Accounting Policies, by Policy (Policies)

12 Months Ended

Jun. 03, 2014

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Description of Business and Principles of Consolidation
Ruby Tuesday, Inc. including its wholly-owned subsidiaries (“RTI,” the “Company,” “we” and/or “our”) develops, operates and franchises casual dining restaurants in the United States, Guam, and 12 foreign countries under the Ruby Tuesday® brand. We also own and operate 20 Lime Fresh Mexican Grill® (“Lime Fresh”) fast casual restaurants. At June 3, 2014, we owned and operated 668 Ruby Tuesday restaurants concentrated primarily in the Southeast, Northeast, Mid-Atlantic, and Midwest of the United States, which we consider to be our core markets. As of our fiscal year end, there were 79 domestic and international franchise Ruby Tuesday restaurants located in 14 states primarily outside of our existing core markets (primarily the Western United States and portions of the Midwest) and in the Asia Pacific Region, Middle East, Guam, Canada, Iceland, Eastern Europe, the United Kingdom, and Central and South America. Also at fiscal year end, there were six domestic franchise Lime Fresh restaurants located in Florida.

RTI consolidates its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Fiscal Period, Policy [Policy Text Block]

Fiscal Year
Our fiscal year ends on the first Tuesday following May 30 and, as a result, a 53^rd week is added every five or six years. The fiscal years ended June 3, 2014 and June 4, 2013 each contained 52 weeks. Fiscal 2012 contained 53 weeks. The first three quarters of fiscal 2012 each contained 13 weeks and the fourth quarter contained 14 weeks. In fiscal 2012, the 53^rd week added $22.9 million to restaurant sales and operating revenue and $0.03 to diluted earnings per share in our Consolidated Statement of Operations and Comprehensive Loss.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents
Our cash management program provides for the investment of excess cash balances in short-term money market instruments. These money market instruments are stated at cost, which approximates market value. We consider amounts receivable from credit card companies and marketable securities with a maturity of three months or less when purchased to be cash equivalents. Book overdrafts are recorded in accounts payable and are included within operating cash flows.

Inventory, Policy [Policy Text Block]

Inventories
Inventories consist of food, supplies, china and silver and are stated at the lower of cost (first-in, first-out) or market.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment and Depreciation
Property and equipment is valued at cost. Expenditures for major renewals and betterments are capitalized while expenditures for repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of depreciable assets generally range from three to 35 years for buildings and improvements and from three to 15 years for restaurant and other equipment.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Other Intangible Assets

Other intangible assets which are included in Other assets, net in the Consolidated Balance Sheets consist of the following (in thousands):

	2014				2013
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Reacquired franchise rights	$	14,460	$	8,371	$	14,723	$	6,847
Trademarks		4,194		390		6,025		854
Favorable leases *		2,059		322		2,205		255
Acquired franchise agreements		1,500		463		1,500		248
Other		100		41		100		22
	$	22,313	$	9,587	$	24,553	$	8,226

* As of June 3, 2014 and June 4, 2013, we also had $0.9 million and $1.0 million, respectively, of unfavorable lease liabilities which resulted from the terms of acquired franchise operating lease contracts being unfavorable relative to market terms of comparable leases on the acquisition date. In addition, as of June 3, 2014 and June 4, 2013, we had a liability of $0.1 million and $0.2 million, respectively, which resulted from the terms of a Lime Fresh license agreement being unfavorable relative to market terms of a comparable license agreement. The majority of these liabilities are included within Other deferred liabilities in our Consolidated Balance Sheets. See Note 4 to the Consolidated Financial Statements for more information on the favorable and unfavorable leases acquired and assumed from our acquisition of Lime Fresh in fiscal 2012.

The reacquired franchise rights reflected in the table above were acquired as part of certain franchise acquisitions. Trademarks consist primarily of the Lime Fresh trademark that was acquired as part of the Lime Fresh acquisition in fiscal 2012. The favorable leases resulted from the terms of acquired franchise operating lease contracts being favorable relative to market terms of comparable leases on the acquisition date. See Note 4 to the Consolidated Financial Statements for more information on the purchase price allocation applied to the Lime Fresh acquisition in fiscal 2012.

Amortization expense of other intangible assets for fiscal 2014, 2013, and 2012 totaled $2.5 million, $3.3 million, and $2.3 million, respectively. We amortize acquired and reacquired franchise rights on a straight-line basis over the remaining term of the franchise operating agreements. The weighted average amortization period of acquired and reacquired franchise rights is 7.3 and 8.4 years, respectively. We amortize favorable leases as a component of rent expense on a straight-line basis over the remaining lives of the leases. The weighted average amortization period of the favorable leases is 25.6 years. We amortize trademarks on a straight-line basis over the life of the trademarks, typically 10 years. Amortization expense for intangible assets for each of the next five years is expected to be $2.3 million in fiscal 2015, $2.0 million in fiscal 2016, $1.6 million in fiscal 2017, $1.3 million in fiscal 2018, and $1.3 million in fiscal 2019. Rent expense resulting from amortization of favorable leases, net of the amortization of unfavorable leases, is expected to be insignificant for each of the next five years.

Lease, Policy [Policy Text Block]

Deferred Escalating Minimum Rent

Certain of our operating leases contain predetermined fixed escalations of the minimum rentals during the term of the lease, which includes option periods where failure to exercise such options would result in an economic penalty. For these leases, we recognize the related rental expense on a straight-line basis over the life of the lease, beginning with the point at which we obtain control and possession of the leased properties, and record the difference between the amounts charged to operations and amounts paid as deferred escalating minimum rent. Any lease incentives received are deferred and subsequently amortized on a straight-line basis over the life of the lease as a reduction to rent expense.

Pension and Other Postretirement Plans, Policy [Policy Text Block]

Pensions and Post-Retirement Medical Benefits

We measure and recognize the funded status of our defined benefit and postretirement plans in our Consolidated Balance Sheets as of our fiscal year end. The funded status represents the difference between the projected benefit obligation and the fair value of plan assets.  The projected benefit obligation is the present value of benefits earned to date by plan participants, including the effect of future salary increases, as applicable.  The difference between the projected benefit obligation and the fair value of assets that has not previously been recognized as expense is recorded as a component of other comprehensive loss.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition
Revenue from restaurant sales is recognized when food and beverage products are sold. We present sales net of sales tax and other sales-related taxes. Deferred revenue-gift cards primarily represents our liability for gift cards that have been sold, but not yet redeemed, and is recorded at the expected redemption value. When the gift cards are redeemed, we recognize restaurant sales and reduce the deferred revenue.

Using gift card redemption history, we have determined that substantially all of our customers utilize their gift cards within two years from the date of purchase. Accordingly, we recognize gift card breakage for non-escheatable amounts beginning 24 months after the date of activation.

We recognized gift card breakage income of $0.6 million, $1.9 million, and $1.8 million during fiscal 2014, 2013, and 2012, respectively. This income is included as an offset to Other Restaurant Operating Costs in the Consolidated Statements of Operations and Comprehensive Loss.

Franchise development and license fees received are recognized when we have substantially performed all material services and the restaurant has opened for business. Franchise royalties are recognized as franchise revenue on the accrual basis. Advertising amounts received from domestic franchisees are considered by us to be reimbursements, recorded on an accrual basis when earned, and have been netted against selling, general, and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.

We charge our franchisees various monthly fees that are calculated as a percentage of the respective franchise’s monthly sales. Our Ruby Tuesday concept franchise agreements allow us to charge up to a 4.0% royalty fee, a 1.5% support service fee, a 1.5% marketing and purchasing fee, and an advertising fee of up to 3.0%. Our Lime Fresh concept franchise agreements allow us to charge up to a 5.25% royalty fee and an advertising fee of up to 3.0%. We defer recognition of franchise fee revenue for any franchise with negative cash flows at times when the negative cash flows are deemed to be anything other than temporary and the franchise has borrowed directly from us.

A further description of our franchise programs is provided in Note 2 to the Consolidated Financial Statements.

Preopening Expenses [Policy Text Block]

Pre-Opening Expenses
Salaries, personnel training costs, pre-opening rent, and other expenses of opening new facilities are charged to expense as incurred.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Share-Based Employee Compensation Plans
We recognize share-based payment transactions, including grants of employee stock options and restricted stock, as compensation expense based on the fair value of the equity award on the grant date. This compensation expense is recognized over the service period on a straight-line basis for all awards except those awarded to retirement-eligible individuals, which are recognized on the grant date at their estimated fair value. We classify share-based compensation expense consistent with the other compensation expense for the recipient in Selling, general, and administrative, net in our Consolidated Statements of Operations and Comprehensive Loss. See Note 12 to the Consolidated Financial Statements for further discussion regarding our share-based employee compensation plans.

Advertising Costs, Policy [Policy Text Block]

Marketing Costs
Except for television and radio advertising production costs which we expense when the advertisement is first shown, we expense marketing costs as incurred. Marketing expenses, net of franchise reimbursements, which are included in Selling, general, and administrative expense in the Consolidated Statements of Operations and Comprehensive Loss, totaled $67.2 million, $71.4 million, and $47.2 million for fiscal 2014, 2013, and 2012, respectively.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment or Disposal of Long-Lived Assets
We review our long-lived assets related to each restaurant to be held and used in the business, including any allocated intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be recoverable. We evaluate restaurants based upon cash flows as our primary indicator of impairment. Based on the best information available, we write down an impaired restaurant to its fair value based upon estimated future discounted cash flows and salvage value, if any. In addition, when we decide to close a restaurant it is reviewed for impairment and depreciable lives are adjusted. The impairment evaluation is based on the estimated cash flows from continuing use through the expected disposal date and the expected terminal value.

See Note 9 to the Consolidated Financial Statements for a further discussion regarding our closures and impairments, including the impairments of goodwill and other long-lived assets.

Income Tax, Policy [Policy Text Block]

Income Taxes
Our deferred income taxes are determined utilizing the asset and liability approach. This method gives consideration to the future tax consequences associated with differences between financial accounting and tax bases of assets and liabilities and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If, after consideration of all available positive and negative evidence, current available information raises doubt as to the realization of the deferred tax assets, the need for a valuation allowance is addressed. A valuation allowance for deferred tax assets may be required if the amount of taxes recoverable through loss carry-back declines, if we project lower levels of future taxable income, or if we have recently experienced pretax losses. Such a valuation allowance is established through a charge to income tax expense which adversely affects our reported operating results. The judgments and estimates utilized when establishing, and subsequently adjusting, a deferred tax asset valuation allowance are reviewed on a periodic basis as regulatory and business factors change.

The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We recognize interest and penalties accrued related to unrecognized tax benefits as components of our income tax expense.

We recognize in our consolidated financial statements the benefit of a position taken or expected to be taken in a tax return when it is more likely than not (i.e. a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. Changes in judgment that result in subsequent recognition, derecognition or change in a measurement of a tax position taken in a prior annual period (including any related interest and penalties) are recognized as a discrete item in the interim period in which the change occurs.

See Note 11 to the Consolidated Financial Statements for a further discussion of our income taxes.

Earnings Per Share, Policy [Policy Text Block]

Loss Per Share
Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during each period presented. Diluted loss per share gives effect to stock options and restricted stock outstanding during the applicable periods. The following table reflects the calculation of weighted-average common and dilutive potential common shares outstanding as presented in the accompanying Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per-share data):

	2014			2013			2012
(Loss)/income from continuing operations	$	(64,910	)	$	(23,434	)	$	3,526
Income/(loss) from discontinued operations		564			(15,979	)		(3,714	)
Net loss	$	(64,346	)	$	(39,413	)	$	(188	)
Weighted-average common shares outstanding		60,231			61,040			62,916
Dilutive effect of stock options and restricted stock		–			–			592
Weighted average common and dilutive potential common shares outstanding		60,231			61,040			63,508
Loss per share – Basic
(Loss)/income from continuing operations	$	(1.08	)	$	(0.38	)	$	0.06
Income/(loss) from discontinued operations		0.01			(0.27	)		(0.06	)
Net loss per share	$	(1.07	)	$	(0.65	)	$	(0.00	)
Loss per share – Diluted
(Loss)/income from continuing operations	$	(1.08	)	$	(0.38	)	$	0.06
Income/(loss) from discontinued operations		0.01			(0.27	)		(0.06	)
Net loss per share	$	(1.07	)	$	(0.65	)	$	(0.00	)

Stock options with an exercise price greater than the average market price of our common stock and certain options with unrecognized compensation expense do not impact the computation of diluted loss per share because the effect would be anti-dilutive. The following table summarizes stock options and restricted shares that did not impact the computation of diluted loss per share because their inclusion would have had an anti-dilutive effect (in thousands):

	2014		2013		2012
Stock options		2,833*		2,161*		2,229
Restricted shares		1,121*		1,492*		819
Total		3,954*		3,653*		3,048

*Due to a loss from continuing operations for the years ended June 3, 2014 and June 4, 2013, all then outstanding share-based awards were excluded from the computation of diluted loss per share.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Loss
Comprehensive loss includes net loss adjusted for certain revenue, expenses, gains and losses that are excluded from net loss in accordance with U.S. GAAP, such as pension adjustments. Comprehensive loss is shown as a separate component in the Consolidated Statements of Operations and Comprehensive Loss.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The fair values are assigned a level within the fair value hierarchy to prioritize the inputs used to measure the fair value of assets or liabilities. These levels are:

● Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities;

● Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

● Level 3 – Unobservable inputs which require the reporting entity to develop its own assumptions.

See Note 15 to the Consolidated Financial Statements for a further discussion of our financial instruments.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting
Operating segments are components of an entity that engage in business activities with discrete financial information available that is regularly reviewed by the chief operating decision maker (“CODM”) in order to assess performance and allocate resources. Our CODM is the Company’s President and Chief Executive Officer. As discussed further in Note 13 to the Consolidated Financial Statements, we consider our Ruby Tuesday concept and Lime Fresh concept to be our reportable operating segments.

Reclassification, Policy [Policy Text Block]

Immaterial Reclassifications of Prior Period Consolidated Statements of Operations and Comprehensive Loss and Consolidated Statements of Cash Flows

We reclassified $0.5 million from Interest expense, net to Loss on extinguishment of debt in our Consolidated Statements of Operations and Comprehensive Loss for the year ended June 4, 2013. We also made certain reclassifications to prior year amounts in our Consolidated Statements of Cash Flows to conform to current year presentation (all reclassifications were within Operating activities).