Acquisition of Ruth’s Chris Steak House

6 Months Ended

Nov. 26, 2023

Business Combination and Asset Acquisition [Abstract]

On June 14, 2023, we acquired 100 percent of the equity interest of Ruth’s Chris Steak House (Ruth’s Chris) for $724.6 million in total consideration. We funded the acquisition with the proceeds from the issuance of a $600.0 million Term Loan (Term Loan) combined with cash on hand. We repaid the Term Loan in full on October 10, 2023 with proceeds from the issuance of $500 million fixed-rate 6.30% Senior Notes, due 2033 (the 2033 Notes), and cash on hand. The 2033 Notes were issued under the Company’s Indenture, dated as of January 1, 1996 (Base Indenture, between the Company and Computershare Trust Company, National Association, as trustee (Base Trustee). The 2033 Notes will mature on October 10, 2033. Interest on the 2033 Notes will be paid semi-annually in arrears on April 10 and October 10 of each year, commencing on April 10, 2024, to holders of record on the preceding March 26 or September 25, as the case may be.

The acquired operations of Ruth’s Chris include 77 company-owned locations, 74 franchisee-owned locations and 4 managed locations operating under contractual agreement. The results of Ruth’s Chris operations are included in our consolidated financial statements from the date of acquisition.

The assets and liabilities of Ruth’s Chris were recorded at their respective fair values as of the date of acquisition. We are in the process of confirming, through internal studies and third-party valuations, the fair value of these assets, including land, buildings and equipment, intangible assets, and income tax assets and liabilities. The fair values set forth below are based on preliminary valuations and are subject to adjustment as additional information is obtained. When the valuation process is completed, adjustments to goodwill may result.

The preliminary allocation of the purchase price is as follows:


	Balances at				Balances at
(in millions)	June 14, 2023		Adjustments		November 26, 2023
Cash	$	24.7	$	—	$	24.7
Other current assets	20.9		—		20.9
Land, buildings and equipment	170.5		(26.7)		143.8
Operating lease right-of-use assets	291.6		7.9		299.5
Trademark	341.7		—		341.7
Other assets	12.0		12.4		24.4
Goodwill	339.5		16.0		355.5
Total assets acquired	$	1,200.9	$	9.6	$	1,210.5
Current liabilities	113.5		(1.5)		112.0
Deferred income taxes	79.5		3.1		82.6
Operating lease liabilities - non-current	276.3		7.5		283.8
Other liabilities	7.0		0.5		7.5
Total liabilities assumed	$	476.3	$	9.6	$	485.9
Net assets acquired	$	724.6	$	—	$	724.6

The excess of the purchase price over the aggregate fair value of net assets acquired was allocated to goodwill. Of the $355.5 million recorded as goodwill, $15.2 million is deductible for tax purposes. The portion of the purchase price attributable to goodwill represents benefits expected because of the acquisition, including sales and unit growth opportunities in addition to supply-chain and support-cost synergies. The trademark has an indefinite life based on the expected use of the asset and the regulatory and economic environment within which it is being used. The trademark represents a highly respected brand with positive connotations, and we intend to cultivate and protect the use of this brand. Goodwill and indefinite-lived trademarks are not amortized, but are reviewed annually for impairment or more frequently if indicators of impairment exist. Buildings and equipment will be depreciated over a period of 2 years to 30 years.

As a result of the acquisition and related integration efforts, we incurred expenses of approximately $12.8 million ($9.6 million, net of tax) and $37.6 million ($31.8 million, net of tax) during the quarter ended and six months ended November 26, 2023, respectively, which are included in general and administrative expenses, impairment, net and interest expense in our consolidated statements of earnings. Pro-forma financial information of the combined entities for periods prior to the acquisition is not presented due to the immaterial impact of the financial results of Ruth’s Chris on our consolidated financial statements.