Ruth's Hospitality Group Inc (RUTH) 2008 Q1 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. first quarter 2008 earnings 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. Bob Vincent], Chief Financial Officer. Please go ahead, sir.

Thank you. Good afternoon. This being my first time with this audience, I would like first to say that I’m very excited to be part of the Ruth’s Chris team. I appreciate your interest and support of the company and look forward to meeting and getting to know all of you. 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 guaranteed of future performance, and therefore, undue reliance should not be placed 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 future operating results and financial conditions. The order for today’s call is as following, [Rob Selati], our Chairman, will begin our discussion. I will then provide an overview of the financial detail of our first quarter, and then [Geoff Stiles], our Brand President at Ruth’s Chris, will provide some commentary on the current state of the business and the variety of initiatives that are in place to help drive results. And with that, we’ll go ahead and begin with Rob.

hanks, Bob, and good afternoon, everyone. My name is Rob Selati, and as many of you are aware, I recently became chairman of the board of Ruth’s Chris, a position I’ve held before. I’m a managing director at Madison Dearborn Partners, a private equity firm that’s been the largest shareholder of the company for some time. Madison Dearborn always has been and still remains highly committed to the success of this business and the creation of shareholder value here. Despite Craig Miller’s recent departure, I can assure you that the day-to-day operations at Ruth’s Chris are running very well, and that we possess sufficient bench strength, both at the corporate level and in the field, to manage the business without disruption while we search for a new CEO. As you know from our April 24th press release, in order to ensure that we have appropriate stewardship of the company during the search process, we formed an executive management committee comprised of four senior executives the company, and headed by Banis Hudson, one of our outside directors. Banis is an incredibly accomplished executive with decades of relevant retail experience and one in whom Madison Dearborn has great confidence. The board has a lot of faith in the executive committee, and as I said, is highly confident that the transition to a new CEO will be quite smooth. With that let me turn the call back over to Bob Vincent.

Thank You, Rob. Again, on today’s call, I will briefly speak to Q1 results and confirm 2008 guidance, and then Jeff will provide some color on the key initiatives intended to drive our business. Given the overall macro economic dynamics, our top-line results, while disappointing, were consistent with the trends we experienced during the latter half of the fourth quarter; however, our ability to control cost allowed us to mitigate the weakness in sales and generate earnings that were inline with internal expectations. Our special occasion diners, which transcends all demographics, were once were the group most affected group by the current can downturn. The timing of New Year’s Eve was a positive for the period, although poor weather, specifically in a few markets, along with an early Easter, negatively impacted results. We continue to experience traffic weakness in both the California and Florida markets, again, consistent with Q4 trends; however we are encouraged with improving traffic trends in our Midwest and Western region. As described in our earnings release today for the first quarter ended March 30th, 2008, we generated total revenues of 98.6 million, which was 21% higher than last year’s 81.5 million. Company-owned restaurant sales at Ruth’s Chris Steak House grew 8.8 percent to 85 million, from 78.1 million in the first quarter of 2007, largely as a result of a 20.3% growth in restaurant operating week, including an additional nine company-owned Ruth's Chris Steak House restaurants in operation year over year.

Average weekly sales for all company-owned Ruth's Chris Steak House restaurants were $107.240 in the first quarter, compared to $118,567 in the same period last year. Comparable restaurant sales at Ruth’s Chris Steak House decreased 6.9%, consisting of an average check increase of 2%, driven by menu mix shifts in year-over year pricing of approximately 2.8%. This increase was offset by entre reductions of 8.7%. Please note that our comparable restaurant sale at Ruth's Chris Steak House overlap last year's quarter growth of 1.9%. With our Mitchell's acquisition closing on February 19, we also recognize 9.9 million in restaurant sales from our new fish market and steakhouse brands. There were 123 Mitchell’s operating weeks including in our first quarter results. As we said on the last call, we will not consider Mitchell's to be comparable until the end of the second quarter of 2009, once we have operated these locations ourselves for more than a full year. We, therefore, will only provide Mitchell's average weekly sales in fiscal 2008. Actual average weekly sales results for the entire first quarter, which includes the period January 1st through February 18th, when we did not own Mitchell's, were $80,813, compared to $83,877 in the first quarter of 2007. We are combining the Fish Market and Steak House brands for the purpose of both average weekly sales and operating weeks, although the latter reflects less than 15% of both metrics. Franchise income grew to 3.1% to 3 million, versus 3.2 million in the first quarter of 2007, due primarily to nine additional franchise-owned locations year over year. Domestic comparable franchise owned restaurant sales decreased 7.6%, while international comparable franchise owned restaurant sales increased 8%, combining for a blended comparable franchise-owned restaurant sales decrease of 5.1%.

In terms of our cost structure, food and beverage costs were at 30.4 million, compared to 25.4 million in the first quarter of 2007. As a percentage of restaurant sales, food and beverage costs decreased 60 basis points to 32%, from 32.6% in the prior period. Favorable beef and seafood costs, mixed shifts, and a combined 2.8% price increase offset higher lobster, grocery, and dairy costs through the period. During the first quarter, beef costs, especially tenderloins were favorable. And we also locked in approximately 25% of our prime needs for the balance of 2008. We continue to monitor the market as it relates to our buying decisions, but to date, the spot market remains favorable. Restaurant operating expenses were 45.5 million in the first quarter, compared to 34.4 million in the prior year period. These operating expenses, as a percentage of restaurant sales, increased 390 basis points to 48%, from 44.1% in the prior year. The majority of this de-leveraging was due to a weak comparable sale, as many of these expenses are fixed. Marketing and Advertising costs were 2.6 million in the first quarter, compared to 2.3 million in the prior year, or 2.6% of total revenue versus 2.9. We expect the first quarter will be the low point in terms of marketing cost as a percentage of leverage. Geoff Stiles will update you on our marking initiative after my remarks, as we look for the increase our expenditures with the expectation of generating additional guest traffic. General and administrative costs were 6.9 million compared to 6.6 million during the prior year. G&A costs as a percentage of total revenues decreased by 100 basis points due to the leverage from gross in total revenues of approximately 21%. Operating income was 9.3 million, compared to 10.9 million last year. Included in the prior year we benefited from 2.4 million in net insurance proceeds relating to Hurricane Katrina, for which there was no comparable benefit in the first quarter of 2008. Adjusting for the net insurance proceeds, the prior year operating income would have been 8.5 million. Our interest expense increased to 3.2 million from 1 million last year. About $800,000 of this increase was due to the additional borrowings for the Mitchell acquisition. At quarter end, our total debt was approximately 179 million versus 97 million last year.

Also included in expense was an approximate 1.4 million mark to market non-cash charge related to an interest rate swap. This represented approximately 4 cents per diluted share after tax. Net income available to Carmen shareholders for the quarter was 4.5 million or 19 cents per diluted share, compared to net income of 6.8 million or 29 cents per diluted share in the prior year. Our effective tax rate for the first quarter of 2008 was 29%. On an adjusted basis, if we exclude the non-cash interest rate swap charge this year, as well as the 2.4 million insurance proceeds from the prior year, adjusted diluted earnings per share after tax were 23 cents in 2008, versus 22 cents in 2007. In terms of our fiscal 2008 guidance, we are reiterating previous expectations, which are the following. We anticipate increasing company-wide restaurant operating weeks of Ruth's Chris by approximately 15%. In addition to the full-year impact of the 2007 openings, we will open approximately five to six company-owned, and six-eight franchise Ruth Chris's Steak House locations. To date, one company owned and two franchise locations have already opened in Ft. Worth, Texas, Aruba, and Myrtle Beach, South Carolina, respectively. An additional company-owned location in downtown New Orleans is expected to open May 12th, 2008. We are maintaining the previous guidance of a comparable sales decrease of between 2 and 5% for Ruth’s Chris steakhouse, with greater pressure expected during the first half of fiscal 2008, as first quarter trends already suggest. For Mitchell's, operating weeks during 2008 are expected to be approximately 836 for the 19 Fish Markets and 132 for the three Steak Houses. And it’s expected that we will begin adding additional Mitchell’s Fish Market locations sometime in fiscal 2009.

On a consolidated basis, cost of sales as a percentage of restaurant sales is expected to be within our historical range of 31.8% to 32.3%. G&A expense is expected to be mutual to slightly lower on a percentage basis compared to fiscal 2007. The effective tax rate of fiscal 2008 is expected to be at or below 30%. Based on these factors, we are reiterating our previous fiscal 2008 GAAP earnings per share guidance from continued operations of between 55 and 60 cents for a diluted share, excluding nonrecurring charges related to the recent CEO departure. As we mentioned on the previous call, factored into the 2008 guidance is an increase in the share base of approximately 5%. In terms of CapEx for the full year 2008, we estimate spending will be between 125 and $130 million, including the Mitchell acquisition. With that, let me turn the call over to Geoff Stiles, a member of our executive committee and president of the Ruth’s Chris brand.

Thanks, Bob. To give you some context, I have been with Ruth's Chris Steak House for almost a decade, and regardless of the environment, we’re dedicated to the core values, great food, genuine hospitality that represents the Ruth’s Chris brand. Our culture is deeply routed in our teams, and despite a tough economy, moral is strong. In fact, as Bob mentioned, we did a very good job operationally in the first quarter. We just need to reenergize our traffic. To that point, we recently made a decision to ramp up our promotional activities for Ruth's Chris Steak House with additional media and have hired a new advertising agency to direct our campaign. Heavy media spending is uncharacteristic for our company. Our objective is to drive traffic with this planned initiative. We have tested this program in multiple markets and are comfortable implementing system wide. The focus on this campaign will promote our value-oriented menu items, along with the various incentives in place to better reach the special occasion diner. For competitive reasons, we don’t want to get too granular on the subject, but I will say it is that our advertising to sales ratio will rise approximately 100-plus basis points on a year-over-year basis. As stated on the last call, our menu now contains a broader range of attractive price points than at any time in the recent past. And due to menu engineering we can still drive solid margins. The offer will bundle a variety of menu choices, accompanied with advertisers and dessert selections for a fixed price. This offer will be available throughout the summer. We are launching beverage initiatives through wine tasting, wine dinners, and through a new signature drink line that compliments an innovative bar food menu in selected locations. These offerings support dining in the bar versus traditional seating, and we consider this initiative to be one that our youngest guests respond to favorably. In fact the fastest growing segment of our business is the 21 to 35-year -old demographic. This is our next generation of dedicated guests.

Another focus of our operating team is to develop greater sales through promoting and supporting private dining. We have just completed an upgrade of all company-operated restaurants, providing high-speed Internet connectivity in select locations, and video conferencing capabilities. We are supporting this portion of our business with new collateral and a fresh marketing campaign targeted at meeting planners and business executives. Turning briefly to the Mitchell's acquisition. Things are proceeding as planned, and the 22 restaurants are operating just as they did before the acquisition. Fortunately, Mitchell's and Ruth's Chris have parallel values regarding passion for the guest and staff and a commitment to the highest quality ingredients. These elements have made the transition easier than we expected.

In closing, as a representative of the executive committee I want to assure investors that we’re working on these initiatives and focused on our operations. We look forward to updating you during this transition period and are confident that we are positioned to create value. At this point I would like to have Margaret open the lines for questions.

Thank you, sir. Ladies and gentlemen, the question and answer session will be conducted electronically. (OPERATOR INSTRUCTIONS). We'll pause for just a moment to assemble our roster. And we'll take our first question from Jeff Omohundro with Wachovia.

Got a couple of questions. I guess first, I appreciate the comments on Mitchell's, but I wonder if you would talk a little bit more about the management change at Ruth's and how that might impact the Mitchell's integration status, and also maybe some comment about the downdraft in average weekly sales at Mitchell's.

Let me address the management side. You know, the management team at Mitchell's have been in place for a long period of time. Their turnover rates are very similar to ours at Ruth's. There has been no change within the system nor within our Ruth’s Chris as well. And we are not anticipating any up tic in turnover or in strategy regarding the brands.

You know, Jeff, Bob Vincent here. With regard to the second part of your question, you know, I would say realistically, you know, the macro economics conditions that really are impacting all of the brands in the space, and those characteristics are no different from Mitchell's. So the fact that there was a slight decline in average weekly volumes, I don't think it’s indicative of anything other than the fact that the pressures that we’re facing, you know, in the space, if you will, are present there as well.

And moving on to Ruth’s Chris and the beef cost situation. We are seeing a pickup in cattle future prices. I'm just thinking, is there a time when you would contemplate contracting further out rather than having so much in the spot market? And what is your thinking is as you move into the end of this year and next year on the beef?

Well I would say that, you know, our teams continue to monitor the market daily. And from what I understand, and let me be honest, you know, I'm just into this thing, you know, six weeks. The spread between the spot and the future market is pretty significant. In terms of tenderloins, what I understand is that the spot market were at approximately 700-750, and the future markets are somewhere north of $10. And so I think that, you know -- clearly I think there’s an -- that we have a desire to hedge and make sure that we have the predictability in our food costs. But on the other hand it needs to be economically feasible to do so. And so I think we’ll -- you know, stay tuned. We’ll continue to monitor it, and then when there’s an opportunity we will certainly take advantage of it.

Great. Thanks.

And our next question comes from Nicole Reagan, Piper Jaffray.

Good afternoon. This is actually [Rob Weiler] on behalf of Nicole Miller Reagan. Looking back at the tax rebates from 2001 and 2003, what type of impact do you guys expect to see from the tax rebates that have been mailed out and some people have already received right now?

Yes, you know, Rob, I think that there are probably certain businesses that will benefit from this. You know, it’s very difficult to foresee that kind of impact on Ruth’s Chris. We do think that there is a longer-term benefit that is business owners and larger enterprises benefit from the spend. We, in turn, will get a percentage from that, but it’s impossibility to predict the impact on Ruth’s Chris.

Sure. And then you mentioned that you had a benefit from New Year's Eve shift. Did the Easter shift, did that help or hurt you guys this past quarter?

Yes. New Year's was a positive. Easter was a negative. We had some kind of weather issues in certain markets. I think overall we kind of looked at it all and felt like the adjustments on balance were kind of a net neutral to maybe down 50 basis points. But I don't think really any of those factors in the aggregate influenced the results significantly. Sure. Thank you. And then last question I have is, how is the search for the new CEO going? Any update there?

I'll take that. This is Rob Selati. We have begun the process. We established the spec and we’ve begun the process. And, you know, we hope to get it done as quickly as possible but we’re going to wait until we absolutely have the right person.

And that includes you guys have hired an outside counsel to help you guys identify and locate a new CEO; correct?

Yes.

Okay. That’s all I have. Thank you very much.

Next we'll go to [David Terantino], Robert W. Baird.

Hi. Good afternoon. Question, Geoff, on the increase promotional activity. Just wondering what your thoughts are with increasing the value-oriented promotions and how that might influence the perception of the brand longer term and how you're balancing with the need to drive near-term traffic?

I think it’s a very valid question, one that we have certainly deeply considered before accepting this program. You know there is a -- in the studies we've done, there was a demand of the guests to be able to bundle things together in a way where, you know, the ala carte issues of our menu for some is a challenge. And in the testing that we have done in a variety of different regions, we have found the program to be very, very effective. And to attract guests that really spend virtually the same amount on additional items, whether it be alcohol or after-dinner drinks or coffee, and so we're very sensitive to that, and we do not feel that we are in any way placing the brand at risk by going into a program of this nature.

Okay. Thank you. And a clarification. You mentioned a 100 basis points increase in the spending ratio. Is that for the balance of the year or is that for the entire year?

That will be for the entire year.

Okay. Great. And a question on G&A leverage. It seemed very impressive in Q1, and the guidance suggests less leverage going forward. Could you help reconcile why you would expect less in the balance of the year?

Well, a couple of factors, David. You know, one is that we have an annual meeting of your general managers and franchisees later in the year, and the venue has changed a bit. And so that will add some incremental expense. And the charges associated with 123, 123 will also incrementally over the next several quarters ramp up a bit. And then finally, we'll have the full integration cost of the Mitchell support. We had a portion of it here in Q1. But we'll have a fully loaded or fully allocated piece for the balance of the year. So those are the pieces that are really driving the differential.

Okay. Thank you.

We'll now go to Steven Rees, JPMorgan.

Hi. This is [Joseph Janco] for Steve. I had a question on sort of capital allocation going forward in terms of what you guys have kind of thought right now in terms of development in ‘09 or thoughts on, you know, what cash returns you need to justify development?

Well, I think it -- you know, it’s something that we're obviously evaluating. And I think it’s a little premature to speak to it. I think that we all recognize that the environment today is very challenging. But in some respects it does provide an opportunity in the sense that the cost of the real estate, you know, and the opportunities within the real estate market, you know, may, in fact, provide some opportunities. But I think that we need to assess, you know, our capacity to make good decisions, and make certain that if we are going to, you know develop in any market it is prudent. We have demanded the best out of the real estate, and that we can, you know, achieve the returns that this company has historically generated. And I don't think we're in a position to compromise, and I wouldn’t expect us to compromise in that regard as we move forward. So I think as we move into the next quarter or two we'll probably be able to provide a little more color. But I would just leave you with the thought that we are going to continue to challenge -- you know, development opportunities and make certain that the things we do are going to generate the highest returns.

Okay, thanks.

And next is Steven Kron, Goldman Sachs.

Hi. Thanks. A couple of questions. I guess, Jeff, just first to follow up on the media spend. It seems as though you had some positive responses in the test markets. Can you give us a sense for how long you were testing this value messaging and, you know, what kind of impact it had for the same store sales.

Yes. You know the testing goes through a variety of different regional focuses. I would prefer not to discuss the results at this point in time. I think we'll see those as we go forward. But it's one that we are confident it’s a good business move for our organization.

But suffice to say that the test was long enough that it was in place through the various shifts in calendar so you had a true kind of lift expectation?

That is correct, Steven.

Okay. And then I guess, Bob, just a couple of follow ups on the same store sales discussion. You indicated in the prepared remarks that you had regional weakness still in California and Florida, but you saw improvement in the western region. I assume that includes California. So first, I guess, did I hear that correctly, and, you know, is California showing some sort of sequential improvement?

Well, the strongest improvement was really in the Midwest.

Okay.

And some of the other states in the western region did -- we did see some improvement. But, again, I think the important take away here is that the Florida and California markets, you know, have stabilized in our judgment. And I think the important thing to think about as we move forward is, as we start to overlap Q3 and 4, we really should be able to get some traction. Last year, Q1, you know, for those two markets, were strong. The decline really came over the balance of '07, but we started out positive. And there was weakness as the year went on. So I do think that on an absolute basis as we move into the year, the expectation is, and particularly in the second half of the year, that those two markets we'll start to see some improvement performance.

And then within the same store sales number, it seems like mix declined a little bit, I guess. Are you seeing check management within the people sitting down at the table? Or, you know, are there less people going to the bar area, which had been about, you know, 12 to 24 months ago, had been kind of a lift to that same sales number. Is there less traffic going to the bars? Have you been able to isolate where the weakness is coming from, aside from just pure traffic numbers?

You know, Steven, I think it’s somewhat broad. I you could -- a little bit from alcohol, a couple may order one less appetizer or side. We haven’t really seen it in a certain segment of the business. So I hope that answers the question.

That’s fine. And then lastly as it relates to the balance sheep, I think you said 175-or-so million of debt. Can you just give us an update as to how you’re felling about the position of your ratios as it relates to any debt covenants? Anything we should be thinking about based on your existing guidance?

No. I think at this point we're not anticipating any issues with the covenants.

Okay. Thanks very much.

Next question comes from [Jason West], Deutsche Bank.

Yes, thanks. I jumped on a little late, so I apologize if you guys already answered this. But did you mention any differences you’re seeing around business account spending versus, you know, consumer, you know, spending, any trends there that you have seen in the last quarter or two?

You know, Jason, we have seen really just a very small amount of softening in our private dining or business account management. And that was really over the first quarter. You know, I don't think it's enough to really draw attention to it. But just a little bit of softening, we are seeing, you know, some fairly balanced trends when it comes to what we understand the competition is feeling in the same area. So it’s not alarming, but, yes, we have seen a very small drawback on the business account spend.

And can you remind us how big you consider business account spending among, you know, your total sales base?

You know, I think it’s probably in the 10 to 15% range, give or take a little bit, of our business.

Okay. Sorry. And then one other one. Did you guys comment at all about the April and May trends on comps, or we assume that thing is sort of continued as in the first quarter?

No, we're not going to provide any full guidance on a monthly basis.

Okay. Fair enough. Thanks.

We'll now go to Bryan Elliott of Raymond James.

Good afternoon. I apologize, I thought it was a 5:00 call and missed the 4:30 start as well. Is there a replay number?

Yes. I believe it was -- it was distributed under release. But let me --

Okay. Okay. I'll look it up. And then my -- my -- actually he just asked my business question. So that's fine. All right thank you.

You're welcome, Bryan.

We'll now go to Barry Stouffer, BB&T Capital Markets.

Good afternoon. Will you continue to report the Mitchell’s revenue separate on a quarterly basis?

I'm sorry, Barry, I didn't hear that question.

Will you continue to report the Mitchell's revenue on a quarterly basis?

Yes. We have indicated that we will report average weekly sales in total, and also total revenues for the Mitchell's brand, yes.

Okay. And you mentioned that you had locked in some beef for 25% or so of your requirements. Was that higher or lower than last year, and if so by how much?

Well, you know, at this point it’s hard to make that calculation because, you know, the seasonality of the beef market and so forth that, you know, it’s unfair to take a snapshot of what we have locked in today and then draw our conclusion. So I think that as the year progresses, we'll be able to provide you, you know, an update as to how well that decision played out.

Okay. That's all I had. Thank you.

Barry, we're having a tough time hearing you.

Next is [Don Metter], Bear Stearns.

Yes, just a couple of things. You’ve changed your menu, some different items. I guess we’ll call it I think fish and chicken and steak. Do you have any brief percentages as to how that’s working out? In other words, what percentage are going to non-meat dishes and fish?

You know, in spite of the fact we had expanded offering of meat alternatives we’ll call it.

Yes.

We find the demand for beef to be very, very static. You know, our offerings of seafood have increased really to provide options for returning guests and higher frequency. But our demand for our beef is virtually the same as it was five years ago.

And what was your average check this quarter versus last quarter, just roughly?

Just a second. It’s about just under $75.

$75. So that’s up or down from the last quarter?

Up slightly.

That’s up?

Geoff Stiles. Yes, sir.

I see.

Yes.

Of all your stores owned, the stores that you own, which stores are your top stores? Which stores are your top three?

It would be, obviously Manhattan is one of our larger restaurants, Boston, and California. I mean San Diego is a very, very strong market for us.

Beverly Hills?

Beverly Hills is a little smaller square footage but still a very, very strong restaurant.

Well I must say every time I go it is as busy as can be.

Don, thank you..

If you evaluate your stock price versus Beverly Hills, you know there’s something out of whack.

Oh, thank you.

And I'll be there in a couple weeks -- I mean this weekend. Thank you, Geoff.

You're welcome, Don. Enjoy your meal.

Thank you

And next is [David Rainey, Acre Capital].

Hi. Thank you. Could you just -- two items in the press release. Remind us why you expect the share account to increase about 5%, as well as why would bonus expenses have inched up in the quarter given same source sales?

Well in terms of the share base, there was a restricted stock grant that was announced last quarter. And so that’s starts to factor into the calculation. It will drive up the diluted share base. In terms of the second question, as I indicated in my opening remarks we did, in fact, achieve internal expectations. And so our program is such that as we, you know, hit internal expectations, there is an accrual for payment of a bonus. So the charge is a book charge. All of it is not paid out. And, again, it's really driven by the internal results -- or actual results against our internal targets.

Okay. Thank you. And as a follow up to the share grant, is it 5% diluted once its all fully vested? Is only part of it vested in 2008? So is it in total 5%, or is it incremental 5% in 2008, and more thereafter?

Yes, it’s -- I actually, you know something, I don't have the answer for that question.

Okay. So is it conceivably dilutive as well in 2009?

Yes.

So what would be the cumulative impact of the dilution, assuming it was all vested on day one, something like that?

I'd like to get back to you on that. I don't want to really respond to something that I'm not prepared to do so.

Okay. That would be great. Thank you.

We'll go to [Martin Bach, Morgan Stanley].

Thank you. Could you update us on your thoughts about the stock purchase from the last quarter when the statement was made that there was an allocation in your line of credit but that you were reluctant to do it?

Well, I would tell you -- all I could say to that is that's a board decision, and so, you know, the comment, I think, was just describing the provision within the new credit facility. And so there is a placeholder for it. But frankly any decision to repurchase stock is really a board decision.

And that has not been discussed or --

Not that -- not in my short time.

Okay. Thank you.

As a reminder, ladies and gentlemen, it is star one if you have a question. And we'll go to [Michael Perna, AAD Capital].

Hello, yes, thanks for taking my question. And congrats on going after the bar business. We think that makes a lot of sense. Just a follow-up on that, please. Would you be willing to share who the ad agency is or what markets you’re testing it in?

The new agency is Merkley & Partners out of New York. And we currently have the test going on in seven different markets. And we’re seeing some very, very positives embraced by our guests. So we think it’s a real added value. And I would agree with you, it’s a market that we need to continue to explore.

Okay. Great. A few more questions, please. I'm sorry that I missed this in the opening remarks, but are you still planning on opening any Mitchell’s doors this year?

No. The guidance we provided in the opening was that we expect to open a Mitchell's Fish Market sometime in 2009.

Michael Perna... Okay. And, Bob, you just mentioned that you achieved your internal expectations for this quarter. What metrics are those based on?

You know there’s variety of factors, but certainly EPS is really the driving factor.

Okay. Great. And, Rob, maybe this is a question for you. Can you speak about -- you know, do you see any low-hanging fruit in terms of cutting back expenses -- or, you know, year one, what would you like to accomplish in terms of right-sizing the shape, if there is any work to be done there?

I think that question is probably better directed to Bob. But, you know, I think he’s in the process of evaluating, you know, any, you know, cost cutting or, you know, capital deployment efficiency initiatives that are out there, and, you know, we’ll report back to you as we find them.

Okay. Thank you for your time.

And we will go back to Bryan Elliott, Raymond James.

Thank you. I wanted to get a little more color on the non-compete with Cameron Mitchell and how his ocean prime concept might be differentiated from Ruth's.

Yes. You know without our legal representation here, I'm reluctant to speak to anything regarding non-competes or the terms of the sale. However, it's something we can certainly try and get back to you on. But, you know, it’s traditionally not something that we would have a comment on.

Okay. Thank you.

Thanks Bryan.

We'll take a follow-up from Don Metter with Bear Stearns.

I'd like to throw a question out to Geoff and your associates. As you know, Geoff, I'm in Beverly Hills area, which is West Los Angeles. And it seems like every month, another steak restaurant opens, whether it’s in Hollywood, Santa Monica, West L.A., Beverly Hills, Santa Monica. There is always more steak restaurant opening. This might be a naive question, but what is the magic, and how can they keep opening, and most of them are not really as good, and the value is not as good as your restaurants? Can you fill me in on this one?

Well, Don, that’s a very complex answer. I'm not sure I could cover it all here.

Well, is it easy entry? Is it easy to open up a steak restaurant? You just get a grill -- I’m joking -- a grill and a good chef and meat and potatoes and you go?

Yes, Don, I don't think it’s complex. I think that a lot of restaurants choose to do it. I mean the way we do it, it’s a little different. I mean from the preparation of the ingredients -- the manner in which we serve the food, Don on Sizzling platters, and the broilers we utilize to lock in the flavors, Ruth's is different. And we do feel strongly that there is true differentiation between our brand and many of those competitors. And, you know, it is somewhat surprising to maintain the consistency of sales that we do with the intrusion of competition in the markets. I believe it speaks volumes about the quality of the brand and our commitment to the guests and the service and food that we provide them.

Well I'm invited, and I don’t go to those, but I go to those when I'm invited. And the prices are much higher than your restaurants. They’re much higher.

Again, Don, we feel that we offer a very healthy value -- Don Metter… I agree. -- value deal. And, you know, we're sticking by that.

I would just throw this out. It’s interesting how you answered it, and I appreciate it. Thank you.

You're welcome, Don.

Ladies and gentlemen, that concludes the question and answer session today. Mr. Vincent, I'd like to turn the conference back over to you for any additional or closing remarks.

Thank you, Margaret. I would just want to thank all of you for your interest and participation on today's call. And we certainly look forward to speaking to you again in the next quarter. Thank you again.

That does conclude today’s conference. We thank you for your participation. You may now disconnect.