Ruby Tuesday Q2 Earnings Call Transcript

123jump.com Staff
25 Jan, 2009
New York City

Ruby Tuesday second quarter net loss was $37.42 million or $0.73 per share much wider than a net loss of $10.35 million or $0.20 per share last year. Total revenue decreased 9.7% during the quarter fueled by a 10.8% decline in same restaurant sales.

Ruby Tuesday, Inc. ((RT))
Q2 2009 Earnings Call Transcript
January 7, 2009 5:00 p.m. ET

Executives

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

Analysts

Jeffrey Omohundro – Wachovia Securities
Howard Penny - Research Edge
Sean Dodge – SunTrust Robinson Humphrey
Analyst Ken for Keith Siegner - Credit Suisse
Peter Saleh – Telsey Advisory Group
Anthony Visano – Trapeze Asset Management

Presentation

Operator

Greetings ladies and gentlemen and welcome to the Ruby Tuesday, Inc. second quarter fiscal year 2009 conference call. (Operator Instructions) At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the presentation. If anyone should require assistance during the conference please press “*0” on your telephone keypad. As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Steve Rockwell, Vice President Finance for Ruby Tuesday. Thank you, Mr. Rockwell, you may begin.

Steve Rockwell – Vice President Finance

Thank you Joan and thanks to all of you for joining us this evening. With me today are Sandy Beall, Ruby Tuesday Chairman and CEO, and Margie Duffy, Chief Financial Officer. In addition, Kimberly Grant, our Executive Vice President of Operations and Mark Young, our Senior Vice President of Marketing are with us for the Q&A portion of the call. I would like to remind you that there are likely to be forward-looking statements in our comments and I refer you to the note regarding forward-looking statements in our most recently filed Form 10Q. A copy of our press release can be found on the investor relations section of our website at www.rubytuesday.com. We plan to release third quarter fiscal ‘09 earnings in early April. The second quarter earnings were released today after the market closed and were available on Business Wire, First Call and other wire services.

We would also like to mention that we will be presenting at the Seventh Annual Cowen Consumer Conference in New York City next Tuesday at 3’ o clock ET. If you are interested you can listen to the audio web cast via the link on the Investor Relations page of our website. Our format today includes an overview of our second fiscal quarter financial results and a discussion of our restructuring and impairment charges, our updated fiscal 2009 outlook including our cost savings initiatives and a review of our plans and strategies. At the conclusion of our prepared remarks we will open the lines for questions. I will now turn the call over to Margie.

Marguerite N. Duffy – Chief Financial Officer

Thank you, Steve and good evening everyone. As we announced in December, we finalized the restructuring plan that includes closing approximately 40 restaurants during the third quarter and another 30 over the next several years. We also identified and implemented additional cost savings during the quarter amounting to approximately $40 million to $45 million annualized. I will review our fiscal second quarter operations and charges and our financial plans for the rest of the year and Samuel will discuss our cost savings and update you on the strategies we are employing in this environment.

We recorded a net loss of $0.73 per share versus a loss of $0.20 per share last year. Our pre-tax loss was $59.9 million compared with $15.2 million last year. Included in this quarter’s loss were non-cash charges of $56.2 million we announced in December including restructuring charges totaling $37.2 million and a write off of our goodwill balance of $19 million. Excluding the restructuring and goodwill charges our pre-tax loss was $13.7 million in the most recent period compared with the $15.2 million loss a year earlier. The charges reduced earnings per share by $0.71 in the quarter. I will discuss our operating results first and then review the charges. Total revenue decreased 9.7% during the quarter fueled by a 10.8% decline in same restaurant sales. On a monthly basis our same restaurant sales were down 9.4% in December, 10.4% in October and 12.7% in November. Similar to the prior several quarters, same restaurant sales in our Northern markets out performed those in our Southern markets declining at a rate closer to that of our franchise restaurants. Same restaurant sales for our franchisees were down 6.2%. We closed a net of one company owned restaurant in the quarter. In December same restaurant sales for company operated restaurants were down 9.1% and those of our franchise restaurants declined 9.9%.

The restaurant level operating margin was 13.5% during the quarter compared with 15% a year earlier. Food costs were down 50 basis points reflecting unusually high food costs last year as a percentage of revenue due to promotional activity that produced a significantly lower average check. Payroll and related costs increased 210 basis points primarily reflecting lost leverage from our lower sales volumes and relatively fixed management labor. In addition, higher minimum wages in several states, increased health insurance costs and higher hourly labor reflecting the roll out of our quality service specialist program during the second quarter of the prior year, also contributed to the increase. Other operation expenses were up 100 basis points. The bulk of this increase was due to higher utilities and rent and other fixed expenses primarily as a result of a loss of leverage.

SG&A expenses declined 160 basis points as a percent of revenue. Advertising expenses declined 25% to 30% as we cut back on advertising to improve cash flow. We were on air 11 weeks compared with 7 weeks a year earlier. Although we were on air more weeks this year than last year we were at lower GRP’s per week which equates to less air time this year. Also contributing to the decline were lower support center expenses reflecting our cost savings efforts and a realignment of regional and area supervisors to increase the number of restaurants per supervisor. This is possible because we are not expanding and there are very few operating changes at our restaurants. Equity and losses at our franchise partners was less than last year due in part to providing fee relief as we continue to work closely with them to improve their profitability during these difficult times. They also experienced reduced interest and other operating costs.

Interest expense was in line with our expectations and was higher than last year because of higher rates paid following the May amendment to our loan agreement. We had a tax benefit of $32.5 million largely because of our write off’s. Excluding the impact of the restructuring and goodwill charges we also had a benefit principally because of FICA chip and other tax credits. Turning to our balance sheet, our book debt including current maturity was $565 million essentially flat compared with the prior quarter after paying down $40 million in the first quarter. The second quarter is our seasonally lowest volume quarter and we have begun to resume paying down debt during the third quarter. Our total debt including operating leases, guarantees and letters of credit was $852 million. We were in compliance with our covenants as of the end of the quarter. Our leverage ratio was 4.22 compared with the requirement of 4.5. Our fixed charge coverage ratio was 2.48 versus a 2.25 minimum required and we had a $13.6 million excess on our net worth covenant.

With our re-imaging complete and our new unit expansion effectively on hold, capital expenditures were only $5 million in the quarter. As reported, we have restructuring and goodwill charges of $56.2 million in the quarter. These are divided into two primary categories; closures and impairment expenses of $37.2 million largely related to our analysis of our operating restaurants and surplus properties that we intend to sell and the write up of our goodwill balance that totaled $19 million. Our $37 million in closures and impairments falls into three principle categories. Approximately $15 million for the restaurants we are closing in the third quarter, approximately $10 million for 30 restaurants that are expected to close over the next several years as their leases expire or sooner if possible and the remaining $11 million is associated with the write down of the value of surplus properties and our company claims we are holding for sale in order to expedite their sales and pay down debt.

Also included in this number is the write down of the development costs at sites we no longer intend to open and closed restaurant lease reserves. The write off of our goodwill followed our ongoing review process and we continue to see overall poor economic conditions, declines in fair value, same restaurant sales trends at company owned restaurants and the challenging environment for the restaurant industry.

We also announced in December that we would incur lease cancellation costs of approximately $10 million to 15 million in the third quarter. These charges are expected to initially be largely non-cash with related cash expenditures to occur over the remaining life of the leases or upon settlement of the leases. We expect these actions to have a positive impact on our annualized financial results. For example, average restaurant volumes should increase approximately 40,000 a year. Pre-tax income should increase approximately $10 million a year. The impact on EBITDAR is likely to be positive as well at a little over $1 million.

Our guidance is as follows. We expect to open one additional company operated restaurant this year and close the 40 restaurants already discussed. For the year, we expect same restaurant sales to be down 9% to 10% assuming a modest improvement from second quarter trends. We expect restaurant operating margins to be down for the year as higher labor and other operating expenses, in part reflecting lost leverage from the lower restaurant sales offset by a modest decline in food costs. Depreciation is estimated to be in the $74 million to 76 million range. SG&A is targeted to be down 20% to 25% reflecting lower advertising expenditures and the benefits of our cost savings as Samuel will discuss in more detail. Including the impact of our closures, impairments and goodwill charges in the second quarter and the lease reserve charges in the third, our loss per share is projected to be in the $0.45 to $0.55 range for the year. For the full year those charges are expected to total approximately $0.85 per share. We project capital expenditures in the $19 million to 21 million range for the year. This is down from our prior estimate of $23 million to 25 million.

Our free cash flow, defined as cash from operations less capital expenditures, is estimated to be in the $68 million to 78 million range. This cash flow as well as proceeds from the sale of assets and other should enable us to pay down approximately $80 million to 90 million of debt during the year including the $40 million we repaid in the first half of the year.

Now let me turn the call over to Sandy.

Samuel Beall – Chief Executive Officer

Thank you Margie and thanks to all of you listening in. We appreciate your interest in Ruby’s. The second quarter was another challenging sales quarter with same restaurant sales down 10.8%, the same rate of decline as the first quarter. We did experience some deceleration in the rate of decline in the early part of the quarter and then the financial crisis hit and consumer confidence and spending deteriorated. Our business was not immune and sales weakened as a result. The South continued to be our weakest region with same restaurant sales down 13.9% compared with a decline of 7.7% in our Northern markets. The company’s weakest states are Florida, Alabama, Georgia, Virginia and Tennessee.

In December Margie mentioned that same store sales for the company were down 9.1%. The decline in our Northern region was approximately 6.5% while the decline in the South was an improvement as it was down only 11.7%.

From a seasonality standpoint the second quarter is our weakest profit and cash flow quarter. Nonetheless we were able to keep our book debt essentially flat. We expect to resume paying down debt in the current quarter and to pay down a total of $80 million, $90 million for the year as Margie mentioned. We are in compliance with our loan covenants in the second quarter. With the overall environment deteriorating and our sales remaining soft in the second quarter, we took very decisive action to lower our costs and improve the productivity and profitability of our assets by reducing costs and restructuring our property portfolio which we think is very appropriate for the times. Specifically, we identified and executed on $40 million to $45 million in annual cost savings with a little less than half of those savings to be realized in the second half of this fiscal year. In total we have lowered our cost by $60 million to $65 million over the last 12 to 18 months included in the recent $40 to $45 million in savings.

Included in that are some of these items, $17 to $18 million for payroll including lower benefit costs, $14 to $15 million for G&A, mostly field supervision, $10 million related to the restructuring of the property portfolio and some other miscellaneous items. Our unit level payroll savings in part reflects a new labor scheduling standard system for several restaurant positions as based on guest counts rather than sales dollars. This makes it much more efficient. Our G&A reductions include the restructuring of our field support. We also reduced executive and staffing levels at the support center. Our support center headcount is down approximately 20% over the last 18 months. Benefit costs have also been lowered substantially for next year following a large increase this year. Overall our team has done an excellent job of reducing costs. It is almost part of the culture now with everybody looking every day on how to save another $1 million.

In addition I think we have done an excellent job controlling capital expenditures and next year will be a drastic improvement from this on the CapEx front. Another decisive action we took was to restructure our property portfolio following an extensive analysis of our entire portfolio of owned properties including surplus locations. Margie reviewed the financial impact of this action. We determined which restaurants to close after a thorough evaluation of a number of factors including profitability, location and operational quality and the potential impact of sales on nearby units. Over the next couple of years, we will have closed approximately 10% of our company-owned restaurants. This analysis also led us to write down the value of our excess properties to facilitate a quicker sale if possible in this market, to sell them as fast as we can to raise cash to pay down our debt.

We are very committed to selling these properties and have reorganized our business so we have a senior executive who is now dedicated totally on disposal of properties and incentivized very well to do so. As difficult as it was to make these decisions, we believe they were the right ones to make in order to maintain and lay the foundation for increasing shareholder value in these uncertain times. It is really a great platform as the market turns in the future. The third area that turned is productivity and profitability of our assets and sales.

We have a great deal of control over our costs and we are very good at controlling costs but we have much less control over sales especially in the current economic environment and with fewer ad dollars. In today’s environment price is clearly what attracts guests. Lower price points determine value today. During the quarter we responded and had an emphasis on price. We advertised our burgers starting at $5.99 with endless fries. In December we also complimented this value message by adding more promotional activity to be competitive with deals offered by others in our segment. These promotions include offerings for free appetizers, $4.00 off, buy one get one free and other high value promotions in certain markets. We especially tested a lot in the South where we are trying to get our sales back to more normal to the Northern levels to solve a lot of our problems. We are further testing these programs in the third quarter and we hope to have them implemented in the fourth quarter to have even more impact on sales.

We also need some help from outside forces, for example, industry wide actions such as restaurant closings. We are starting that and we hope others follow. A halt and slow down on expansion which I believe is well underway and an inevitable increase in consumer confidence and spending the timing of which is anybody’s guess but it would obviously help us and everyone. Now I’d like to discuss our covenants. Our three financial ones are our leverage ratio, our debt-to-EBITDAR, our fixed charge coverage ratio and our net worth requirement. As we have indicated, we are in compliance with our covenants at the end of the second quarter. The leverage ratio, I think Margie mentioned this, was 4.22 versus our maximum requirement of 4.5 times. Our FCCR was 2.48 versus our minimum requirement for this of 2.25 and we also had $13.6 million of excess net worth.

We are generating substantial free cash flow as we have mentioned several times and have the ability to repay a lot of debt so we don’t have liquidity issues but I realize some investors are concerned we will violate our covenants. We believe that the principle concern is the leverage ratio that declines to 2.425 for the current quarter through the first quarter of fiscal 2010. Then it goes down to four times again debt-to-EBITDAR for the second quarter and third quarters of fiscal 2010 and then goes down to 3.75 at the very end of 2010. Clearly the declining leverage ratio is a challenging one for us in this environment. While we believe the actions we have taken will help us remain in compliance, the current economic environment is highly uncertain and as you think about our covenants, I’d like you to keep three things in mind.

First, as we mentioned we continue to have significant liquidity and cash flow. Margie went over how much free cash flow we are projecting and how much debt we are repaying, etc. So we are in a very, very good position there. We have very, very low CapEx, cutting costs left and right, etc. Second, our cost cutting initiatives, we have done an outstanding job in cutting costs as evidenced by the $40, $45 million we have already cut. In addition I’m sure we will find at least another $10 million, hopefully a lot more before the New Year starts. All of this provides some insurance against continued sales weakness. Third, we believe we have a good relationship with our lenders and to be prudent we have been in regular dialog with them. We always have been on a quarterly basis at least keeping them up to date on how we are doing. We just had a great investor conference here about a month ago and keeping them up to date with them so it is a good time to be ready to address these step downs if we need to if there is any change in trends or in our outlook.

To conclude, our mission statement is to be the best in bar grill by executing a high quality, casual dining level with compelling value. We believe we are doing that. Our brand vision is that Ruby’s is one restaurant offering the best burger in the business. Burgers are the biggest seller in the business. It is a $60 billion segment and our position within this segment we believe is credible with our guests as our burgers consistently get very high or highest qualitative ratings. About 40% of our entrees served are burgers. We offer more than 25 varieties and we believe our burgers offer incredible, differentiated and value category that resonates well with our guests.

Finally, as difficult as the operating financial environment is, I have never felt better about how we are executing at the restaurant level. Actually I have never felt better about how we are dealing with all of the issues in front of us today because we are dealing with them. Our internal customer research continues to show that we are executing at very high levels. Intent to revisit, intent to recommend our food, service and value guest satisfaction scores continue to be at record high levels. Additionally, our employee management turnover is at or near record low levels. We cannot predict when sales will return but we will get through this tough time and when we do I believe we are better positioned than ever with our brand, with our management team, with our ability to control costs and make money in the future as we gain market share in the future.

With that I’ll open it up for questions.

Question-and-answer Session

Operator

(Operator Instructions) Thank you. Ladies and gentlemen we’ll now conduct the question-and-answer session. If you''d like to ask a question please press “*1” on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press”*2” if you’d like to remove your question from the queue, for participants using speaker equipment, it maybe necessary to pick up the handset before pressing the * keys. One moment please, while we poll for questions. Our first question comes from the line of Jeff Omohundro with Wachovia Securities. Please proceed with your question.

Jeffrey Omohundro – Wachovia Securities

Thanks, just a couple. I wonder if you could give us a little bit of color on the units that are being closed, any kind of characteristics, mall versus free standing for example first?

Samuel Beall

As it is spread out can you give some details?

Marguerite Duffy

Yes, approximately 1/3 of them were leases that were just expiring naturally in the coming months, December 31 in this year, right? That was one group. The other groups were one-off locations in small towns that hadn’t performed and we felt like going forward they would not be able to perform in the current environment and then the other third were just miscellaneous restaurants.

Samuel Beall

As far as size of market or anything it is really spread out, Jeff.

Jeffrey Omohundro – Wachovia Securities

Okay. In terms of going forward and looking at your efforts in this competitive environment maybe an update on your thoughts in how it is evolving in terms of price competition and how you might be responding in terms of advertising efforts around promoting value and targeted marketing perhaps in the South?

Mark Young

Jeff, from a value perspective, value is key and we have been focused on that for the last year or so getting our value more in line with as Sammy said even $5.99 burgers. Going forward from an advertising perspective we are evaluating everything we have got out there and operating in a more short-term cycle right now in the next 45-60 days based on what we are seeing and what is working out there. But it will be generated around promotions, targeted programs, in-restaurant strategy, maybe some wild stuff out there as well. For sure all centered around, communicating the value message.

Samuel Beall

There is a lot of testing in the South. I mentioned some of that in my talk points. But I think Jeff it is more in the South where we are hitting different promotions and even if one successful one we did was with military bases which are more in the South. That is just one, different promotions in different markets, different lunch specials. So it is really we are hitting the Southern markets. If you take the Southern markets where we have our biggest problem, and correct me Kimberly if I’m wrong here, but I think it is really as you get outside the larger cities in the South they are the ones who have been hurt a lot more. So Atlanta produce in the last several quarters hasn’t been hurt as bad but then you get out to Macon or Vidalia or some of those and you are getting hurt much worse.

Kimberly Grant

That is a consistent trend in all the Southern major markets in Nashville, Atlanta and all those type markets. The further you get away from the city the worse off the consumer is.

Jeffrey Omohundro – Wachovia Securities

Thanks.

Operator

Thank you. Our next question comes from the line of Howard Penny with Research Edge. Please proceed with your question.

Howard Penny - Research Edge

Thanks so much. If you did I think I heard you but can you narrow down the benefits associated with the store closings specifically? And then also how sharp is your scalpel when it comes to assessing the store base?

Samuel Beall

I’ll do the scalpel and then Margie will do the benefits. Scalpel is everything we could find that we thought we should close any time in the next couple of years and that’s considered as the worst sales time we ever had. I think the scalpel was thorough. It was complete. We have since even gone through, because we did this really over the last three months and made the decision of course at the beginning of this quarter, but we have been working on it for a long time. But since then, we have been implementing another system of rating all 700 restaurants based on several characteristics just do validate to ourselves but also prepare for the future anything else that we may consider looking at some day in the future. We are very, very clean. Actually we are very proud that we only have the number of restaurants we had to close in the whole system based on how bad business is overall. Margie what happened to the benefits?

Marguerite Duffy

Yes, the financial benefit is approximately $10 million and that is by eliminating the losses of those that will close this quarter as well as reduced appreciation on those that were impaired even though they are staying open and reducing rent on those that we have reserved. That comprises $10 million.

Howard Penny - Research Edge

And is that a pre-tax number?

Marguerite Duffy

Yes that’s correct, pre-tax.

Howard Penny - Research Edge

And then just lastly, there are the two data points you gave on the South, the comps you gave in the quarter and also the most recent month. Can you compare that to a couple of quarters back when things were a little worse? What was the low point if you have seen the low point to date in the Southern region in comps?

Samuel Beall

The low point in the Southern region, we are looking that up. The point in time you are talking about?

Howard Penny - Research Edge

Actually the point in time would be great as well as the absolute number.

Samuel Beall

August at 15%, it has been coming back since then.

Howard Penny - Research Edge

Right, thank you.

Samuel Beall

August 20th actually.

Howard Penny - Research Edge

Thanks.

Operator

Thank you. Our next question comes from the line Sean Dodge with SunTrust. Please proceed with your question.

Sean Dodge – SunTrust Robinson Humphrey

Yeah, good afternoon, I was just wondering what your fiscal second quarter same restaurant sales would have looked like had you excluded the 40 restaurants you are planning on closing during the third quarter, kind of a pro forma there.

Marguerite Duffy

Maybe a half point roughly what we had estimated. Remember these restaurants were lower volume locations so it is not a significant impact.

Sean Dodge – SunTrust Robinson Humphrey

Okay and then earlier in the comments I think I heard Margie mention something about royalty abatement. I was just wondering if you can just give a little more color on that maybe as far as how many franchises have been abated currently?

Samuel Beall

We have always abated franchisees for the last three years.

Sean Dodge – SunTrust Robinson Humphrey

Is it more than you had been doing in the past?

Samuel Beall

Franchise partners rather, yes it is more than it has been in the past.

Sean Dodge – SunTrust Robinson Humphrey

Do you know how much approximately?

Samuel Beall

Of course we do.

Marguerite Duffy

Probably $3 or $4 million less.

Sean Dodge – SunTrust Robinson Humphrey

Okay. Right I appreciate thank you.

Operator

Thank you. Our next question comes from the line of Keith Siegner with Credit Suisse. Please proceed with your question.

Analyst Ken for Keith Siegner - Credit Suisse

Hi this is actually Ken on for Keith. Two quick questions, through the holiday season, particularly November and December, can you comment on how your gift card sales were trending relative to either Q3 or what they looked like last year?

Kimberly Grant

Yes this is Kimberly. Our gift card sales from the November/December period were actually very strong. Our third-party sales were up significantly and even with our traffic declines our gift card sales were essentially flat about 2% to 3% down versus the prior year same period of time which is an improvement trend for the whole year.

Analyst Ken for Keith Siegner - Credit Suisse

Do you think you would attribute any of the benefit to any one channel or just to wider distribution relative to last year or still up on kind of a comparable outlook basis?

Kimberly Grant

We definitely increased our outlets that we distributed in this year.

Analyst Ken for Keith Siegner - Credit Suisse

Thank you and then one other quick one, do you have any thoughts in how you kind of think about your brand with all of the restaurant remodels and everything historically the salad bar has been the strong differentiating part of your concept. How has the uptake on that been trending? Is it the same percentage of patrons getting a salad bar with their meals as they have in the past or has that changed?

Mark Young

I don’t think that has changed at all. I think it is over 40% of our guests.

Analyst Ken for Keith Siegner - Credit Suisse

Right thank you very much.

Operator

Thank you. Our next question comes from the line Peter Saleh with Telsey Advisory Group. Please proceed with your question.

Peter Saleh – Telsey Advisory Group

Great, appreciate taking my call. I am wondering if you can give us a little bit of color on your expectations for your advertising calendar, the number of weeks in the back half of the year versus last year.

Mark Young

We haven’t decided that yet for sure. We are just planning the advertising closer. We are not looking that far ahead. As you can tell our company is very, very focused on cash flow. We watch sales monthly. We think about advertising or TV or anything like that you can get it in place pretty fast. It is not sold out by any means at decent prices. So, we haven’t made any commitments yet for the fourth quarter.

Peter Saleh – Telsey Advisory Group

All right. Any franchisees open any units in this quarter or did you guys have zero in this quarter?

Kimberly Grant

Just wait a second, I’ll give you that. Including international we had two international openings in the quarter and two traditional openings in the quarter.

Samuel Beall

As Kimberly just said we have two more traditionals opening this week.

Peter Saleh – Telsey Advisory Group

Right, thank you.

Operator

Thank you. (Operator instructions) As a reminder ladies and gentlemen If you''d like to ask a question please press “*1” on your telephone keypad.

Samuel Beall

Let’s do one more question.

Operator

Right, our next question comes from Anthony Visano with Trapeze Asset. Please proceed with your question.

Anthony Visano – Trapeze Asset Management

Thank you. Good afternoon. I am wondering if we can get some color on the December slight improvement in comps?

Samuel Beall

Get some color on it?

Anthony Visano – Trapeze Asset Management

Was that more a calendar shift or is there any…?

Samuel Beall

It is not a calendar shift at all. I think our promotional efforts helped us some. The Washington market is helping us some. It is more just I would say promotional efforts. Either that or some of what we are doing is paying off. It is too early to tell though. I mean, we are positive about December. We are not excited about December. We’re going to wait and see where January is.

Anthony Visano – Trapeze Asset Management

Beyond the 10% of the company owned stores that have been outlined, are there any other stores that are negative free cash flow stores?

Samuel Beall

I think we have ten.

Marguerite Duffy

Ten. Beyond that there is not a lot there.

Samuel Beall

It is certainly not worth noticing those.

Anthony Visano – Trapeze Asset Management

And the last question is going to be different color on the pro forma. Should the stores that have closed in this quarter beyond the same store sales, I think you already have 150 bps. Can we look at a pro forma EBIT or an EBITDA number for this quarter?

Marguerite Duffy

No. We don’t have that readily available.

Anthony Visano – Trapeze Asset Management

Okay thank you.

Samuel Beall

We want to thank you for joining us. If you have any questions or any follow-up’s please give Steven a call. Have a good day.

Operator

Thank you. Ladies and gentlemen this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.