007 diluted earnings per share to be between $0.92 and $0.95, including the impact of FAS 123R expense. One note -- the 2007 guidance does not include any impact from potential pre-close acquisition costs that may be incurred during the fourth quarter, but not capitalized -- is not capitalizable.

For fiscal 2008, which is also a 52-week year, we're not in a position to offer detailed financial guidance at this time, because of the pending acquisition. However, the Company anticipates increasing restaurant operating weeks by approximately 15%, which will result in the opening of approximately six to seven Company-owned and six to seven franchise Ruth's Chris Steak House locations, as well as two to three Mitchell's Fish Market locations.

The Company expects 2008 earnings-per-share growth before the benefit from the closed acquisition to be consistent with the Company's stated long-term target of 17.5%. This growth will be over -- can be based over our 2007 GAAP earnings per share, excluding the net insurance proceeds of $0.07 per share we received in the first quarter of 2007.

We will provide additional guidance metrics when we do our earnings release for the fourth quarter and annual 2007 fiscal results. With that, I'd like to turn the call over to Craig Miller, our Chairman, President and Chief Executive Officer.

Thanks very much, Tom, and good morning, everyone. We want to share some exciting news. Over the last couple of days -- we are very enthusiastic about what we have recently entered into.

I'm going to let Tom cover the financial aspects and investment highlights of our proposed acquisition. To complement that, I will focus my formal remarks on a brief history of Mitchell's Fish Market; how it differentiates itself; what we see as its general growth prospects; and, most importantly, how it fits with our own Ruth's Chris brand. I will also touch on Cameron's Steakhouse, despite the fact that we have no immediate plans for material development of that concept.

Mitchell's Fish Market and Cameron's Steakhouse were founded by entrepreneur Cameron Mitchell. Cameron will be with us later in the call, during the Q&A. Cameron, over the last 15 years, has built a very successful and diverse portfolio of varied restaurant concepts under the Cameron Mitchell Restaurants banner. There are actually nine distinct Cameron Mitchell concepts, operating 33 restaurants in nine states.

Like Ruth's Chris, Cameron has a people-first culture and a chef-food-focused philosophy that's deeply embedded into every level of his organization. Their people live and breathe genuine hospitality those guests, vendors and the community at large truly feel and appreciate.

I know we have spoken many times about the Southern hospitality that drives the culture of Ruth's Chris, and we see many parallels with our new partners. Mitchell's culture has propelled its success and it's, perhaps, evident in its industry-low management and unit-level turnover.

Clearly, the focus of the transaction for us was the Mitchell's Fish Market, which is an upscale seafood-restaurant concept, featuring the highest quality seafood in a sophisticated and contemporary atmosphere. Mitchell's Fish Market is positioned between traditional casual-dining chains and higher-end white-tablecloth establishments, which has allowed it to expand rapidly and enjoy tremendous success in terms of guest satisfaction, growth the overall financial performance.

There are currently 17 Mitchell's Fish Market restaurants in the portfolio across eight states, with a strong concentration in the Midwest, including Columbus, where the concept is known as Columbus Fish Market. It also has a firm footing in Cincinnati, Chicago, Detroit, Indianapolis, Milwaukee, Lansing and Pittsburgh. Finally, there are two locations in Florida, with a third to open shortly in Jacksonville, and one to open next month in Stanford, Connecticut.

So based on this success and our analysis of Mitchell's portability, we believe the market opportunity is at least equal to, and, possibly, greater than our core Ruth's Chris brand. We see a long runway of opportunity to grow this brand for the benefit of our shareholders.

Developers of lifestyle centers and other high-quality retail projects have embraced Mitchell's Fish Market as an ideal traffic driver, and we think the combination of Ruth's Chris and Mitchell's Fish Market in our portfolio makes us an even more attractive candidate in developer's eyes.

Mitchell's Fish Market provides its guest with a strong value proposition, current average check of $22 at lunch and $39 at dinner. Over the years, Mitchell's Fish Market has earned numerous industry awards and recognitions for its high-quality food, warm and inviting dining atmosphere and excellent service.

To that point, the success of Mitchell's Fish Market has been built on excellent guest service and the freshest seafood, flown in daily from around the world, with a menu that is updated twice daily. Freshness is Mitchell's theme and the concept offers more than 80 made-to-order seafood dishes, including flavors not found at competing restaurants. They also have a great bar business with a wide selection of cocktails and complementary wines. And although Mitchell's is known for its seafood, the restaurant also has a selection of salads and non-seafood items, including steaks and chicken, which broaden its appeal.

The restaurants are generally between 7,500 and 8,000 square feet and are known for their attractive interior and exterior design, which create a feeling of a coastal vacation for its guests. The decor is an upscale nautical theme, featuring rich mahogany wood and vintage nautical imagery.

Most restaurants have exhibition-style kitchens, where guests can view their fresh seafood prepared by the expert culinary staff, which adds significant energy to the dining ex theme and the concept offers more than 80 made-to-order seafood dishes, including flavors not found at competing restaurants. They also have a great bar business with a wide selection of cocktails and complementary wines. And although Mitchell's is known for its seafood, the restaurant also has a selection of salads and non-seafood items, including steaks and chicken, which broaden its appeal.

The restaurants are generally between 7,500 and 8,000 square feet and are known for their attractive interior and exterior design, which create a feeling of a coastal vacation for its guests. The decor is an upscale nautical theme, featuring rich mahogany wood and vintage nautical imagery. Most restaurants have exhibition-style kitchens, where guests can view their fresh seafood prepared by the expert culinary staff, which adds significant energy to the dining experience.

Cameron's Steakhouse, also known as Mitchell's Steakhouse, is a sophisticated 21st Century update of the upscale American steakhouse. Throughout the restaurant, the feel of leathers and woods are softened by warm lighting, linens and contemporary paintings. There are three locations of this concept in Ohio and Michigan, and they are part of this transaction, as I stated earlier.

In considering this acquisition, the Company identified the following characteristics, which make this a solid strategic fit, from our perspective. First, Mitchell's Fish Market has proven its appeal by offering consumers a best-in-class seafood dining experience, similar to what Ruth's Chris offers in the upscale-steakhouse or fine-dining category. Therefore, Mitchell's complements our own brand and diversifies and expands our market opportunity and restaurant portfolio.

Similar to Ruth's Chris, Mitchell's is positioned to continue its rapid growth, primarily through geographic expansion, as well as same-store sales increases. And we both feel that as a part of a large, public entity, that growth will be accelerated.

Second, Mitchell's has a comparable demographic profile to Ruth's Chris of a fluent baby and eco boomers that are split nearly evenly between men and women. Third, Mitchell's has demonstrated success in multiple markets, with urban and suburban locations, and has a new unit pipeline for expanded. Importantly, the concept has performed well in its core Midwest markets and is expected to match that success in the coastal regions, where seafood is even more popular.

Fourth, since the concept's very beginning, it has focused on the importance of developer and landlord relationships to foster its growth. Initially, these relationships were with regional developers. But with its ability to deliver exceptional results, Mitchell's is afforded a first look at many retail developments all across the country with some of the biggest names in real estate. This has helped Mitchell's not only to secure better locations, but also drives down development costs due to Mitchell's status as a key tenant. We think this acceptance can also be enhanced by our acquisition.

Just like Ruth's Chris, Mitchell's has demonstrated that individual markets can support multiple high-volume locations, even in parts of the country that have been economically challenged, like parts of the Midwest. Mitchell's benefits from certain efficiencies when operating multiple restaurants in a single metro region, with savings including reduced training, efficient use of regional-management resources, as well as advertising, which can be leveraged further through this acquisition. Mitchell's has delivered strong financial performance, which Tom is going to talk about in a moment.

In summary, we think the valuation we're paying for Mitchell's is reasonable. And because of our intent to operate the business independently, it will not pose a distraction from the opportunities we have for the continued growth of our core Ruth's Chris brand. Additionally, despite incremental acquisition-related borrowings, we still plan on opening six to seven Ruth's Chris units in 2008 and expect long-term growth rates to be in line, if not better than the averages we generally speak of.

Now, I'd like to turn the call back over to Tom, who will cover the financial considerations of this acquisition, before we go to Q&A. Tom?

Thank you, Craig. The total purchase price for the 19 Fish Markets and three Steakhouses the Company will acquire is $94 million, which amounts to an EBITDA multiple of approximately seven times on a go-forward or run rate basis. We will be financing the purchase through debt, and on a pro forma basis, our EBITDA leverage will be just under 2.8 times, with EBITDAR leverage around four times. We expect the acquisition to be accretive in its first full year post-closing.

While our existing credit facility will provide for the completion of this acquisition, we do expect to make some modifications to our facility in the first quarter of 2008 to provide for additional capacity.

Mitchell's Fish Market has excellent development potential, in our view, due to its strong unit-level economics, success across multiple markets and upscale-seafood positioning. Mitchell's has proven its ability to drive exceptional unit-level and cash-on-cash returns in a variety of markets.

For units opened for at least 18 months, through July 1, 2007, cash-on-cash and fully capitalized returns were in excess of 45% and 23%, respectively, with average unit volumes in excess of $4.3 million.

From a financial standpoint, we identified three opportunities for Mitchell's Fish Market, which we believe we can successfully help them realize. Mitchell's has 17 successful restaurants in 18 states, and, going forward, plans to both increase locations in current markets, such as Florida, and expand into new markets nationwide. Mitchell's has built an excellent reputation with leading real estate owners and developers and is an exciting restaurant tenant for new lifestyle centers and other high-volume retail centers.

As Craig mentioned, the combination of Ruth's Chris and Mitchell's as complementary co-tenants makes for an even more compelling real estate opportunity for the combined Company. On the same-store sales side, Mitchell's has an excellent opportunity to continue to drive same-store sales growth through a variety of initiatives. First, to increase guest count and average check, the menu focuses on the most popular items, which includes the Daily Chef Features. Mitchell's marketing and advertising campaign emphasizes the freshness of the seafood with the tagline, "Fish any fresher would still be in the ocean."

Despite the geographic concentration in the Midwest and the current consumer environment, Mitchell's has achieved consistent positive same-store sales over the last year. From a margin standpoint, Mitchell's has run a very efficient operation. And going in, we view really limited opportunity to significantly increase margins.

That said, Mitchell's has identified several areas for accomplishing that. Through its recently implemented portion-control program, the concept has and can continue to improve cost of sales. The margin-improvement initiatives have proven successful, with food costs declining to 33% of sales, compared to 35.1% for the same period in 2006. While restaurant-level percentage margins are slightly below that of Ruth's Chris, the strong returns on invested capital in G&A and advertising leverage will make this a very successful acquisition from a financial and shareholder-return standpoint.

Thank you for your attention. At this time, we'd be happy to answer any questions that you may have. Katie, you're free to open up the lines for Q&A.

Thank you. (OPERATOR INSTRUCTIONS). And we'll take our first question from Jeff Omohundro with Wachovia.

Good morning, and congratulations on this announcement.

Thank you, Jeff.

I guess, first, could you outline a little bit about the infrastructure additions you're contemplating in Orlando to support this acquisition?

Well, the people that are coming from the Mitchell's organization, Jeff, are primarily the operating and culinary folks. The support additions here at the corporate office will center around normal accounting, finance-type of -- human-resource-type of folks. We do see some additions coming next year to assimilate approximately a 30% increase in the number of Company-operated restaurants. There will also be folks engaged in marketing and facilities. We're also going to be using some of the staff of Cameron Mitchell restaurants during the interim to support the transition.

And then, one more question on Mitchell's -- perhaps you could review their practices around seafood sourcing, menu, update frequency, and how that all plays into cost-of-sales management.

Okay. There's no better person to answer that question than Cameron. So, Cameron, I'm going to let you take that one.

Good morning. Two things -- first on the sourcing issue -- I think -- we continually purchase what we call the top of the trip. We try to buy the finest quality seafood and we source out and select purveyors in the cities we operate. We also direct-ship into our restaurants fish from the northeast and the Gulf Coast states also, depending on availability and seasonality.

And then, on the menu side itself -- I would also go back to that -- the restaurants themselves all have a refrigerated fish kitchen solely dedicated for the preparation and butchering of fresh fish. So the fish itself never really leaves 34-degree environments from the time -- from the purveyor to the plate.

Secondly, on the menu update itself -- we update the menus twice annually -- most -- for seasonality itself, and in winter and summer, depending on where we're at.

And then, just one final question on the Ruth's Chris side -- could you give us an update on the Friday lunch program? Thanks.

Sure. That program has been in test in eight restaurants, Jeff. As we move into our seasonal, busy period, many stores are going to be serving lunch, as has been our history, through the holiday season. So we're not adding, specifically, any additional stores right now to the test.

We've been encouraged, so far, on the acceptance of the Friday lunch. And I would anticipate that that test will be expanded after the first of the year. It's been particularly successful, as you might suspect, in very high-volume restaurants, when there's already significant demand. I don't believe it's going to be a chain-wide offering. But, certainly, based on the success we've seen so far, there will be stores added to that next year.

Thanks a lot.

And we'll take our next question from Nicole Miller with Piper Jaffray.

Thanks. Good morning. Congratulations.

Thank you, Nicole.

I just also want to concentrate on Ruth's and then move on to the acquisition. If we look at the fourth quarter -- and I do apologize -- I've been traveling like crazy, so this might be in here. But if you look at your guidance that's just sort of been condensed into that low end of the range, what shifted mostly in your thinking from the beginning of the year, or even last quarter, into now? And is it something to do with the current same-store-sales profile -- what you're seeing in the fourth quarter -- or is it more of a cost-structure issue?

No. It's really not a cost-structure issue, Nicole. Actually, on the cost side, we are feeling better than we -- when we did six months ago. It, primarily, centers around consumers. We started the quarter with some pressure -- more pressure in southern California in about four or five restaurants, due to the fires.

And you'll notice in the guidance that we've moved down our same-store sales for the year about half a tick. And so that is primarily the conservatism that brought the top end of the range down a couple of pennies. It's unlikely we're going to be able to deliver the $0.97, given the continued sales performance.

And when you strip away kind of the impact of the fires, there's been no material change, either on the positive or negative side, in our sales performance over the last several months. It's been fairly consistent -- right around flat same-store sales. And our anticipation is that, until we see something that -- catalyst externally, that's going to propel that -- we want to be a bit more cautious.

That's actually very helpful. Thank you. So -- and where are you running currently, then, in the fourth quarter, in terms of -- at the lower high end of the revised range on a top-line for comps?

We're really right in the middle of where we expect to be. We were a little bit lower in the first couple of weeks. But, again, as you strip out the impact of the fires, we're pretty much exactly where we thought we were going to be.

We do have a fiscal switch month-to-month with Halloween week being in November, as compared to October. So if you talk specifically about October, it was a little bit less than our trend line, but we're going to make that up this week and next week, because of the shift of the fiscal calendar with the Halloween week, which is a very soft week for us, being in October this year versus November last year.

Okay. And then, in terms of acquisition, how should we think about this? I mean, which of -- it sounds like the Mitchell's is the growth vehicle going forward. And if that is the case, what is the ultimate growth opportunity for that concept?

Well, Mitchell's Fish Market, clearly, is the focus for this acquisition. The three restaurants -- the Steakhouse restaurants that we acquired -- will really complement our steakhouse business. And we feel we can learn with the association with Cameron some things about his approach to fine-dining steakhouses that we might be able to apply to the future growth of our steakhouse business. So the acquisition really centers around the Mitchell's Fish Market.

When you look at the demographics -- when you look at, you know, why seafood? -- demographic trends support both seafood and steak. Baby boomers and their kids are going to go from 52% of the population to 63% of the population over the next nine years. That is a compelling reason to have the opportunity to really drive more units in the high-end space of the restaurant industry.

That's our specialty. We've been doing it for 42 years. We feel like -- that the opportunity to develop a major chain of both steak and seafood restaurants in the high-end space of the restaurant industry is something that we can do. It's our expertise. And when you look at the competitive space out there, my view is there's a pretty big hole in the competitive space for high-end seafood that's an opportunity for someone. And if you look at our operating expertise, I believe Ruth's Chris can deliver on that.

So in terms of size, because the average check is $25 or so less than Ruth's Chris, you're dealing with more occasions and a wider consumer base for this type of dining experience. So with volumes in existing restaurants in the $4.3 million range -- some of the newer restaurants performing at levels higher than that -- and the fact that this brand has not really been developed yet in some of the higher regions for seafood consumption -- if you look at the consumption of seafood in restaurants in the Midwest, it's 30% to 40% less than it is in the Southeast and the coastal regions. So we believe, by embracing a brand like Mitchell's and growing it aggressively -- that we can be the dominant player in high-end seafood, just as we are in high-end steak.

So it sounds like the answer, ultimately, is there's an opportunity for more of those. If you look out -- and what you've given us in the long-term projection in Ruth's -- you can certainly have more Mitchell's.

There's no question about it. There's -- and it's really about the average check, which is a barrier to high-end steakhouses that doesn't exist when you move down the price-point line. There are just more people with more opportunities to dine at a restaurant more frequently -- like Mitchell's -- than there is for a special-occasion concept like Ruth's Chris.

And there's no name changes to any of the concepts? They will operate as they stand currently?

That's correct.

And when you talk about the positive same-store sales for these concepts over the past -- I think you said 12 months, or whatever it was -- if you look at the average check -- can you talk to us about what they're running on in price, what's the pricing power? And, actually, maybe, kind of quantify for us what the concept should look like so we can help understand how this might lever your business.

Well, the same-store sales for Mitchell's have been running at around -- I think, Cameron -- around 3% for the last 12 months. They've been fairly consistent numbers. Most of that is in average check, with traffic being up slightly. When you look at that versus the competitive environment, that's pretty astounding. So we're very pleased with acquiring a business that has that type of performance in these particular times.

But we really look at this, Nicole, as a long-term strategy. We're building a world-class restaurant Company at the high-end space. And the performance of all restaurants in today's environment is challenging, given what's going on with the consumers. But that just really stimulates us, in a lot of respects, to build our platform -- to be able to take advantage of when this cycle turns around, which it, certainly, will.

So the core thing here is to have great brands, have great operators, be culinary and service-focus -- really, delivering great hospitality. And that's what Ruth's Chris was built on. And by adding Mitchell's, we're able to do that basically with two runways of growth. Our goal is to be a 20% or better grower. With the advantage of a second brand, we can move our growth rate up based on how we assimilate this acquisition, and with the opportunities to build new restaurants.

I would -- I actually agree. I think that very well helps articulate the long-term objectives and what could -- this to look like. And my last question -- it's very loaded -- and I really don't mean for it to be. But it is a difficult environment for everybody.

And given that you've been focusing on Ruth's in terms of the Friday lunch program and some other things you're doing with your menu, help give us increased confidence that integrating this business -- how is that going to look like over the next 12 months, because it is, yet -- an opportunity, and at the same time, a challenge.

Well, running restaurants is difficult in the best environment. When you've got some consumer pressures, it challenges you even more. But it's all about your people. And what we're acquiring here -- and Cameron and I talked about this a lot -- what we're really acquiring here is a platform, a proven brand and a great team of people. And it's people that really make these restaurants what they are.

And we are acquiring great chefs, great management, great staffs. And we're getting some support from the senior-level people at Cameron Mitchell restaurants to help us integrate this business. We are going to be making some organizational changes to provide stronger leadership for both brands -- and more focused leadership. We're going to -- able to leverage our infrastructure and finance and human resources and training.

So, really, it's all about providing great leadership and maintaining the philosophy of serving great meals on every occasion. And we have proven, I believe, over time, that we can operate restaurants. I think we have also proven that we are willing to invest in our infrastructure to make sure that we maintain the quality and execution of our restaurants. That will not change.

And as you build your base, you're able to leverage that investment in all of the infrastructure that we've built. And it is a significant acquisition for us, but we believe that, based on this management team -- how we've performed since we've been public, in terms of not only getting through some of the challenges of Katrina -- that this management team is up to this task.

Well, thank you. And congratulations again.

Thanks very much.

We'll go next to Andy Barish with Banc of America Securities.

Hey, guys. Two quick questions on the -- just the way you talk about the deal accretion -- are you sort of looking neutral in '08 and then accretive in '09?

No. This is going to be an accretive transaction, based on our pro forma expectations the first year. Somewhere in the 5% range is what we're thinking, Andy.

Okay. And then, secondly, on the unit growth for the Ruth's Chris business -- how does that lay out for 2008, as you stand here today?

We're still looking at six to eight Company-owned, six to eight franchise stores. We are not interested in opening restaurants in the fourth quarter next year, so we're pulling back a little bit.

Whether it's six, seven or eight next year, it's really going to depend on how the locations fall out. We have opportunities, depending on when these restaurants actually get finished. As everybody knows, the challenges of targeting exactly the number of restaurants in a calendar period is difficult, given some of the environments that we have in building, construction, permitting and licensing.

So we are consistently operating under a strategy of a certain percentage of growth and new units. And based on our pipeline right now, I'd probably say that the six to seven units -- and they will, typically, open in the first three quarters of the year, if we achieve our time schedules.

And, Andy, we basically look at it as kind of a two-two-three of the -- if you look at the seven side of it -- two in the first quarter, two in the second quarter and three in the third quarter.

Great. Thank you very much.

You bet.

And we'll go next to Steven Rees, with JPMorgan.

Hi. Thank you. Can you talk about potential franchisee acquisitions in 2008 at the Ruth's business? Do you still see opportunity there, or do you anticipate a pause, given this acquisition announcement today?

Well, there will be no pause -- from a strategic standpoint, there's no limitations on our capital in order to be able to do franchise acquisitions. Those are things that are very hard to time. We have been in discussions from time to time with some of our existing franchisees. But my suspicion is that there may be one or two acquisitions over the next 18 months or so, but it will not be of any large unit -- large numbers.

Okay. And then, just in terms of your expectations for 2008 pre-acquisition, what sort of same-store sales levels have you embedded, and should we expect a noticeable pickup from these -- the franchise acquisitions that are entering the comp base here in the fourth quarter?

Well, the franchise acquisitions -- the Moran acquisition -- we have, I guess, five of those units, Tom, that are in our comp base for the -- here -- on the fourth quarter. Two of those will enter in the first quarter, which will complete the seven. They'll go into our comp base. Those continue to contribute some to our same-store sales. The recent acquisition of the three northwest restaurants won't go into the comp base until the fourth quarter of 2008.

Are you assuming kind of a status quo trend, at least in the first half, or are you assuming --?

It's very hard to look out six, nine, 12 months, and determine what kind of same-store sales expectations you would have. What we're pro forming right now is kind of a continuation of our current same-store sales performance, which is flat-to-positive -- slightly positive.

We have some pricing opportunities that we're going to be implementing as we move into 2008, consistent with our prior. What we need to see, really, is a pickup in business in our southern California and Florida markets. If that, then we will achieve more aggressive same-store sales numbers. But yet, we haven't seen that.

And there is still pressure coming from -- and the way I characterize it to people -- there's three things that people spend the most amount of their money on -- transportation, housing, and food. And both transportation and housing, for many American consumers, have been, literally, hammered over the last two years. And that leaves food being the victim of the three.

So I believe that as people's budgets get stabilized and some of these costs tend to flatten out -- that the food consumption away from home will return to more normalized levels. But when you see $100 a barrel of oil, you tend to be more conservative.

Okay, great. And then, just finally, on beef costs -- you made some pretty good progress on [cost] this year. As you look into next year, what's your initial thoughts on beef? And, I guess, if you had to lock in today, what sort of prices would you see relative to '07?

Well, the only comment I can make on that, because we're in a lot of internal discussions about when we're going to lock in, how much of next year's buy we're going to lock in -- we're in the period of time of the year when you really don't do that because of the seasonality -- demand pressure on certain products.

But I can tell you that the folks that we talk to are generally more positive on beef pricing for 2008 than where we felt we were a year ago. So that's probably the best I could say about it. We will be able to be more articulate about that issue on our next call in January or so, when we will have locked in, I suspect, a certain percentage of our usage. And if you look at the year, we locked in about half of our buys in 2007, so we were half-right and half-wrong.

Okay, great. Thank you very much.

And we'll go next to Steven Kron with Goldman Sachs.

Good morning, guys.

Good morning, Steve.

A couple of questions on the acquisition -- I guess, first, as it relates to capital structure. I think, Tom, you mentioned you'll be at roughly three times debt-to-EBITDA post transaction. How are you guys --?

A little less.

I'm sorry?

Yes, a little bit less than that.

Okay -- a little bit less than that. How are you thinking about that going forward? Is the plan, ultimately, going to be used -- going to be to use some free-cash flow or cash flow to pay down debt? Or are you comfortable at that level?

At that level, in our internal forecast, we be -- we see ourselves being able to continue our growth for both concepts, really, as -- from cash flow, but not in a position to pay down the cash -- to start paying down the debt for a couple of years. So we'll be maintaining, really, a comparable level, and then a slight start -- being in the position to start decreasing that after about three years.

But the ratio, of course, Steve, will come down pretty dramatically as the EBITDA comes --

Right.

-- online from the new businesses and the new restaurant.

Yes. So to put that in perspective, we'll be growing -- with the growth, we'll be growing the EBITDA component of it, but not necessarily growing the debt.

Sure. Understood

(inaudible) average -- we'll be de-leveraging that through. But in an absolute-dollar amount, we don't see being able to reduce that for a few years out.

Okay, fair enough. And then, from a CapEx standpoint, Tom, can you just talk a little bit -- I mean, this is a Company-owned business that you're acquiring. And the growth seems to -- you seem to be looking to accelerate that growth down the road. Ruth's has been pretty balanced, more recently, on growth, from franchise versus Company. How should we expect the CapEx to look like over the next couple of years?

Well, as far as CapEx, we -- as we mentioned before, the return on invested capital in both of these concepts is very comparable. So the good thing is we don't have to sit there, being concerned which one we grow better for returns.

We're going to be growing both of our concepts equally as we go forward. And we've targeted, once again, maintaining that 10% to 15% operating-week growth on both concepts. So when we say acceleration, it's relative to the history of Mitchell's. But, you'll look at two to three restaurants next year, and that continuing and slightly growing as the years go forward.

The capital requirements for the Mitchell's Fish Markets has been less than what we experience with our steakhouses. And one of the things, as we look at overall CapEx, will be provide -- that's one of the metrics of both concepts. We plan to provide more visibility on the next call.

Is there any subtle message as to the long-term potential that you guys see domestically for the Ruth's Chris brand?

No, there is not at all, Steve. This is all about using our platform, our status as a public Company, and leveraging the talent and the management we have here, and being able to kind of have a bit more of a balanced portfolio. When you're in one segment -- the high-end, fine-dining segment -- and you specialize in one product, being able to balance that a bit, we think, makes a lot of sense for our Company and for our shareholders.

So we're on parallel tracks. We've recently completed, as you know, a franchise -- new franchise sale -- in the Middle East. We'll be continuing our international expansion of Ruth's Chris. And we see no shortage of opportunities for the continued growth of our Ruth's Chris band domestically. So nothing subtle -- in fact, to the opposite -- we're very outwardly bullish on continuing the expansion of the Ruth's Chris brand.

You look at -- again, if you look at the unit economics of both of these businesses, Steven -- that's what drives the proper use of capital. And our business, on the steak side, continues to operate at some industry-leading metrics in terms of return on invested capital, return on cash invested and overall sales-to-investment ratios. And these ratios and metrics are very similar to the business we're acquiring. So, as Tom said, it gives us the opportunity to really build both of these businesses on a solid platform.

And I think the reception we're getting from our bankers on this transaction have been very positive because they understand what's being value-added to this enterprise in terms of its cash flow and its future growth.

And Steve, an additional driving force there is -- as our development team focuses on the lifestyle centers and different items across the country, consistently, they're always looking for a steakhouse and a seafood place.

And having both of those together is one of the things -- our development people have been saying, "Man, if we could have something else to go in there, we could have some efficiencies." And that's something that, really -- to Craig's point -- allows us to be strong on both brands and get some leverage as we go through our development process also.

That's very helpful. Just two more quick ones, if I might -- first, as far as -- you mentioned the margins of this business at the restaurant level are a little bit less than your Ruth's business. Can you quantify that for us? How much less?

It's about -- what? -- 200 or 300 basis points less, Steve. Most of it is kind of spread throughout the P&L. It's a little bit higher cost of sales in the 50 to 100 basis points -- a little bit higher labor and a little bit higher occupancy costs because the volumes per square foot are less.

Okay

So it's -- but if you look at it and tier it against kind of upper-tier restaurant companies, these margins are terrific when you compare it against averages or, even, above-average concepts.

So it's tough. It's one of the reasons why, quite honestly, it's been difficult for us to identify a Company and/or a brand that can deliver the type of unit economics that we have at Ruth's Chris. And when you layer this out across the industry and you see the performance of many companies' brands out there, Ruth's Chris always sticks out at the very top one or two. And so this has been a challenge for us -- to identify a partner and a brand that's been put together as well as Cameron's has, that delivers those type of unit-level economics.

Okay. And then last one -- you mention that the opportunity to improve upon their margins is somewhat limited because they've been operating pretty efficiently, but you also guided to what turns out to, I think, be roughly $0.05 accretion, if everything goes according to plan.

I guess -- what are your assumptions in that accretion estimate as far as the synergies that you'll get from putting this business on your platform? Is it revenue synergies? Is it cost synergies? Is it just levering G&A? Is there a supply component to it?

Well, the G&A is clearly one of the great leverage points because the cost of running a public Company, the cost of the infrastructure that we have in place -- with our revenue base, now, probably going to grow by 50% next year with this acquisition and our continued growth, clearly, there's opportunities to drive down the overall cost, from a percentage standpoint, of our G&A.

We have not yet clearly identified all of the synergies on -- for example, on distribution -- product distribution into the restaurants. We're operating Ruth's Chris in and around all of our Mitchell's Fish Market restaurants. We're close by, and our trucks, delivering Ruth's Chris' supplies and food products to our own restaurants, drive by Mitchell's.

So we anticipate being able to leverage product distribution and things of that nature as well. We have not factored those type of synergies into our assumptions yet. But it's logical to assume that we're going to be able to bring some efficiencies of scale.

Opening up our own team of people -- we have some seafood in all of our Ruth's Chris restaurants. The supply sources that Cameron has developed in the high-quality products that get acquired can be additive to our Ruth's Chris business.

The other part of this is -- the Mitchell's business does about 20% in adult beverages. The leverage on wine and other adult beverages -- the buying power that comes from that -- can also be helpful. So it's all about scalability. And having a lot of similar products being used in both restaurants certainly should drive the cost down.

And just to clarify, Steve, the $0.05 additional would be assuming a full year in 2008, which we probably would expect based on liquor licensing and the like. It could be more of a mid-first-quarter close of the acquisition.

Yes, the 5% we talked about -- and back to Andy's point -- I think that's one that really needs to be clearly focused on, because you really don't know exactly when this is going to close. But we pro forma-ed this out -- first 12 months, 5% accretion.

Got it. Thanks very much.

Yes, sir.

And we'll go next to [Ed Antillian] with [Tartwell].

Hi, guys.

Hi, Ed.

Just to keep focusing a little bit on the balance sheet -- I'm kind of curious, number one, on your 5% accretion and what kind of comps you're estimating for Mitchell's. And then, maybe, you could just -- I guess I -- talk about the down side and -- you levered up a little more. And this business already has leverage in it because we've leased all -- a lot of the assets. If sales continue to be weak for a year, what's the impact on the business?

Well, we have pro forma-ed Mitchell's same-store sales for 2008 at 2%. So that's what's built into the accretion number. If you look at the stability of the cash flow of Mitchell's business and the stability of the cash flow of the Ruth's Chris business, we feel very comfortable with the amount of leverage that we've put on the business. On an EBITDA and EBITDAR basis, we think that it's reasonable.

You always want to be cautious. And I think that the caution that you outlined there is something that we, clearly, understand. But again, the opportunities to create a platform for the future growth of our enterprise -- we feel that we're going to have two great brands, two great operating teams that have long histories of successfully operating our businesses, and that any continued weakness in the consumer -- we're going to find ways to drive through that.

And when the cycle flips over, we're going to be in the best position to take advantage of that, having the vehicles out there to perform at. And you also don't -- can't minimize what's going on with the consumers short-term. You really also have to look at the growth and the demographics and the fact that consumers in America today continue to have a flight toward quality. The use of their time is very valuable, so the experience and the hospitality that they get when they dine at a restaurant is extraordinarily important to their decision.

I can't think, quite honestly, of a company that has a better opportunity to take advantage of that than a Company that has brands like Ruth's Chris and Mitchell's.

Thank you.

And we'll go next to Jason West with Deutsche Bank.

Yes, thanks. Just to touch on the Ruth's business for a minute -- I was wondering if you could talk about the trends you're seeing in the special-occasion user, which, typically, you said, is a little over 50% of the business. Is that still trending the way it has been in the last few quarters? And any changes on the business side with the boardroom business? Anything change there at all?

Yes. Our banquet business has been strong all year. It's been running up high single digits. We continue to see a demand in that area. We're gaining a little bit more of a percentage of our business growth -- coming from that area.

Special-occasion diners, which, of course, are across all demographics, are, clearly, the group that is pinched. And generally speaking, that traffic has been, as I said previously, pretty consistent, really, for about the last 18 months. There has not been a material change better or worse. So I guess what I'd have to say is some of the initiatives that we've taken may have neutralized that and kept us kind of on par. It hasn't really added a lot of new momentum from the special-occasion diners.

We're trying several ideas to try to bring a bit more value to the occasion, particularly in times when we have capacity, in the early week. We're doing some prime-dining-for-two testing in a few markets, particularly on Monday through Thursday -- the chef's feature introduction of our menu that offers us the opportunity to not only promote some great, new products, but maybe add some price points that are a bit more attractive. We're going to be doing a bid gift card promotion here with regional advertising and email blast during this very important time of the year.

One of the things about -- of our business -- is that people still need and want to celebrate. And despite the fact that there are some short-term pressures, people really do love going out and enjoying a great experience at Ruth's Chris. And we're pretty excited about our fourth quarter -- and as we move into 2008 -- that, at least, we're going to have some stability in our traffic. And as soon as we can see a little bit of the pressure taken off the consumers, it's our view that restaurants and restaurants like Ruth's Chris will come out of it before some other businesses might.

Okay. And then, on the guidance for next year -- the 17.5% growth -- does that include the $0.04 or so from the acquisition to get there, or would that be incremental?

That does not.

No.

Okay, great. Thanks a lot guys.

Yes.

We'll go next to Bryan Elliot with Raymond James.

Good morning. A couple clarifications and followups -- first, the accretion assumption that's been talked a lot about -- it sounds like you modeled it sort of pro forma the first 12 months. Did you assume expansion and pre-opening costs and other sort of support costs in there? Is that a real number or is that just sort of on the existing business that is being acquired?

No. That includes the ramp-up of two to three restaurants in the latter part of next year.

Okay. All right.

So it's a real number.

I just wanted to make sure on that. All right. Craig, you talked about southern California and Florida. Could you give us a sense of how big the gap is between your weak markets and the rest of the country? We've heard from operators -- not in your price points, specifically -- but as much as a 10-point gap between some of the housing bust markets and some of the non-housing-bust markets. Are you seeing that wide a dispersion?

No, we're not seeing that wide a gap at all. I guess you might -- for us to get to that number, we'd have to compare it when we were up 5% in those markets, whereas now, those markets are maybe down 5% in terms of traffic.

So I would say, when I look at it on a regional basis, there's about a 200 to 300-basis-point spread between the southern California and the Florida markets and the rest of the chain. The Northeast is positive. The balance of the country is pretty -- kind of much flat to slightly positive. That's with the exception of a pretty wide gap in southern-California market during the first couple weeks of October, when the fires were -- we actually had to close a couple of restaurants for a couple of days.

And, Bryan, we also have a few that -- we have, like, three major outliers that are dragging on that, too -- that we're doing some major remodel work, where we have --

Oh.

-- in one case, half the restaurant shut down for a period of time. That's still in our comp base, because it's still operating. And that's something that will come back to us in the fourth quarter that will be assisting us also. But it has been a drag on the comps for us.

Okay. All right, helpful. Thank you. On -- back to Mitchell's for a second. Are the investment costs per square foot in line with Ruth's investment costs?

They're lower than the Ruth's Chris investment.

All right. And finally, Tom, any unusual items in the quarter similar to some of the breakage and other issues that we've seen in other quarters, or was it pure operating numbers that we're looking at?

I am very proud to say it is very pure, and -- with no surprises, other than as we've talked about -- the incentive compensation at the executive level is low, and -- which is unfortunate for people in the room, but it's the reality of the times we're dealing with.

But it was a very clean quarter from our point -- a high-quality earnings quarter, purely driven by operations -- and really starting to see some of the positive leveraging and cost management, even with the softer top sales, and, I think, our operators, overall, which gives us some confidence as we go forward.

We came off of three years of -- as I kind of alluded -- cumulative 25% to 30% comp-store sales growth. And that's something our operators were enjoying from 2004 through 2006. And it was an adjustment for us to go to a little bit softer growth in the traffic side. And I think our operators have done a good job of now, really understanding that environment a little bit better, and have improved their day-to-day management.

Great. Thank you.

You bet.

And we'll go next to [Martin Bach] with Morgan Stanley.

Thank you and congratulations.

Thank you.

Are you -- aren't you concerned about picking up the phone and finding out that there is an unsolicited attempt to buy you out one day? You guys are doing so well, and yet your stock is 30% less than two years ago, when you went public.

Well, we have -- I don't lose any sleep over that. To be honest with you, we have -- first of all, there's nothing that you can do other than to take yourself private that would prevent that. And we don't have any aspirations to do that. We think the public-equity market is a great place for a high-growth Company like Ruth's Chris.

From time to time, the market undervalues some equities, whether it's because they get put into a category of other businesses that may be struggling, or whether it's a sector move. We don't think the current valuation of the stock is going to be there very long if we continue to perform like we anticipate we will.

We also benefit a little bit from our former equity owner -- equity sponsor -- Madison Dearborn -- owning a pretty good position in the Company, as well as -- the management team also has a pretty big space in the Company. So clearly, at current market conditions, the stock is, in our opinion, undervalued. But over time, we believe that the market will take care of that.

Has a stock buyback been considered by the Board?

We, certainly -- at these levels, a stock repurchase would be an accretive transaction for the Company. It's our view that the best use of our capital, though, is to grow our business. And we're a growth Company. We want to be a growth Company. We're on a track.

We've made a huge investment to position ourselves to be a top-tier restaurant Company, and we want to achieve that objective. We are going to make sure that we do maintain enough balance-sheet flexibility that we can do some share repurchases in the future, if it's warranted. My hope, actually, is that we don't have to do that. But we are going to make sure that we maintain some flexibility if it's necessary. But returning money to shareholders, right now, for us, is -- yes. It would probably help the stock a little bit short-term.

But it also takes -- to the former analyst's question -- it would further leverage up the Company at a time when we really want to position ourselves -- we're on track to be, including our franchise system, over $1 billion in system-wide revenue here within the next 24 months. And that's an exciting opportunity for us.

So it's all about a strategy of what you want to be, I guess. And we want to be a great international high-end restaurant company. And we feel like we've laid the runway and the platform to do that.

Thank you. Good answer.

Thank you.

And we'll go next to Paul Westra with Cowen and Company.

Great. Thanks. Just one more quick question, if you don't mind, on Mitchell's -- could you talk about the current sort of marketing initiatives at Mitchell's and what you plan to do now that it's part of Ruth's, and the cross-marketing potential, some of the programs you have?

Then, related -- we often do see, actually, a lot of economies on scale on purchasing, in particular, and similar acquisitions. And if that is the case, I guess, philosophically, are you sort of happy with the current margins? And if you get those savings, will you plow them back into either lower pricing or more offensive initiatives? Or will you sort of take that to the bottom line?

Those are operating questions that I would probably like to defer until we assimilate this business into our corporation. I can tell you that these are very, very, very well-run restaurants, extraordinarily great facilities, well-kept, well-maintained. And that's the way we run our restaurants. So I am not going to promise improved margins out of this business at this time.

Can their tweaks be made? Can their leverages come from outside the restaurant in terms of how you buy or who you buy from or joining yourself with some of the buying power of Ruth's Chris? Certainly, there should be.

We want to be a high-value offering to our guests in terms of the experience and the hospitality they receive. And we want to get fair prices for that experience. And it's a consistent philosophy we have with Ruth's Chris. And it's one that Cameron has also, historically, implemented.

So this is not about trying to be at the unit level, as absolutely profitable as possible. What you want to do is balance that with long-term traffic growth and improving the top line, because that's where the leverage in this business really comes from.

On your marketing question -- we do see some opportunities on the marketing side. The Mitchell's brand has not used marketing, other than in a local and public-relations way. I think, as a percentage of sales, Cameron -- historically, around 1%. We have been, historically, bigger advertisers than that.

Some of the competition -- competing concepts out there are significantly greater in terms of their advertising. But we will learn as we go -- where there's opportunities to drive traffic, improve sales. And through the use of advertising -- we're a believer in that as long as you get a return on its investment.

So, current plans -- you're looking to keep it roughly where it has been, and maybe you'll add as you see -- or as you go forward? So, currently, you're not looking to immediately ratchet that 1% up to your Ruth's level?

No. I don't think we'll address that until we -- one of the things, when you acquire a very successful business, that you better be very careful of -- and we talk about it jokingly around here is -- in very blunt terms, don't mess this up.

So we want to learn from the Mitchell's team what has made them, day in and day out, so successful and so attractive to their guests. And can we bring some value-added? I think Cameron and I both believe that the two teams together, and partnership, can drive both growth and more success for the Mitchell's brand.

Great. Okay, thank you.

Thanks, Paul.

Thank you. As we have no further questions, I'd like to turn the conference back over to Mr. Craig Miller for any additional or closing remarks.

Thank you very much. And we're excited, as you can tell, by this move on the part of the Company. We are not at all changing our strategy on the growth and development of our core brand.

The restaurant industry continues to be a very attractive place for growth. As you look out into the next decades, clearly, there is going to be changes in the makeup of brands, changes in the makeup of the mixture of successful restaurant companies.

Ruth's Chris and Mitchell's want to play a long-term role in bringing high-quality hospitality to the American consumer, and we think the blending of our two companies will do that. Thanks very much. And we look forward to chatting with you next quarter.

Thank you. That does conclude our conference call today. We appreciate your participation. And you may disconnect at this time.