NOTE 1 – BASIS OF PRESENTATION

Ruby Tuesday, Inc., including its wholly-owned subsidiaries (“RTI,” the “Company,” “we,” and/or “our”), owns and operates Ruby Tuesday® casual dining and Lime Fresh Mexican Grill® (“Lime Fresh”) fast casual restaurants. We also franchise the Ruby Tuesday concept in selected domestic and international markets and the Lime Fresh concept in selected domestic markets. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not

include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring entries) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates. Operating results for the 26-week period ended December 1, 2015 are not necessarily indicative of results that may be expected for the 52-week year ending May 31, 2016.

The Condensed Consolidated Balance Sheet at June 2, 2015 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. As discussed below, we have made certain reclassifications to prior year amounts in our Condensed Consolidated Financial Statements to conform to the current period.

For further information, refer to the consolidated financial statements and footnotes thereto included in RTI’s Annual Report on Form 10-K for the fiscal year ended June 2, 2015.

Reclassifications

As further reflected in Note 6 to the Condensed Consolidated Financial Statements, we adopted Accounting Standards Update (“ASU”) 2015-03,

Interest-Imputation of Interest (

Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs

(“ASU 2015-03”) during the first quarter of fiscal year 2016. As shown in the table below, pursuant to the guidance in ASU 2015-03 we have reclassified unamortized debt issuance costs associated with our senior notes and mortgage loan obligations in our previously reported Consolidated Balance Sheet as of June 2, 2015 as follows (in thousands):

	As presented June 2, 2015		Reclassifications			As adjusted June 2, 2015
Prepaid rent and other expenses	$	13,181	$	(783	)	$	12,398
Other assets		57,554		(3,156	)		54,398
Current maturities of long-term debt, including capital leases		10,861		(783	)		10,078
Long-term debt and capital leases, less current maturities		234,173		(3,156	)		231,017

As shown in the table below, we have also reclassified amortization of intangible assets from Other restaurant operating costs to Depreciation and amortization in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the prior period to be comparable with the classification for the 13 and 26 weeks ended December 1, 2015. We made this reclassification to more accurately reflect the nature of the expenses in our Condensed Consolidated Statements of Operations and Comprehensive Loss. Amounts presented are in thousands.

	As presented Thirteen weeks ended December 2, 2014		Reclassifications			As adjusted Thirteen weeks ended December 2, 2014
Other restaurant operating costs	$	60,097	$	(581	)	$	59,516
Depreciation and amortization		12,538		581			13,119

	As presented Twenty-Six weeks ended December 2, 2014		Reclassifications			As adjusted Twenty-Six weeks ended December 2, 2014
Other restaurant operating costs	$	119,896	$	(1,162	)	$	118,734
Depreciation and amortization		25,196		1,162			26,358

Change in Accounting Principle

During the first quarter of fiscal year 2016, we completed the implementation of a new inventory management system in our company-owned restaurants. In connection with this implementation, we changed our method of accounting for inventory from the lower of cost (first-in, first-out) or market method utilized by our legacy system to the lower of cost or market method using a weighted-average cost method. We believe this change in accounting principle is preferable because we believe it will result in greater precision in the costing of inventories. In addition, the weighted-average cost method better aligns with the functionality of the new inventory management system. We determined that the effects of adopting the average cost method were not material to our Condensed Consolidated Financial Statements. Prior to the conversion to the new inventory management system, we were not able to determine the impact of the change to the weighted-average cost method. Therefore, we did not retroactively apply the change to periods prior to fiscal year 2016.