16. Supplemental Condensed Consolidating Financial Statements

As discussed in Note 8 to the Consolidated Financial Statements, the Senior Notes are a liability of Ruby Tuesday, Inc. (the "Parent") and are guaranteed on a senior unsecured basis by our existing and future domestic restricted subsidiaries, subject to certain exceptions (the "Guarantors"). Each of the Guarantors is wholly-owned by Ruby Tuesday, Inc. None of the few remaining subsidiaries of Ruby Tuesday, Inc., which were primarily created to hold liquor license assets, guarantee the Senior Notes (the "Non-Guarantors"). Our Non-Guarantor subsidiaries are immaterial and are aggregated within the Parent information disclosed below.

The following condensed consolidating financial information, which has been prepared in accordance with the requirements for presentation of Rule 3-10(f) of Regulation S-X promulgated by the Securities and Exchange Commission, presents the condensed consolidating financial information separately for the Parent, the Guarantors, and elimination entries necessary to consolidate the Parent and Guarantors. Investments in wholly-owned subsidiaries are accounted for using the equity method for purposes of the consolidated presentation. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

Condensed Consolidating Balance Sheet

As of June 4, 2013

(In thousands)

	Parent		Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	52,635	$	272	$	–		$	52,907
Accounts receivable		1,854		2,980		–			4,834
Inventories		21,961		8,911		–			30,872
Income tax receivable		118,329		–		(116,429	)		1,900
Deferred income taxes		5,372		1,924		–			7,296
Other current assets		19,519		3,836		–			23,355
Total current assets		219,670		17,923		(116,429	)		121,164

Property and equipment, net		635,478		224,352		–			859,830
Investment in subsidiaries		167,887		–		(167,887	)		–
Due from/(to) subsidiaries		76,485		230,583		(307,068	)		–
Other assets		46,812		15,377		–			62,189
Total assets	$	1,146,332	$	488,235	$	(591,384	)	$	1,043,183

Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable	$	11,725		$	3,239	$	–		$	14,964
Accrued and other current liabilities		47,775			34,406		–			82,181
Current maturities of long-term debt,
including capital leases		(347	)		8,834					8,487
Income tax payable		–			116,429		(116,429	)		–
Total current liabilities		59,153			162,908		(116,429	)		105,632

Long-term debt and capital leases,
less current maturities		232,462			58,053		–			290,515
Deferred income taxes		(1,070	)		6,823		–			5,753
Due to/(from) subsidiaries		230,583			76,485		(307,068	)		–
Other deferred liabilities		108,369			16,079		–			124,448
Total liabilities		629,497			320,348		(423,497	)		526,348

Shareholders' equity:
Common stock		612			–		–			612
Capital in excess of par value		67,596			–		–			67,596
Retained earnings		459,572			167,887		(167,887	)		459,572
Accumulated other comprehensive loss		(10,945	)		–		–			(10,945	)
Total shareholders' equity		516,835			167,887		(167,887	)		516,835

Total liabilities & shareholders' equity	$	1,146,332		$	488,235	$	(591,384	)	$	1,043,183

Condensed Consolidating Balance Sheet

As of June 5, 2012

(In thousands)

	Parent			Guarantors			Eliminations				Consolidated
Assets
Current assets:
Cash and cash equivalents	$	47,986			$	198		$	–			$	48,184
Accounts receivable		2,234				2,466			–				4,700
Inventories		20,896				8,134			–				29,030
Income tax receivable		97,290				–			(96,453	)			837
Deferred income taxes		19,030				8,104			–				27,134
Other current assets		15,216				3,167			–				18,383
Total current assets		202,652				22,069			(96,453	)			128,268

Property and equipment, net		727,379				239,226			–				966,605
Goodwill		7,989				–			–				7,989
Investment in subsidiaries		204,386				–			(204,386	)			–
Due from/(to) subsidiaries		78,799				245,257			(324,056	)			–
Other assets		47,144				23,531			–				70,675
Total assets	$	1,268,349			$	530,083		$	(624,895	)		$	1,173,537

Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable	$	28,302			$	6,646		$	–			$	34,948
Accrued and other current liabilities		55,301				29,521			–				84,822
Current maturities of long-term debt,
including capital leases		(344	)			12,798			–				12,454
Income tax payable		–				96,453			(96,453	)			–
Total current liabilities		83,259				145,418			(96,453	)			132,224

Long-term debt and capital leases,
less current maturities		246,892				67,317			–				314,209
Deferred income taxes		20,910				16,657			–				37,567
Due to/(from) subsidiaries		245,257				78,799			(324,056	)			–
Other deferred liabilities		95,807				17,506			–				113,313
Total liabilities		692,125				325,697			(420,509	)			597,313

Shareholders' equity:
Common stock		640				–			–				640
Capital in excess of par value		90,856				–			–				90,856
Retained earnings		498,985				204,386			(204,386	)			498,985
Accumulated other comprehensive loss		(14,257	)			–			–				(14,257	)
Total shareholders' equity		576,224				204,386			(204,386	)			576,224

Total liabilities & shareholders' equity	$	1,268,349			$	530,083		$	(624,895	)		$	1,173,537

Condensed Consolidating Statement of Operations and

Comprehensive (Loss)/Income

For the Fiscal Year Ended June 4, 2013

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	904,761		$	340,465		$	–		$	1,245,226
Franchise revenue		188			6,073			–			6,261
		904,949			346,538			–			1,251,487

Operating costs and expenses:
Cost of merchandise		248,378			93,134			–			341,512
Payroll and related costs		298,194			121,485			–			419,679
Other restaurant operating costs		185,224			73,790			–			259,014
Depreciation		43,541			15,581			–			59,122
Selling, general, and administrative		91,587			47,195			–			138,782
Intercompany selling, general, and
administrative allocations		68,466			(68,466	)		–			–
Closures and impairments		13,181			1,475			–			14,656
Goodwill and trademark impairments		9,023			5,035			–			14,058
Equity in earnings of subsidiaries		(38,485	)		–			38,485			–
Interest expense, net		21,461			5,656			–			27,117
Intercompany interest expense/(income)		13,826			(13,826	)		–			–
Gain on extinguishment of debt		(519	)		–			–			(519	)
		953,877			281,059			38,485			1,273,421

(Loss)/income from continuing operations
before income taxes		(48,928	)		65,479			(38,485	)		(21,934	)
Provision/(benefit) for income taxes from
continuing operations		(25,494	)		26,994			–			1,500
(Loss)/income from continuing operations		(23,434	)		38,485			(38,485	)		(23,434	)

Loss from discontinued operations, net of tax		(15,979	)		(810	)		810			(15,979	)
Net (loss)/income	$	(39,413	)	$	37,675		$	(37,675	)	$	(39,413	)

Other comprehensive income:
Pension liability reclassification, net of tax		3,312			–			–			3,312
Total comprehensive (loss)/income	$	(36,101	)	$	37,675		$	(37,675	)	$	(36,101	)

Condensed Consolidating Statement of Operations and

Comprehensive (Loss)/Income

For the Fiscal Year Ended June 5, 2012

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	944,501		$	361,524		$	–		$	1,306,025
Franchise revenue		216			5,522			–			5,738
		944,717			367,046			–			1,311,763

Operating costs and expenses:
Cost of merchandise		271,559			104,014			–			375,573
Payroll and related costs		309,854			130,899			–			440,753
Other restaurant operating costs		186,754			75,819			–			262,573
Depreciation		47,475			16,669			–			64,144
Selling, general, and administrative		79,594			40,770			–			120,364
Intercompany selling, general, and
administrative allocations		71,670			(71,670	)		–			–
Closures and impairments		12,282			4,469			–			16,751
Goodwill impairment		1,440			15,479			–			16,919
Equity in earnings of subsidiaries		(35,905	)		–			35,905			–
Interest expense, net		13,295			10,017			–			23,312
Intercompany interest expense/(income)		13,096			(13,096	)		–			–
		971,114			313,370			35,905			1,320,389

(Loss)/income from continuing operations
before income taxes		(26,397	)		53,676			(35,905	)		(8,626	)
(Benefit)/provision for income taxes from
continuing operations		(29,923	)		17,771			–			(12,152	)
Income from continuing operations		3,526			35,905			(35,905	)		3,526

Loss from discontinued operations, net of tax		(3,714	)		(1,392	)		1,392			(3,714	)
Net (loss)/income	$	(188	)	$	34,513		$	(34,513	)	$	(188	)

Other comprehensive (loss)/income:
Pension liability reclassification, net of tax		(1,205	)		–			–			(1,205	)
Total comprehensive (loss)/income	$	(1,393	)	$	34,513		$	(34,513	)	$	(1,393	)

Condensed Consolidating Statement of Operations and

Comprehensive Income

For the Fiscal Year Ended May 31, 2011

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated
Revenue:
Restaurant sales and operating revenue	$	985,500		$	268,526		$	–		$	1,254,026
Franchise revenue		429			6,718			–			7,147
		985,929			275,244			–			1,261,173

Operating costs and expenses:
Cost of merchandise		285,931			78,349			–			364,280
Payroll and related costs		318,298			94,756			–			413,054
Other restaurant operating costs		201,498			52,278			–			253,776
Depreciation		50,165			12,432			–			62,597
Selling, general, and administrative		58,241			33,850			–			92,091
Intercompany selling, general, and
administrative allocations		73,709			(73,709	)		–			–
Closures and impairments		4,086			89			–			4,175
Equity in (earnings)/losses of subsidiaries		(59,338	)		500			59,412			574
Interest expense, net		8,157			5,351			–			13,508
Intercompany interest expense/(income)		12,888			(12,888	)		–			–
		953,635			191,008			59,412			1,204,055

Income from continuing operations
before income taxes		32,294			84,236			(59,412	)		57,118
(Benefit)/provision for income taxes from
continuing operations		(17,261	)		24,824			–			7,563
Income from continuing operations		49,555			59,412			(59,412	)		49,555

Loss from discontinued operations, net of tax		(2,677	)		(1,806	)		1,806			(2,677	)
Net income	$	46,878		$	57,606		$	(57,606	)	$	46,878

Other comprehensive income:
Pension liability reclassification, net of tax		125			–			–			125
Total comprehensive income	$	47,003		$	57,606		$	(57,606	)	$	47,003

Condensed Consolidating Statement of Cash Flows

For the Fiscal Year Ended June 4, 2013

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated

Net cash provided by operating activities	$	34,877		$	89,925		$	(88,848	)	$	35,954

Investing activities:
Purchases of property and equipment		(31,531	)		(5,586	)		–			(37,117	)
Proceeds from sale-leaseback transactions, net		51,765			–			–			51,765
Proceeds from disposal of assets		4,421			2,576			–			6,997
Other, net		468			–			–			468
Net cash used by investing activities		25,123			(3,010	)		–			22,113

Financing activities:
Principal payments on long-term debt		(14,514	)		(12,666	)		–			(27,180	)
Stock repurchases		(30,278	)		–			–			(30,278	)
Proceeds from exercise of stock options		4,090			–			–			4,090
Payments for debt issuance costs		(358	)		–			–			(358	)
Excess tax benefits from share-based
compensation		382			–			–			382
Intercompany transactions		(14,673	)		(74,175	)		88,848			–
Net cash used by financing activities		(55,351	)		(86,841	)		88,848			(53,344	)

Increase in cash and cash equivalents		4,649			74			–			4,723
Cash and cash equivalents:
Beginning of year		47,986			198			–			48,184
End of year	$	52,635		$	272		$	–		$	52,907

Condensed Consolidating Statement of Cash Flows

For the Fiscal Year Ended June 5, 2012

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated

Net cash provided by operating activities	$	48,516		$	105,820		$	(42,085	)	$	112,251

Investing activities:
Purchases of property and equipment		(28,253	)		(9,713	)		–			(37,966	)
Acquisition of franchise and other entities, net		(24,084	)		–			–			(24,084	)
Proceeds from sale-leaseback transactions		21,150			–			–			21,150
Proceeds from disposal of assets		5,834			160			–			5,994
Other, net		1,151			–			–			1,151
Net cash used by investing activities		(24,202	)		(9,553	)		–			(33,755	)

Financing activities:
Proceeds from issuance of senior unsecured
notes		246,340			–						246,340
Net payments on revolving credit facility		(177,000	)		–			–			(177,000	)
Principal payments on long-term debt		(44,437	)		(41,120	)		–			(85,557	)
Stock repurchases		(18,441	)		–			–			(18,441	)
Payment for debt issuance costs		(5,767	)		–			–			(5,767	)
Proceeds from exercise of stock options		355			–			–			355
Excess tax benefits from share-based
compensation		36			–			–			36
Intercompany transactions		13,096			(55,181	)		42,085			–
Net cash provided/(used) by financing activities		14,182			(96,301	)		42,085			(40,034	)

Increase/(decrease) in cash and cash equivalents		38,496			(34	)		–			38,462
Cash and cash equivalents:
Beginning of year		9,490			232			–			9,722
End of year	$	47,986		$	198		$	–		$	48,184

Condensed Consolidating Statement of Cash Flows

For the Fiscal Year Ended May 31, 2011

(In thousands)

	Parent			Guarantors			Eliminations			Consolidated

Net cash provided by operating activities	$	30,523		$	123,534		$	(37,765	)	$	116,292

Investing activities:
Purchases of property and equipment		(16,592	)		(10,092	)		–			(26,684	)
Acquisition of franchise and other entities, net		(1,999	)		(2,258	)					(4,257	)
Proceeds from disposal of assets		6,646			95			–			6,741
Other, net		(292	)		–			–			(292	)
Net cash used by investing activities		(12,237	)		(12,255	)		–			(24,492	)

Financing activities:
Net payments on revolving credit facility		(26,800	)		(41,100	)		–			(67,900	)
Principal payments on long-term debt		(4,001	)		(19,436	)		–			(23,437	)
Payment for debt issuance costs		(2,812	)		–			–			(2,812	)
Proceeds from exercise of stock options		1,903			–			–			1,903
Excess tax benefits from share-based
compensation		599			–			–			599
Intercompany transactions		12,888			(50,653	)		37,765			–
Net cash used by financing activities		(18,223	)		(111,189	)		37,765			(91,647	)

Increase in cash and cash equivalents		63			90			–			153
Cash and cash equivalents:
Beginning of year		9,427			142			–			9,569
End of year	$	9,490		$	232		$	–		$	9,722