Ruth's Hospitality Group

2014 ANNUAL REPORT

Dear Stockholders:

50 years ago, in May 1965, Ruth Fertel, a single mother with two young boys purchased a single steak house
restaurant in New Orleans and created the foundation and vision for the international restaurant brand we are
today. As we enter our 50th year, her legacy lives on in the culture and principles that guide us every day. I am
honored and privileged to be a part of this iconic company as it reaches this milestone, and I want to take a
moment to thank those who have truly made this possible – Our People.

Our People include: Team Members, who for 50 years have delivered a superior experience for our guests;
Franchise Partners, who continue to be the heart and soul of the brand; Vendor Partners, some of whom have
been with us since the very beginning; Guests, who have been passing on the Ruth’s Chris Steak House
experience from generation to generation for decades; Communities that we call home, as their strength and
vibrancy is our shared responsibility; and you, our Shareholders, who believe in and support our vision. As we
look ahead to the next 50 years, we will build on the solid foundation and core competencies of the brand, and
with the continued support of Our People, strive for the results and best management practices our Shareholders
expect.

Looking back on 2014, I am pleased with the success we achieved with another strong year of operating results
and progress on our total return strategy. While we faced some external challenges, primarily in commodity
inflation, we were able to realize positive results and accomplish significant initiatives to deliver value. Through
our focus on execution and commitment to strengthening the brand experience, we:

•

Increased total revenues 7.4% to $346 million;

• Achieved comparable restaurant sales growth of 3.7%;

• Realized Non-GAAP diluted earnings per share growth of 10.3%;

• Continued development efforts, opening 3 Company and 4 franchise restaurants;

•

In conjunction with the sale of the Mitchell’s restaurants, announced a new $50 million share
repurchase program to replace our previous $30 million program. In addition, we increased our
dividend 25%. (Since 2010, we have returned over $200 million to shareholders through debt
repayment, share buybacks and cash dividend payments);

• Continued our progress in brand evolution through restaurant design, menu innovation and updates to

the guest experience.

Looking forward to the year ahead, we will likely face the ups and downs of commodity costs and other cost
pressures. However, we believe that we have opportunities through strong operational execution, brand
experience strategies, and our pricing to offset many of those headwinds. We are committed to offering a
compelling and differentiated experience to our guests and will continue to leverage the legacy of our brand.

We also remain focused on shareholders and will continue to focus on a balanced approach consisting of
strengthening the Ruth’s Chris Steak House brand, new restaurant development, and returning capital to our
shareholders. Today, I am proud that we remain true to Ruth’s ideals of focusing on Our People and the highest
quality standards of food, hospitality and operational execution. We are excited about the opportunities in the
year ahead … as well those in the next 50.

Thank you, our shareholders, for your continued support.

Sincerely,

Michael P. O’Donnell
Chairman, President and Chief Executive Officer
Ruth’s Hospitality Group, Inc.

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 28, 2014

OR

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934
For the transition period from

to

Commission File Number 000-51485

RUTH’S HOSPITALITY GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
1030 W. Canton Avenue, Suite 100
Winter Park, Florida
(Address of Principal Executive Offices)

32789
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (407) 333-7440

72-1060618
(I.R.S. Employer
Identification No.)

Securities Registered Pursuant to Section 12(b) of the Act:

Common stock, par value $0.01 per share
(Title of class)

The NASDAQ Stock Market LLC
(Name of exchange on which registered)

Securities Registered Pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes ‘ No È

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes ‘ No È

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes È No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a

smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer ‘
Non-accelerated filer ‘ (Do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Accelerated filer È
Smaller reporting company ‘

Act). Yes ‘ No È

As of June 29, 2014, the last day of the registrant’s most recently completed second fiscal quarter, the aggregate market

value of the registrant’s common stock, par value $0.01 per share, held by non-affiliates was approximately $431,858,059.

The number of shares outstanding of the registrant’s common stock as of March 1, 2015 was 34,775,906, which includes

569,275 shares of unvested restricted stock.

DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of Annual Report on Form 10-K, to the extent not set forth herein, is incorporated

herein by reference to the registrant’s Proxy Statement for the 2015 Annual Meeting of Stockholders, to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the registrant’s
fiscal year.

TABLE OF CONTENTS PAGE REFERENCES TO BE UPDATED

PART I

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5.

Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Management’s Discussion and Analysis and Results of Operations and Financial Condition . .
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . .
Item 9.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A.
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B.

PART III

Item 10.
Item 11.
Item 12.

Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15.

Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and the materials incorporated by reference herein contain “forward-
looking statements” that reflect, when made, the Company’s expectations or beliefs concerning future events that
involve risks and uncertainties. Forward-looking statements frequently are identified by the words “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “project,” “targeting,” “will be,” “will continue,” “will likely result,”
or other similar words and phrases. Similarly, statements herein that describe the Company’s objectives, plans or
goals also are forward-looking statements. Actual results could differ materially from those projected, implied or
anticipated by the Company’s forward-looking statements. Some of the factors that could cause actual results to
differ include: reductions in the availability of, or increases in the cost of, USDA Prime grade beef, fish and other
food items; changes in economic conditions and general trends; the loss of key management personnel; the effect
of market volatility on the Company’s stock price; health concerns about beef or other food products; the effect
of competition in the restaurant industry; changes in consumer preferences or discretionary spending; labor
shortages or increases in labor costs; the impact of federal, state or local government regulations relating to
Company employees; the sale or preparation of food, the sale of alcoholic beverages and the opening of new
restaurants; harmful actions taken by the Company’s franchisees; the Company’s ability to protect its name and
logo and other proprietary information; the impact of litigation; the restrictions imposed by the Company’s credit
agreement; changes in, or the discontinuation of, the Company’s share repurchase program or dividend
payments; and the Company’s indemnification obligations in connection with its recent sale of the Mitchell’s
Fish Market and Mitchell’s/Cameron’s Steakhouse restaurants. For a discussion of these and other risks and
uncertainties that could cause actual results to differ from those contained in the forward-looking statements,
please see Item 1A, Risk Factors, in this Annual Report on Form 10-K as well as the Company’s other filings
with the Securities and Exchange Commission (the SEC), all of which are available on the SEC’s website at
www.sec.gov. All forward-looking statements are qualified in their entirety by this cautionary statement, and the
Company undertakes no obligation to revise or update this Annual Report on Form 10-K to reflect events or
circumstances after the date hereof. You should not assume that material events subsequent to the date of this
Annual Report on Form 10-K have not occurred.

Unless the context otherwise indicates, all references in this Annual Report on Form 10-K to the

“Company,” “we,” “us” or “our” or similar words are to Ruth’s Hospitality Group, Inc., and its wholly owned
subsidiaries.

Item 1.

BUSINESS

Introduction

PART I

Ruth’s Hospitality Group, Inc. is a leading restaurant company focused on the upscale dining segment. As of

December 28, 2014, the Company owned the Ruth’s Chris Steak House, Mitchell’s Fish Market, Columbus Fish
Market, Mitchell’s Steakhouse and Cameron’s Steakhouse concepts. As of December 28, 2014, there were 143
Ruth’s Chris Steak House restaurants, including 65 Company-owned restaurants, one restaurant operating under
a management agreement and 77 franchisee-owned restaurants, including 20 international franchisee-owned
restaurants in Aruba, Canada, China, Hong Kong, El Salvador, Japan, Mexico, Panama, Singapore, Taiwan and
the United Arab Emirates.

As of December 28, 2014, the Company also operated eighteen Mitchell’s Fish Markets and three

Mitchell’s/Cameron’s Steakhouse restaurants (the Mitchell’s Restaurants), located primarily in the Midwest and
Florida. On January 21, 2015, the Company sold the Mitchell’s Restaurants to a third party. For financial
reporting purposes, the Mitchell’s Restaurants are classified as discontinued operations for all periods presented
and, as of December 28, 2014, the assets are classified as held for sale.

The Company has a 52/53-week fiscal year ending the last Sunday in December. The 2014 fiscal year ended
December 28, 2014, the 2013 fiscal year ended December 29, 2013, and the 2012 fiscal year ended December 30,
2012. Fiscal years 2014 and 2013 each had 52 weeks and fiscal year 2012 had 53 weeks.

The following description of the Company’s business should be read in conjunction with the information in

Management’s Discussion and Analysis of Results of Operations of Financial Condition in Item 7,
Management’s Discussion and Analysis and Results of Operations and Financial Condition of this Annual Report
on Form 10-K and the consolidated financial statements included in this Annual Report on Form 10-K.

Background

The year 2015 marks the 50th anniversary of the founding of Ruth’s Chris Steak House. The Company was
founded in 1965 when Ruth Fertel mortgaged her home for $22 thousand to purchase the “Chris Steak House,” a
60-seat restaurant located near the New Orleans Fair Grounds racetrack. After a fire destroyed the original
restaurant, Ruth relocated her restaurant to a new 160-seat facility nearby. As the terms of the original purchase
prevented the use of the “Chris Steak House” name at a new restaurant, Ruth added her name to that of the
original restaurant—thus creating the “Ruth’s Chris Steak House” brand.

The Company’s expansion began in 1972, when Ruth opened a second restaurant in Metairie, a suburb of

New Orleans. In 1976, the first franchisee-owned Ruth’s Chris Steak House opened in Baton Rouge, Louisiana.
In 2005, the Company and certain selling shareholders completed an initial public offering of the Company’s
common stock, which is currently listed on the Nasdaq Global Select Market under the ticker symbol “RUTH”.

Mitchell’s Restaurants

The Company acquired the Mitchell’s Restaurants in 2008. Mitchell’s Fish Market is an eighteen-restaurant

upscale seafood concept and Mitchell’s/Cameron’s Steakhouse is a modern American steakhouse concept.

In November 2014, the Company and Landry’s, Inc. and Mitchell’s Entertainment, Inc., an affiliate of
Landry’s Inc. (together with Landry’s Inc., Landry’s), entered into an asset purchase agreement (the Agreement).
Pursuant to the Agreement, the Company agreed to sell the Mitchell’s Restaurants and related assets to Landry’s
for $10 million. The sale of the Mitchell’s Restaurants closed on January 21, 2015. The assets sold consisted
primarily of leasehold interests, leasehold improvements, restaurant equipment and furnishings, inventory, and
related intangible assets, including brand names and trademarks associated with the 21 Mitchell’s Restaurants.
Under the terms of the Agreement, Landry’s assumed the Mitchell’s Restaurants’ facility lease obligations and

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the Company will reimburse Landry’s for gift cards sold prior to the closing date and used at the Mitchell’s
Restaurants during the eighteen months following the closing date. Landry’s offered employment to substantially
all of the employees of the Mitchell’s Restaurants.

Recent Developments

•

•

In 2014, Ruth’s Chris Steak House was recognized by surveys and publications as a premier
steakhouse restaurant brand, including having the highest number of restaurants on Open Table’s 2014
Top 100 Steakhouses in America. Additionally, many of our restaurants continue to be ranked best
steakhouse by local publications in the areas in which they operate. The Company has also been
recognized for its award-winning core wine list, for which a majority of its Company-owned
restaurants received “Awards of Excellence” from Wine Spectator magazine.

In the fourth quarter of fiscal year 2014, Ruth’s Chris Steak House achieved its 19th consecutive quarter
of same-store sales growth and 20th consecutive quarter of traffic growth.

• Three new Company-owned Ruth’s Chris Steak House restaurants opened during 2014, including

locations in Denver, CO, Gaithersburg, MD and Marina del Rey, CA. In February 2014, the Company
acquired the franchisee-owned restaurant located in Austin, TX.

•

•

•

Franchisees opened three new restaurants during 2014, including locations in Boise, ID, Panama City,
Panama, and Taipei, Taiwan.

In February 2015, a new Ruth’s Chris Steak House restaurant opened in St. Petersburg, FL and a
restaurant is expected to open in Dallas, TX in 2015. The Company expects that franchisees will open
four new Ruth’s Chris Steak House restaurants during 2015.

In November 2014, the Company announced a new share repurchase program that replaced the then-
existing share repurchase program. Under the new program, the Company may from time to time
purchase up to $50 million of its outstanding common stock. The share repurchases will be made at the
Company’s discretion in the open market or in negotiated transactions depending on share price,
market conditions or other factors. The share repurchase program does not obligate the Company to
repurchase any dollar amount or number of shares. During fiscal year 2014, the Company repurchased
an aggregate of 1,244,065 shares under the old and the new programs. As of December 28, 2014, $44.9
million remained available for future purchases under the new program.

Ruth’s Chris Steak House

With 143 restaurants as of December 28, 2014, Ruth’s Chris Steak House is one of the largest upscale
steakhouse companies in the world. The menu features a broad selection of high-quality USDA Prime- and
Choice-grade steaks and other premium offerings served in Ruth’s Chris’ signature fashion—“sizzling”—
complemented by other traditional menu items inspired by its New Orleans heritage. Ruth’s Chris complements
its distinctive food offerings with an award-winning wine list.

The Ruth’s Chris brand reflects its 50-year commitment to the core values instilled by its founder, Ruth

Fertel, of caring for guests by delivering the highest quality food, beverages and genuine hospitality in a warm
and inviting atmosphere.

Strengths

The Company believes that the key strengths of its business model are the following:

Premier Upscale Steakhouse Brand

The Ruth’s Chris Steak House brand is one of the strongest in the upscale steakhouse segment of the
restaurant industry, with high levels of brand awareness. In 2014, Ruth’s Chris Steak House was again the #1

2

Consumer Pick in the Nation’s Restaurant News annual survey for the fine dining category. Additionally, many
of our restaurants continue to be ranked best steakhouse by local publications in the areas in which they operate.
In addition, the Company has been recognized for its award-winning core wine list, for which a majority of its
Company-owned restaurants received “Awards of Excellence” from Wine Spectator magazine.

Appealing Dining Experience

At the Ruth’s Chris restaurants, the Company seeks to exceed guests’ expectations by offering high-quality

food with warm, friendly service. The Company’s entire restaurant staff is dedicated to ensuring that guests enjoy
a superior dining experience. The Company’s team-based approach to table service is designed to enhance the
frequency of guest contact and speed of service without intruding on the guest experience.

Strategy

The Company’s strategy is to deliver a total return to shareholders by maintaining a healthy core business,

growing with a disciplined investment approach and returning excess capital to shareholders. The Company
strives to maintain a healthy core business by growing sales through traffic, managing operating margins and
leveraging infrastructure. The Company is committed to disciplined growth in markets with attractive sales
attributes and solid financial returns. The Company believes that its franchisee program is a point of competitive
differentiation and looks to grow its franchisee-owned restaurant locations as well. The Company also will
consider acquiring franchisee-owned restaurants at terms that it believes are beneficial to both the Company and
the franchisee.

Improve Sales/Profitability

The Company strives to improve sales and profitability by focusing on:

• Ensuring consistency of food quality through more streamlined preparation and presentation;

•

Increasing brand awareness through enhanced media advertising at the national and local levels;

• Enhancing and/or developing innovative marketing programs through its website (e.g.,
www.ruthschris.com), social media, digital media and email communication; and

• Creating and/or growing revenue opportunities via Ruth’s Catering, Private Dining, HD Satellite

Programs and Gift Cards.

Expand Relationships with New and Existing Franchisees and Others

The Company intends to grow its franchising business by developing relationships with a limited number of

new franchisees and by expanding the rights of existing franchisees to open new restaurants. The Company
believes that building relationships with quality franchisees is a cost-effective way to grow and strengthen the
Ruth’s Chris brand and generate additional revenues. The Company intends to continue to focus on providing
operational guidance to its franchisees, including the sharing of “best practices” from Company-owned Ruth’s
Chris restaurants.

Franchisees opened 54 Ruth’s Chris restaurants from 1999 through the end of 2014. In fiscal year 2014,

franchisees opened three new restaurants including locations in Boise, Panama City, Panama, and Taipei,
Taiwan. In fiscal year 2013, franchisees opened three new restaurants in San Juan, Chattanooga and Shanghai. In
addition, a franchise restaurant opened in 2013 in Las Vegas under a licensing agreement with Harrah’s Casino
under which we receive a fee based on a percentage of sales. A franchise restaurant located in Dubai was closed
in July 2013. In fiscal year 2012, franchisees opened new restaurants in Dubai, Singapore, San Salvador and
Niagara Falls, Ontario. Franchisees are expected to open eleven new domestic and international franchise
restaurants by the end of 2017.

3

The Company and its franchise and licensing partners will have opened or relocated fourteen new Ruth’s

Chris Steak Houses worldwide during the two year period ended December 2014.

Menu

The Ruth’s Chris menu features a broad selection of high-quality USDA Prime grade steaks and other
premium offerings served in Ruth’s Chris signature fashion—“sizzling” and topped with butter—complemented
by other Classic American steakhouse menu items. USDA Prime is the highest meat grade level, which refers to
the superior quality and evenly distributed marbling that enhances the flavor of the steak. The Ruth’s Chris menu
also includes premium quality lamb chops, fish, shrimp, crab, chicken and lobster. Dinner entrées are generally
priced from $26 to $55. Ruth’s Chris is predominantly open dinner hours only with a limited number of
restaurants open for lunch. The lunch menu offers entrées generally ranging in price from $12 to $27. The
blended guest check average at Ruth’s Chris was approximately $76 during fiscal year 2014. While the Ruth’s
Chris core menu is similar at all of its restaurants, the Company seasonally introduces new items such as specials
and prix fixe offerings that allow it to give its guests additional choices while taking advantage of fresh sourcing
and advantageous cost opportunities.

The Company’s Ruth’s Chris restaurants offer ten to thirteen standard appetizer items, including New
Orleans-style barbequed shrimp, mushrooms stuffed with crabmeat, shrimp remoulade, lobster bisque and osso
bucco ravioli, as well as six to eight different salads. They also offer seven to nine types of potatoes and eight to
ten types of vegetables as side dishes. For dessert, crème brûlée, bread pudding with whiskey sauce, cheesecake,
fresh seasonal berries with sweet cream sauce and other selections are available.

The Company’s wine list features bottles typically ranging in price from $40 to over $1,000. Individual
restaurants supplement their 250-bottle core wine list with approximately 20 additional selections that reflect
local market tastes. Most of the Company’s Ruth’s Chris restaurants also offer approximately 36 wines-by-the-
glass and numerous beers, liquors and alcoholic dessert drinks. Wine sales account for approximately 60% of the
total beverage sales.

Restaurant Operations and Management

The Ruth’s Chris President and Chief Operating Officer has primary responsibility for managing Company-

owned restaurants and participates in analyzing restaurant-level performance and strategic planning. The
Company has eight regional vice presidents that oversee restaurant operations at eight to thirteen Company-
owned restaurants and one vice president that has oversight responsibility for franchisee-owned restaurants. In
addition, restaurant education and training is overseen by a regional staff dedicated to the ongoing training and
development of customer service employees and kitchen staff.

The Company’s typical Company-owned restaurant employs five managers, including a general manager,

two front-of-the-house managers, an executive chef and a sous chef. The Company-owned restaurants also
typically have approximately 70 hourly employees.

Purchasing

The Company’s ability to maintain consistent quality throughout its restaurants depends in part upon its
ability to acquire food and other supplies from reliable sources in accordance with its specifications. Purchasing
at the restaurant level is directed primarily by the executive chef, who is trained in the Company’s purchasing
philosophy and specifications, and who works with regional and corporate managers to ensure consistent
sourcing of meat, fish, produce and other supplies.

During fiscal year 2014, the Company purchased substantially all of the beef it used in Company-owned
Ruth’s Chris restaurants from two vendors, Sysco Food Services and Stock Yards Packing (a subsidiary of US
Foods). Each vendor supplied about half of the Company’s beef requirements. In addition, the Company has a
distribution arrangement with a national food and restaurant supply distributor, Distribution Market Advantage,

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Inc. (DMA), which purchases products for the Company from various suppliers and through which all of the
Company-owned Ruth’s Chris Steak House restaurants receive a significant portion of their food supplies.

Quality Control

The Company strives to maintain quality and consistency in its Company-owned restaurants through careful

training and supervision of personnel and standards established for food and beverage preparation, maintenance
of facilities and conduct of personnel. The primary goal of the Company’s training and supervision programs is
to ensure that its employees display the characteristics of its brand and values that distinguish it from its
competitors. Restaurant managers in Company-owned restaurants must complete a training program that is
typically seven to eight weeks long, during which they are instructed in multiple areas of restaurant management,
including food quality and preparation, guest service, alcoholic beverage service, liquor regulation compliance
and employee relations. Restaurant managers also receive operations manuals relating to food and beverage
preparation and restaurant operations. Restaurant managers are certified by the National Restaurant Association
Educational Foundation for food safety.

The Ruth’s Chris Steak House restaurants also employ an independent third-party food safety firm to ensure
proper training, food safety and the achievement of the highest standards for cleanliness throughout the restaurant
through routine quarterly unannounced inspections. The Company instructs chefs and assistants on safety,
sanitation, housekeeping, repair and maintenance, product and service specifications, ordering and receiving food
products and quality assurance.

Throughout each day at the Ruth’s Chris restaurants, the executive chef, together with the restaurant
managers, oversees a line check system of quality control and must complete a quality assurance checklist
verifying the flavor, presentation and proper temperature of the food and beverages.

Marketing and Promotions

The goals of the Company’s marketing efforts are to increase restaurant sales by attracting new guests,
increasing the frequency of visits by current guests, improving brand recognition in new markets or markets
where it intends to open a restaurant and to communicate the overall uniqueness, value and quality exemplified
by our restaurants. The Company uses multiple media channels to accomplish these goals and complements its
national advertising with targeted local media such as print, digital media, radio and outdoor billboards.

Advertising

In fiscal year 2014, the Company spent $10.1 million, or 2.9% of its revenues, in total marketing and
advertising expenditures. In fiscal year 2014, the Company spent approximately $3.7 million, or 36.2% of total
marketing and advertising expenditures, on national media for Ruth’s Hospitality Group, consisting primarily of
national cable television advertisements, online initiatives and consumer research.

During fiscal year 2014, the Company continued to optimize its online marketing efforts, using a variety of

tactics. The Company’s online strategy also included an emphasis on targeted emails with special offers and
announcements, as well as emails regarding seasonal specials, holiday offers and personalized birthday and
anniversary invitations. In the fourth quarter of fiscal year 2014, the Company ran national television advertising
across a targeted selection of cable channels and invested in online advertising. In fiscal year 2014, Ruth’s Chris
Steak House continued its participation in co-branded campaign with American Express Membership Rewards
program. Many of the Company’s restaurants also schedule events to strengthen community ties and increase
local market presence. The Company’s franchisees also conduct their own local media and advertising plans.

Gift Cards

The Company sells Ruth’s Chris gift cards at most of its Ruth’s Chris Steak House restaurants, including
franchises, on its website and through its toll-free number. Ruth’s Chris patrons frequently purchase gift cards for

5

holidays, including Christmas, Hanukkah, Valentine’s Day, Mothers’ Day and Fathers’ Day, and other special
occasions. In December 2013, Ruth’s Chris began offering e-gift cards to purchasers on its e-commerce gift card
website. The e-gift card is emailed directly to the recipient and is redeemable in the same manner as a plastic gift
card. E-gift cards give Ruth’s Chris the opportunity to maximize last-minute gift-giving and address its patrons’
requests for convenient, immediate purchases. In fiscal year 2014, system-wide gift card Company and franchise
sales of Ruth’s gift cards aggregated approximately $55 million. Ruth’s Chris gift cards are redeemable at both
Company and franchisee owned Ruth’s Chris restaurants.

Franchise Program and Relationship

Under the Company’s franchise program, the Company offers certain services and licensing rights to the

franchisee to help maintain consistency in system-wide operations. The Company’s services include training of
personnel, construction assistance, providing the new franchisee with standardized operating procedures and
manuals, business and financial forms, consulting with the new franchisee on purchasing and supplies and
performing supervisory quality control services. The Company conducts reviews of its franchisee-owned
restaurants on an ongoing basis in order to ensure compliance with its standards.

As of December 28, 2014, the Company’s 77 franchisee-owned Ruth’s Chris restaurants are owned by 30
franchisees with the three largest franchisees owning 26 restaurants in total. Currently, franchisees have agreed to
open seventeen additional Ruth’s Chris restaurants, eleven of which are expected to be open by the end of 2017.

Under the Company’s current franchise program, each franchise arrangement consists of a development
agreement, if multiple restaurants are to be developed, with a separate franchise agreement executed for each
restaurant. The Company’s current form of development agreement grants exclusive rights to a franchisee to
develop a minimum number of restaurants in a defined area, typically during a three-to-five-year period.
Individual franchise agreements govern the operation of each restaurant opened and have a 20-year term with
two renewal options each for additional ten year terms if certain conditions are met. The Company’s current form
of franchise agreement requires franchisees to pay a 5% royalty on gross revenues plus up to a 1% advertising
fee applied to national advertising expenditures.

Under the Company’s current form of development agreement, and unless agreed otherwise, the Company

collects a $50 thousand development fee, which is credited toward the $150 thousand franchise fee, for each
restaurant the franchisee has rights to develop. Under the Company’s current form of the franchise agreement, it
collects up to $150 thousand of the full franchise fee at the time of executing the franchise agreement for each
restaurant. If one restaurant is to be developed, a single unit franchise agreement is executed and the $150
thousand franchise fee is collected at signing.

Information Systems and Restaurant Reporting

All of the Company’s restaurants use computerized point-of-sale systems, which are designed to promote
operating efficiency, provide corporate management timely access to financial and marketing data and reduce
restaurant and corporate administrative time and expense. These systems record each order and print the food
requests in the kitchen for the cooks to prepare. The data captured for use by operations and corporate
management includes gross sales amounts, cash and credit card receipts and quantities of each menu item sold.
Sales and receipts information is generally transmitted to the corporate office daily.

The Company’s corporate systems provide management with operating reports that show Company-owned
restaurant performance comparisons with budget and prior year results. These systems allow the Company to monitor
Company-owned restaurant sales, food and beverage costs, labor expense and other restaurant trends on a regular basis.

Service Marks

The Company has registered the main service marks “Ruth’s Chris” and its “Ruth’s Chris Steak House, U.S.

Prime & Design” logo, as well as other service marks used by its restaurants, with the United States Patent and

6

Trademark Office and in the foreign countries in which its restaurants operate. The Company has also registered
in other foreign countries in anticipation of new store openings within those countries. The Company is not
aware of any infringing uses that could materially affect its business. The Company believes that its service
marks are valuable to the operation of its restaurants and are important to its marketing strategy.

Seasonality

The Company’s business is subject to seasonal fluctuations. Historically, the percentage of its annual
revenues earned during the first and fourth fiscal quarters have been higher due, in large part, to increased
restaurant sales during the year-end holiday season and the popularity of dining out in the fall and winter months.

Employees

As of December 28, 2014, excluding the employees of the Mitchell’s Restaurants, the Company employed

4,342 persons, of whom 419 were salaried and 3,923 were hourly personnel, who were employed in the positions
set forth in the table below. None of the Company’s employees are covered by a collective bargaining agreement.

Functional Area

Senior Officers / Corporate VPs / Operations VPs . . . . . . . . . . . . . . . . . . . . . . . .
General Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regional Corporate Chefs / Executive Chefs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sous Chefs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Salaried Restaurant Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Salaried . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Non-salaried . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total number of employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Employees

28
67
162
69
46
3,912
47
11

4,342

As of December 28, 2014, the Mitchell’s Restaurants employed 1,333 persons, of whom 134 were salaried

employees and 1,199 were hourly employees.

Financial Information about Segments

The Company-owned Ruth’s Chris Steak House restaurants in North America are managed as an operating
segment. The Ruth’s Chris restaurants operate within the full-service dining industry, providing similar products
to similar customers. The franchise operations are also considered to be an operating segment. Financial
information concerning the Company’s segments for financial reporting purposes appears in Note 18 of the
consolidated financial statements.

Government Regulation

The Company is subject to extensive federal, state and local government regulation, including regulations

relating to public health and safety, zoning and fire codes and the sale of alcoholic beverages and food. The
Company maintains the necessary restaurant, alcoholic beverage and retail licenses, permits and approvals.
Federal and state laws govern the Company’s relationship with its employees, including laws relating to
minimum wage requirements, overtime, tips, tip credits and working conditions. A significant number of the
Company’s hourly employees are paid at rates related to the federal or state minimum wage. During 2014,
governmental entities acted to increase minimum wage rates in several states wherein Company-owned
restaurants are located. Additionally, the federal government may act to increase the U.S. federal minimum wage
rate.

7

The offer and sale of franchises are subject to regulation by the U.S. Federal Trade Commission (FTC) and

many states. The FTC requires that the Company furnish to prospective franchisees a franchise disclosure
document containing prescribed information. A number of states also regulate the sale of franchises and require
state registration of franchise offerings and the delivery of a franchise disclosure document to prospective
franchisees. The Company’s noncompliance could result in governmental enforcement actions seeking a civil or
criminal penalty, rescission of a franchise, and loss of its ability to offer and sell franchises in a state, or a private
lawsuit seeking rescission, damages and legal fees.

The Company is subject to laws and regulations relating to the preparation and sale of food, including

regulations regarding product safety, nutritional content and menu labeling. The Company is or may become
subject to laws and regulations requiring disclosure of calorie, fat, trans fat, salt and allergen content. The Patient
Protection and Affordable Care Act of 2010 (ACA) requires restaurant companies such as the Company to
disclose calorie information on their menus. The Food and Drug Administration has proposed rules to implement
this provision that would require restaurants to post the number of calories for most items on menus or menu
boards and to make available more detailed nutrition information upon request. A number of states, counties and
cities have also enacted menu labeling laws requiring restaurant companies such as the Company to disclose
certain nutrition information on their menus, or have enacted legislation restricting the use of certain types of
ingredients in restaurants. Although the ACA is intended to preempt conflicting state and local laws regarding
nutrition labeling, the Company will be subject to a patchwork of state and local laws and regulations regarding
nutritional content disclosure requirements until the Company is required to comply with the federal law. Many
of the current requirements are inconsistent or are interpreted differently from one jurisdiction to another. The
effect of such labeling requirements on consumer choices, if any, is unclear at this time.

The Company maintains an employee benefits program that provides self-insured and insured coverage to
employees that meet the applicable requirements under the program. Employees can elect to enroll dependents
that meet eligibility criteria. Coverage includes health, dental, vision, short- and long-term disability, life
insurance and other voluntary ancillary benefits. Employees share in the cost of other coverage at varying levels.
The Company has historically funded a majority of the cost of employee health benefits. The ACA requires that
employers offer health care coverage that is qualified and affordable. Coverage must be offered to all “full-time”
employees, as defined by the ACA. The Company routinely reviews its health benefit plans to assure conformity
with the ACA. While the Company has raised the eligibility requirement thresholds, the hours of service
eligibility criteria for health benefits are lower than required under the ACA. Approximately 67% of eligible
employees elect to participate in the Company’s health benefit plans.

A restaurant company employer may claim a credit against the company’s federal income taxes for FICA
taxes paid on certain tip wages (the FICA tip credit). The credit against income tax liability is for the full amount
of eligible FICA taxes. Employers cannot deduct from taxable income the amount of FICA taxes taken into
account in determining the credit. The Company utilizes the federal FICA tip credit to reduce its periodic federal
income tax expense. The Obama Administration’s budget proposal for fiscal year 2016 would repeal the income
tax credit for FICA taxes an employer pays on tips. The proposed change would be effective for taxable years
beginning after December 31, 2015. Should the proposed repeal be enacted, we would lose the benefit of the
income tax credit. The fiscal year 2014 FICA tip credit net benefit was $2.8 million.

Competition

The restaurant business is highly competitive and highly fragmented, and the number, size and strength of
the Company’s competitors vary widely by region. The Company believes that restaurant competition is based
on, among other things, quality of food products, customer service, reputation, restaurant location, name
recognition and price. The Company’s restaurants compete with a number of upscale steakhouses and upscale
casual seafood restaurants within their markets, both locally owned restaurants and restaurants within regional or
national chains. The principal upscale steakhouses with which the Company competes are Fleming’s, The Capital

8

Grille, Smith & Wollensky, The Palm, Del Frisco’s and Morton’s of Chicago. The Company’s competitors are
better established in certain of the Company’s existing markets and/or markets into which the Company intends
to expand.

Available Information

The Company maintains a website on the Internet at www.rhgi.com. The Company makes available free of
charge, through the investor relations section of its website, its Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K and amendments to those reports electronically filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Such information is available as soon as reasonably practicable after it files such reports with the SEC.
Additionally, the Company’s Code of Ethics may be accessed within the Investor Relations section of its website.
Information found on the Company’s website is not part of this Annual Report on Form 10-K or any other report
filed with the SEC.

Item 1A. RISK FACTORS

In addition to the other information in this Annual Report on Form 10-K, the following risk factors should

be considered carefully in evaluating the Company and its business. Additional risks and uncertainties not
presently known to us or that the Company currently deems immaterial may also impair its business operations.
If any of these certain risks and uncertainties were to actually occur, the Company’s business, financial
condition or results of operations could be materially adversely affected. In such case, the trading price of the
Company’s common stock could decline and its investors may lose all or part of their investment. These risks and
uncertainties include the following:

We may not be able to compete successfully with other restaurants, which could reduce revenues.

The restaurant industry is intensely competitive with respect to price, service, location, food quality,
atmosphere and overall dining experience. Our competitors include a large and diverse group of well-recognized
upscale steakhouse and upscale casual restaurant chains, including steakhouse and seafood chains as well as
restaurants owned by independent local operators. Some of our competitors have substantially greater financial,
marketing and other resources, and may be better established in the markets where our restaurants are or may be
located. If we cannot compete effectively in one or more of our markets, we may be unable to maintain recent
levels of comparable restaurant sales growth and/or may be required to close existing restaurants.

Economic downturns may adversely impact consumer spending patterns.

Economic downturns could negatively impact consumer spending patterns. Any decrease in consumer
spending patterns may result in a decline in our operating performance. Economic downturns may reduce guest
traffic and require us to lower our prices, which reduces our revenues and operating income, which may
adversely affect the market price for our common stock.

Increases in the prices of, or reductions in the availability of, any of our core food products could reduce our
operating margins and revenues.

We purchase large quantities of beef, particularly USDA Prime grade beef, which is subject to significant
price fluctuations due to seasonal shifts, climate conditions, industry demand and other factors. Our beef costs
represented approximately 40% of our food and beverage costs during fiscal year 2014. During fiscal year 2014,
we entered into contracts with beef suppliers to establish set pricing on a portion of anticipated beef purchases.
As of December 28, 2014, we have not negotiated set pricing for beef requirements in 2015. The market for
USDA Prime grade beef is particularly volatile. If prices increase, or the supply of beef is reduced, our operating
margins could be materially adversely affected.

9

In addition, under the Federal Meat Inspection Act and the Poultry Products Inspection Act, the production,
processing or interstate distribution of meat and poultry products is prohibited absent federal inspection. If there
is a disruption to the meat inspection process, we could experience a significant increase in meat prices and a
corresponding reduction in supply, either of which could materially impact our operating margin and results of
operations.

In the recent past, certain types of seafood have experienced fluctuations in availability. Seafood is also

subject to fluctuations in price based on availability, which is often seasonal. If certain types of seafood are
unavailable, or if our costs increase, our results of operations could be adversely affected.

Food safety and food-borne illness concerns throughout the supply chain may have an adverse effect on our
business.

Food safety is a top priority, and we dedicate substantial resources to ensuring that our customers enjoy
safe, quality food products. However, food safety issues could be caused by food suppliers or distributors and, as
a result, be out of our control. In addition, regardless of the source or cause, any report of food-borne illnesses
such as E. coli, hepatitis A, trichinosis or salmonella, and other food safety issues including food tampering or
contamination, at one of our restaurants could adversely affect the reputation of our brands and have a negative
impact on our sales. Even instances of food-borne illness, food tampering or food contamination occurring solely
at restaurants of our competitors could result in negative publicity about the food service industry generally and
adversely impact our sales. The occurrence of food-borne illnesses or food safety issues could also adversely
affect the price and availability of affected ingredients, resulting in higher costs and lower margins.

Negative publicity surrounding our restaurants or the consumption of beef generally, or shifts in consumer
tastes, could reduce sales in one or more of our restaurants and make our brand less valuable.

Our success depends, in large part, upon the popularity of our menu offerings. Negative publicity resulting

from poor food quality, illness, injury or other health concerns, or operating problems related to one or more
restaurants, could make our menu offerings less appealing to consumers and reduce demand in our restaurants. In
addition, any other shifts in consumer preferences away from the kinds of food we offer, particularly beef,
whether because of dietary or other health concerns or otherwise, would make our restaurants less appealing and
adversely affect revenues. In addition, by December 2015, the ACA requires our restaurants to disclose calorie
information on menus. While we cannot predict the changes in guest behavior resulting from the implementation
of this portion of the ACA, it could have an adverse effect on our revenues and results of operations.

If our vendors or distributors do not deliver food and beverages in a timely fashion we may experience supply
shortages and/or increased food and beverage costs.

Our ability to maintain consistent quality throughout Company-owned restaurants depends in part upon our
ability to purchase USDA Prime- and Choice-grade beef, seafood and other food products in accordance with our
rigid specifications. During fiscal year 2014, the Company purchased substantially all of the beef used in
Company-owned Ruth’s Chris restaurants from two vendors, Sysco Food Services and Stock Yards Packing (a
subsidiary of US Foods). Each vendor supplied about half of the Company’s beef requirements.

In addition, we currently have a long-term distribution arrangement with a national food and restaurant
supply distributor, DMA, which purchases products for us from various suppliers, and through which all of our
Company-owned Ruth’s Chris Steak House restaurants receive a significant portion of their food supplies.
Additionally, consolidation in our supply chain due to mergers and acquisitions may change the relationships we
have with our existing vendors and distributors and/or result in fewer alternative supply sources for purchasing
our food supplies which could result in an increase in prices. For example, one of our primary vendors, Sysco
Food Services, has entered into an agreement, subject to regulatory approval, to acquire US Foods, the parent of
another primary vendor, Stock Yards Packing. If for any reason the aforementioned or other vendors or
distributors cease doing business with us, we could experience supply shortages in certain Company-owned

10

restaurants and could be required to purchase supplies at higher prices until we are able to secure an alternative
supply source. Any delay we experience in replacing vendors or distributors on acceptable terms could increase
food costs or, in extreme cases, require us to temporarily remove items from the menu of one or more restaurants.

Labor shortages or increases in labor costs could slow our growth or harm our business.

Our success depends in part upon our ability to continue to attract, motivate and retain employees with the

qualifications to succeed in our industry and the motivation to apply our core service philosophy, including
regional operational managers, restaurant general managers and chefs. If we are unable to continue to recruit and
retain sufficiently qualified individuals, our business and growth could be adversely affected. Competition for
these employees could require us to pay higher wages, which could result in higher labor costs.

In addition, we have a substantial number of hourly employees who are paid wage rates at or based on the

federal or state minimum wage and who rely on tips as a large portion of their income. During 2014,
governmental entities acted to increase minimum wage rates in several states wherein Company-owned
restaurants are located. The federal minimum wage may be increased and there likely will be additional
minimum wage increases implemented in other states in which we operate or seek to operate. Likewise, changes
to existing tip credit laws (which dictate the amounts an employer is permitted to assume an employee receives in
tips when calculating the employee’s hourly wage for minimum wage compliance purposes) continue to be
proposed and implemented at both the federal and state government levels. As federal and/or state minimum
wage rates increase and allowable tip credits decrease, we may need to increase not only the wage rates of our
minimum wage employees but also the wages paid to our employees who are paid above the minimum wage,
which will increase our labor costs. None of our employees are represented by a collective bargaining unit.
Should some of our employees elect to be represented by a collective bargaining unit, our labor costs may
increase due to higher wage rates and / or the implementation of work rules. We may be unable to increase our
prices in order to pass these increased labor costs on to our guests, in which case our margins would be
negatively affected.

Regulations affecting the operation of our restaurants could increase operating costs and restrict growth.

Each of our restaurants must obtain licenses from regulatory authorities allowing us to sell liquor, beer and

wine, and each restaurant must obtain a food service license from local health authorities. Each restaurant’s
liquor license must be renewed annually and may be revoked at any time for cause, including violation by the
Company or its employees of any laws and regulations relating to the minimum drinking age, advertising,
wholesale purchasing and inventory control. In certain states, including states where we have a large number of
restaurants or where we may open restaurants in the future, the number of liquor licenses available is limited and
licenses are traded at market prices. If we are unable to maintain existing licenses, or if we choose to open a
restaurant in those states, the cost of a new license could be significant. Obtaining and maintaining licenses is an
important component of each of our restaurant’s operations, and the failure to obtain or maintain food and liquor
licenses and other required licenses, permits and approvals would materially adversely impact existing
restaurants or our growth strategy.

We are also subject to a variety of federal and state labor laws, pertaining to matters such as minimum wage

and overtime pay requirements, unemployment tax rates, workers’ compensation rates and citizenship
requirements. Government-mandated increases in minimum wages, overtime pay, paid leaves of absence and
mandated health benefits, or increased tax reporting and tax payment requirements for employees who receive
gratuities or a reduction in the number of states that allow tips to be credited toward minimum wage requirements
could increase our labor costs and reduce our operating margins. In addition, the Federal Americans with
Disabilities Act prohibits discrimination on the basis of disability in public accommodations and employment.
Although our restaurants are designed to be accessible to the disabled, we could be required to make
modifications to our restaurants to provide service to, or make reasonable accommodations for, disabled persons.

11

The cost of our employee health care benefit program may increase in the future.

We maintain an employee benefits program that provides self-insured and insured coverage to employees

that meet the applicable requirements under the program. Employees can elect to enroll dependents that meet
eligibility criteria. Coverage includes health, dental, vision, short- and long-term disability, life insurance and
other voluntary ancillary benefits. Employees share in the cost of other coverage at varying levels. The Company
has historically funded a majority of the cost of health benefits.

The ACA requires that employers offer health care coverage that is qualified and affordable. Coverage must
be offered to all “full-time” employees, as defined by the ACA. The Company routinely reviews its health benefit
plans to assure conformity with the ACA. While we have raised the eligibility requirement thresholds, the hours
of service eligibility criteria for health benefits are lower than required under the ACA. Approximately 67% of
eligible employees elect to participate in our health benefit plans. In the future, proportionately more employees
may elect to participate in our health benefit plans because the ACA includes financial penalties for people who
do not have health insurance. We are unable to reliably predict to what extent, if any, the percentage of eligible
employees who elect health care coverage will increase in the future. Because we fund a majority of the cost of
health benefits, our financial accounting expense will increase to the extent that additional employees elect to
participate in the Company’s health benefit plans.

Certain other restaurant companies may curtail the ability of their employees to participate in their health
benefit plans by increasing the hours worked eligibility requirement to the minimum required under the ACA.
Such restaurant companies may gain a cost advantage compared to us by reducing the cost of their employee
health benefit programs.

Also, so-called “medical inflation” has historically tended to outpace general inflation. While medical
inflation in the United States has been relatively muted in recent years, we are unable to reliably predict the
extent to which future medical inflation will outpace general inflation. Additionally, because our medical benefit
program is self-insured, an unusual incidence of large claims may cause our costs to unexpectedly increase.

Our strategy to open franchisee-owned restaurants subjects us to extensive government regulation,
compliance with which might increase our investment costs and restrict our growth.

We are subject to the rules and regulations of the FTC and various state laws regulating the offer and sale of

franchises. The FTC requires that we furnish to prospective franchisees a franchise disclosure document
containing prescribed information and can restrict our ability to sell franchises. A number of states also regulate
the sale of franchises and require the obtaining of a permit and/or registration of the franchise disclosure
document with state authorities and the delivery of the franchise disclosure document to prospective franchisees.
Non-compliance with those laws could result in governmental enforcement actions seeking a civil or criminal
penalty, rescission of a franchise, and loss of our ability to offer and sell franchises in a state, or a private lawsuit
seeking rescission, damages and legal fees, which could have a material adverse effect on our business.

Our franchisees could take actions that harm our reputation and reduce our royalty revenues.

We do not exercise control over the day-to-day operations of our franchisee-owned restaurants. While we

strive to ensure that franchisee-owned restaurants maintain the same high operating standards that we demand of
Company-owned restaurants, one or more of these restaurants may fail to maintain these standards. Any
operational shortcomings of the franchisee-owned restaurants are likely to be attributed to our system-wide
operations and could adversely affect our reputation and damage our brand as well as have a direct negative
impact on the royalty income we receive from those restaurants.

The expansion into international markets by our franchisees also creates additional risks to our brands and
reputation.

Our international operations are subject to all of the same risks associated with our domestic operations, as

well as a number of additional risks. These include, among other things, international economic and political

12

conditions, foreign currency fluctuations and differing cultures and consumer preferences. We are also subject to
governmental regulation in such international markets, including antitrust and tax requirements, anti-boycott
regulations, import/export/customs regulations and other international trade regulations, the USA Patriot Act and
the Foreign Corrupt Practices Act. Any new regulatory or trade initiatives could impact our operations in certain
countries. Failure to comply with any such legal requirements could subject us to monetary liabilities and other
sanctions, which could harm our business, results of operations and financial condition.

We rely on information technology in our operations and a failure to maintain a continuous and secure
network, free from material failure, interruption or security breach, could harm our ability to effectively
operate our business, damage our reputation and negatively affect our operations and profits.

We rely on information systems across our operations, including for marketing programs, point-of-sale
processing systems in our restaurants, online purchases of gift cards and various other processes and transactions.
The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement
systems, a material network breach in the security of these systems as a result of a cyber-attack, or any other
failure to maintain a continuous and secure network could adversely affect our reputation, negatively affect our
results of operations and result in substantial harm to us or an individual.

We accept electronic payment cards from our guests for payment in our restaurants and on our websites. We
also receive and maintain certain personal information about our customers and employees. A number of retailers
and restaurant operators have experienced security breaches in which credit and debit card information may have
been stolen. If we experienced a security breach, we could become subject to claims, lawsuits or other
proceedings for purportedly fraudulent transactions arising out of the theft of credit or debit card information,
compromised security and information systems, failure of our employees to comply with applicable laws, the
unauthorized acquisition or use of such information by third parties, or other similar claims. Any such incidents
or proceedings could negatively affect our reputation and our results of operations, cause delays in guest service,
require significant capital investments to remediate the problem, and could result in the imposition of penalties or
cause us to incur significant unplanned losses and expenditures, including those necessary to remediate any
damage to persons whose personal information may have been compromised. Furthermore, as a result of
legislative and regulatory rules, we may be required to notify the owners of the credit and debit card information
of any data breaches, which could harm our reputation and financial results, as well as subject us to litigation or
other proceedings by regulatory authorities.

A lack of availability of suitable locations for new restaurants or a decline in the quality of the locations of our
current restaurants may adversely affect our sales and results of operations.

The success of our restaurants depends in large part on their locations. Possible declines in neighborhoods

where our restaurants are located or adverse economic conditions in areas surrounding those neighborhoods
could result in reduced sales in those restaurants. In addition, desirable locations for new restaurant openings or
for the relocation of existing restaurants may not be available at an acceptable cost when we identify a particular
opportunity for a new restaurant or relocation. The occurrence of one or more of these events could have a
significant adverse effect on our sales and results of operations.

Our failure to enforce our service marks or other proprietary rights could adversely affect our competitive
position or the value of our brands.

We own certain common law service mark rights and a number of federal and international service mark
registrations, most importantly the Ruth’s Chris Steak House names and logos, copyrights relating to text and
print uses, and other proprietary intellectual property rights. We believe that our service marks, copyrights and
other proprietary rights are important to our success and competitive position. Protective actions we take with
respect to these rights may fail to prevent unauthorized usage or imitation by others, which could harm our
reputation, brand or competitive position and, if we commence litigation to enforce our rights, cause us to incur
significant legal expenses.

13

Litigation concerning food quality, health and other issues could require us to incur additional liabilities and/
or cause guests to avoid our restaurants.

Occasionally, our guests file complaints or lawsuits against us alleging that we are responsible for some
illness or injury they suffered at or after a visit to our restaurants. We are also subject to a variety of other claims
arising in the ordinary course of our business, including personal injury claims, contract claims, claims from
franchisees, claims alleging violations of federal and state law regarding workplace and employment matters and
discrimination and similar matters. In addition, we could become subject to class action lawsuits related to these
matters in the future. For example, in fiscal year 2005, we settled a class-action claim based on violation of wage
and hour laws in California. The restaurant industry has also been subject to a growing number of claims that the
menus and actions of restaurant chains have led to the obesity of certain of their guests. In addition, we are
subject to “dram shop” statutes. These statutes generally permit a person injured by an intoxicated person to
recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.
Recent dram shop litigation against restaurant chains has resulted in significant judgments, including punitive
damages. Regardless of whether any claims against us are valid or whether we are liable, claims may be
expensive to defend and may divert time and money away from our operations and hurt our performance. A
judgment significantly in excess of our insurance coverage for any claims would materially adversely affect our
financial condition and results of operations. Adverse publicity resulting from these claims may negatively
impact revenues at one or more of our restaurants.

The terms of our senior credit agreement may restrict our ability to operate our business and to pursue our
business strategies.

Our senior credit agreement contains, and any agreements governing future indebtedness would likely
contain, a number of restrictive covenants that impose significant operating and financial restrictions on us. Our
senior credit agreement, as amended in February 2012 and May 2013, limits our ability, among other things, to:

•

•

pay dividends or purchase stock in excess of the limits permitted under the senior credit agreement;

borrow money or issue guarantees;

• make investments;

•

•

•

•

use assets as security in other transactions;

sell assets or merge with or into other companies;

enter into transactions with affiliates; and

create or permit restrictions on our subsidiaries’ ability to make payments to us.

Our ability to engage in these types of transactions is limited even if we believe that a specific transaction
would contribute to our future growth or improve our operating results. Our senior credit agreement also requires
us to maintain compliance with certain financial ratios. Our ability to comply with these ratios may be affected
by events outside of our control. Any non-compliance would result in a default under our senior credit agreement
and could result in our lenders declaring our senior debt immediately due and payable, which would have a
material adverse effect on our financial position, consolidated results of operations and liquidity.

We cannot assure our stockholders that we will continue to pay quarterly cash dividends on our common stock
or repurchase shares of our common stock under our share repurchase program. Failure to continue to pay
quarterly cash dividends to our stockholders or repurchase shares of our common stock under our share
repurchase program could cause the market price for our common stock to decline.

During fiscal year 2014, we continued paying quarterly cash dividends to holders of our common stock and
repurchased shares of our common stock under our share repurchase program. Our ability to pay future quarterly
cash dividends or repurchase shares of our common stock will be subject to, among other things, our results of
operations, financial condition, business prospects, capital requirements, contractual restrictions, any

14

indebtedness we may incur, restrictions imposed by applicable law, tax considerations and other factors that our
Board of Directors deems relevant. There can be no assurance that we will continue to pay a quarterly cash
dividend or repurchase shares of our common stock in the future. Any reduction or discontinuance by us of the
payment of quarterly cash dividends or the repurchase of shares of our common stock under our share repurchase
program could cause the market price of our common stock to decline. Moreover, in the event our payment of
quarterly cash dividends is reduced or discontinued, our failure or inability to resume paying quarterly cash
dividends at historical levels could result in a lower market valuation of our common stock.

In the future we could incur unexpected expenses as a result of the sale of the Mitchell’s Restaurants.

Effective January 21, 2015, we sold the Mitchell’s Restaurants and related assets to Landry’s. Under the
terms of the Agreement governing the sale, we will reimburse Landry’s for gift cards sold prior to the closing
date and used at the Mitchell’s Restaurants during the eighteen months following the closing date. If the amount
of gift cards redeemed during such period surpass our expectations, we could incur unexpected expense. Pursuant
the terms of the Agreement, upon closing of the sale of the Mitchell’s Restaurants, Landry’s assumed the lease
obligations of the Mitchell’s Restaurants. However, we have guaranteed Landry’s lease obligations aggregating
$40.2 million under nine of the leases. Also, the Purchase Agreement includes customary seller representations
and warranties. There is a risk that adverse events may occur that requires us to defend against or fulfill an
indemnity claim, which could result in unexpected expense.

We depend on external sources of capital, which may not be available in the future.

Historically, we have relied upon external sources of capital to fund our working capital and other

requirements. Currently, we utilize our senior credit agreement to fund a portion of our working capital and other
financing requirements. Any non-compliance with any restrictive or financial covenants in our senior credit
agreement could result in a default and could result in our lenders declaring our senior debt immediately due and
payable, which would have a material adverse effect on our financial position, consolidated results of operations
and liquidity.

If we are required to seek other sources of capital, additional capital may or may not be available on
favorable terms or at all. Our access to third-party sources of capital depends on a number of things, including
the market’s perception of our current and potential future earnings. Furthermore, additional equity offerings may
result in substantial dilution of stockholders’ interests. If we are unable to access sufficient capital or enter into
financing arrangements on favorable terms in the future, our financial condition and results of operations may be
materially adversely affected.

Tax assessments by governmental authorities could adversely impact our operating results.

We remit a variety of taxes and fees to various governmental authorities, including federal and state income

taxes, excise taxes, property taxes, sales and use taxes, and payroll taxes. The taxes and fees remitted by us are
subject to review and audit by the applicable governmental authorities, which could result in liability for
additional assessments. In addition, we are subject to unclaimed or abandoned property (escheat) laws which
require us to turn over to certain government authorities the property of others held by us that has been
unclaimed for a specified period of time. We are subject to audit by individual U.S. states with regard to our
escheatment practices. The legislation and regulations related to tax and unclaimed property matters tend to be
complex and subject to varying interpretations by both government authorities and taxpayers. Although
management believes that the positions are reasonable, various taxing authorities may challenge certain of the
positions we have taken, which may also potentially result in additional liabilities for taxes, unclaimed property
and interest in excess of accrued liabilities. Our positions are reviewed as events occur such as the availability of
new information, the lapsing of applicable statutes of limitations, the conclusion of tax audits, the measurement
of additional estimated liability based on current calculations, the identification of new tax contingencies, or the
rendering of relevant court decisions. An unfavorable resolution of assessments by a governmental authority
could negatively impact our results of operations and cash flows in future periods.

15

Repeal of the federal FICA tip credit could adversely impact our operating results.

A restaurant company employer may claim a credit against the company’s federal income taxes for FICA
taxes paid on certain tip wages (the FICA tip credit). The credit against income tax liability is for the full amount
of eligible FICA taxes. We utilize the federal FICA tip credit to reduce our periodic federal income tax expense.
The Obama Administration’s budget proposal for fiscal year 2016 would repeal the income tax credit for FICA
taxes that an employer pays on tips. The proposed change would be effective for taxable years beginning after
December 31, 2015. Should the proposed repeal be enacted, we would lose the benefit of the income tax credit.

An impairment in the financial statement carrying value of our goodwill, other intangible assets or property
could adversely affect our financial condition and consolidated results of operations.

Goodwill represents the difference between the purchase price of acquired companies and the related fair

values of net assets acquired. We test goodwill for impairment annually and whenever events or changes in
circumstances indicate that impairment may have occurred. We compare the carrying value of a reporting unit,
including goodwill, to the fair value of the unit. Carrying value is based on the assets and liabilities associated
with the operations of that reporting unit. If the carrying value is less than the fair value, no impairment exists. If
the carrying value is higher than the fair value, there is an indication of impairment. A significant amount of
judgment is involved in determining if an indication of impairment exists. Factors may include, among others: a
significant decline in our expected future cash flows; a sustained, significant decline in our stock price and
market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated
competition; and slower growth rates. Any adverse change in these factors would have a significant impact on
the recoverability of goodwill and negatively affect our financial condition and consolidated results of
operations. We compute the amount of impairment by comparing the implied fair value of reporting unit
goodwill with the financial statement carrying amount of that goodwill. We are required to record a non-cash
impairment charge if the testing performed indicates that goodwill has been impaired.

We evaluate the useful lives of our other intangible assets, primarily our trademarks, to determine if they are

definite or indefinite-lived. Reaching a determination on useful life requires significant judgments and
assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as
the stability of the industry, legislative action that results in an uncertain or changing regulatory environment, and
expected changes in distribution channels), the level of required maintenance expenditures, and the expected
lives of other related groups of assets.

As with goodwill, we test our indefinite-lived intangible assets (primarily trade names) for impairment

annually and whenever events or changes in circumstances indicate that their carrying value may not be
recoverable. We estimate the fair value of the trademarks based on an income valuation model using the relief
from royalty method, which requires assumptions related to projected revenues from our annual strategic plan,
assumed royalty rates that could be payable if we did not own the trademarks and a discount rate.

We review property and equipment (which includes leasehold improvements) for impairment when events or

circumstances indicate these assets might be impaired. We test impairment using historical cash flow and other
relevant facts and circumstances as the primary basis for our estimates of future cash flows. The analysis is
performed at the restaurant level for indicators of permanent impairment. In determining future cash flows, we
make significant estimates with respect to future operating results of each restaurant over the expected remaining
life of the primary asset in the restaurant. If assets are determined to be impaired, the loss on impairment is
measured by calculating the amount by which the asset-carrying amount exceeds its fair value. This process requires
the use of estimates and assumptions, which are subject to a high degree of judgment. If these estimates and
assumptions change in the future, we may be required to record additional losses on impairment on these assets.

We cannot accurately predict the amount and timing of any impairment of assets. Should the financial
statement carrying value of goodwill, other intangible assets or property and equipment become impaired, there
could be an adverse effect on our financial condition and consolidated results of operations.

16

Market volatility could adversely affect our stock price.

Many factors affect the trading price of our stock, including factors over which we have no control, such as

reports on the economy or the price of commodities, as well as negative or positive announcements by
competitors, regardless of whether the report relates directly to our business. In addition to investor expectations,
trading activity in our stock can reflect the portfolio strategies and investment allocation changes of institutional
holders. Any failure to meet market expectations, whether for sales growth rates, earnings per share or other
metrics, could adversely affect our share price.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2.

PROPERTIES

Company-owned restaurants are generally located in spaces leased by wholly-owned direct or indirect
subsidiaries. Sixty-three of the Company-owned Ruth’s Chris restaurants operate in leased space, of which 60
provide for an option to renew for terms ranging from approximately five years to twenty years. All of the
Company’s Mitchell’s Fish Market, Mitchell’s Steakhouse and Cameron’s Steakhouse restaurants were in leased
spaces and each lease provided for at least one option to renew, with the exception of the lease for one Mitchell’s
Steakhouse. Under the terms of the Agreement to sell the Mitchell’s Restaurants, Landry’s assumed the Mitchell’s
Restaurants’ facility lease obligations upon closing of the sale in January 2015. Historically, the Company has not
had difficulty in renewing its leases in a timely manner. Restaurant leases provide for a specified annual rent, and
some leases call for additional or contingent rent based on sales volumes over specified levels.

Pursuant the terms of the Agreement, upon closing of the sale of the Mitchell’s Restaurants in January 2015,

Landry’s assumed the lease obligations of the Mitchell’s Restaurants. However, the Company has guaranteed
Landry’s lease obligations aggregating $40.2 million under nine of the leases. Landry’s indemnified the
Company in the event of a default under any of the leases.

The Company’s corporate headquarters was relocated in 2011 from Heathrow, Florida. The corporate
headquarters now resides in leased space (21,211 square feet) in Winter Park, Florida, with a term set to expire
on August 31, 2021.

The Company owns the real estate for two Ruth’s Chris operating restaurants: Ft. Lauderdale, FL (7,800
square feet) and Columbus, OH (8,100 square feet). We sold our Houston, TX property in 2013. The Houston
restaurant operation was relocated to a nearby leased facility in the summer of 2013.

The following table sets forth information about the Company’s existing Company-owned and franchisee-
owned restaurants as of December 28, 2014. As of December 28, 2014, the Company operated 65 Ruth’s Chris
restaurants and 21 Mitchell’s Fish Market, Mitchell’s Steakhouse and Cameron’s Steakhouse restaurants. In
addition, franchisees operated 77 restaurants and one restaurant operated under a management agreement.
Company-owned Ruth’s Chris restaurants range in size from approximately 6,000 to approximately
13,000 square feet with approximately 180 to 375 seats. The Company expects that future restaurants will range
in size from 8,000 to 10,000 square feet with approximately 230 to 250 seats. Company-owned Mitchell’s
Restaurants ranged in size from approximately 6,000 to 11,000 square feet with approximately 225 to 250 seats.

Company-Owned Ruth’s Chris Restaurants

Franchisee-Owned Ruth’s Chris Restaurants

Year

Opened Locations
1972 Metairie, LA
1977
Lafayette, LA
1983 Washington, D.C.

Property
Leased
or Owned
Leased
Leased
Leased

Year

Opened Locations
1976
1985 Mobile, AL
1986 Atlanta, GA

Baton Rouge, LA

17

Company-Owned Ruth’s Chris Restaurants

Franchisee-Owned Ruth’s Chris Restaurants

Year

Beverly Hills, CA
Ft. Lauderdale, FL
Austin, TX
Nashville, TN
San Francisco, CA
N. Palm Beach, FL
Seattle, WA

Opened Locations
1984
1985
1985
1986
1987
1987
1988
1989 Memphis, TN
1990 Weehawken, NJ
Scottsdale, AZ
1990
1992
Palm Desert, CA
1992 Minneapolis, MN
Chicago, IL
1992
1993
Arlington, VA
1993 Manhattan, NY
1994
San Diego, CA
1995 Westchester, NY
Dallas, TX
1996
Troy, MI
1996
Tampa, FL
1996
Bethesda, MD
1996
Irvine, CA
1997
Jacksonville, FL
1997
Louisville, KY
1998
Parsippany, NJ
1998
Northbrook, IL
1998
Columbus, OH
1999
Coral Gables, FL
1999
1999
Ponte Vedra, FL
1999 Winter Park, FL
2000
2000
2000
2001
2001
2002 Woodland Hills, CA
Fairfax, VA
2002
2002
Bellevue, WA
2002 Washington, D.C.
2003 Walnut Creek, CA
2005
2005
2005
2006
2006
2007
2007
2007
2007
2007
2007 West Palm Beach, FL
Ft. Worth, TX
2008
New Orleans, LA
2008
Princeton, NJ*
2008
Fresno, CA
2008
South Barrington, IL*
2008
Portland, OR
2011
Cincinnati, OH
2012

Roseville, CA
Boston, MA
Sacramento, CA
Pasadena, CA
Bonita Springs, FL
Lake Mary, FL*
Anaheim, CA*
Biloxi, MS
Knoxville, TN
Tyson’s Corner, VA

Sarasota, FL
Del Mar, CA
Boca Raton, FL
Orlando, FL
Greensboro, NC

Property
Leased
or Owned
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Land Leased
Land Leased
Leased
Leased
Leased
Leased
Leased
Leased
Land Leased
Leased
Land Leased
Leased
Leased

18

Year

Pittsburgh, PA

Philadelphia, PA

Raleigh (Cary), NC

Pikesville, MD
San Antonio, TX

Richmond, VA
Baltimore, MD
Birmingham, AL
San Antonio, TX
Taipei, Taiwan
Cancun, Mexico
Sandy Springs, GA
Indianapolis, IN
Long Island, NY
Toronto, CA
Taichung, Taiwan
Indianapolis, IN

Opened Locations
1987
1987 Hartford, CT
1988
1989 Honolulu, HI
1991
1992
1993
1993
1993
1993
1993
1994
1995
1995
1996
1996
1997 Hong Kong
1997
1998 Annapolis, MD
1998 Maui, HI
1999 Atlanta, GA
2000
2000
2000 Wailea, HI
2001 Kaohsiung, Taiwan
2001 King of Prussia, PA
2001 Queensway, Hong Kong
2001
Cabo San Lucas, Mexico
2003 Mississauga, Canada
2005 Virginia Beach, VA
2005
2005 Atlantic City, NJ
2005
2006
2006 Ocean City, MD
2006 Destin, FL
2006 Mauna Lani, HI
2006 Huntsville, AL
2006
2007
2007 Waikiki, HI
Columbia, SC
2007
2007 Mishawaka, IN
2007
Tokyo, Japan
2007 Madison, WI
2007
2007
2007
2008 Aruba
2008 Myrtle Beach, SC
2008 Wilmington, NC
2008
2008 Wilkes-Barre, PA
Raleigh, NC
2008
2008
Savannah, GA
2009 Greenville, SC
St. Louis, MO
2009
2009 Durham, NC

Calgary, Canada
Rogers, AR
Park City, UT

Edmonton, Canada
Charlotte, NC

Charlotte, NC
St. Louis, MO

Baltimore, MD

Ridgeland, MS

Company-Owned Ruth’s Chris Restaurants

Franchisee-Owned Ruth’s Chris Restaurants

Year

Opened Locations
2013
2014
2014
2014 Marina del Rey, CA

Houston, TX
Denver, CO
Gaithersburg, MD

Property
Leased
or Owned
Leased
Leased
Leased
Leased

Year

Opened Locations
2009 Kennesaw, GA
Carolina, Puerto Rico
2009
2010
Salt Lake City, UT
2011 Grand Rapids, MI
2011 Asheville, NC
2012 Dubai
2012
2012
2012 Niagara Falls, Canada
Las Vegas, NV
2013
San Juan, Puerto Rico
2013
Chattanooga, TN
2013
Shanghai, China
2013
Boise, ID
2014
Panama City, Panama
2014
Taipei, Taiwan
2014

Singapore
San Salvador, El Salvador

Ruth’s Chris Restaurants Under Management Agreement

Year

Opened Locations
2012

Cherokee, NC

Company-Owned Mitchell’s Fish Market Restaurants

Company-Owned Cameron’s Steakhouse Restaurants

Year

Acquired Locations

2008
2008
2008

Columbus, OH
Birmingham, MI
Polaris, OH

Property
Leased
or Owned
Leased
Leased
Leased

Year
Acquired or
Opened

2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2010

Locations
Grandview, OH
Crosswoods, OH
Pittsburgh, PA
Newport, KY
Louisville, KY
Lansing, MI
Birmingham, MI
Cleveland, OH
West Chester, OH
Carmel, IN
Livonia, MI
Pittsburgh, PA
Tampa, FL
Rochester Hills, MI
Brookfield, WI
Sandestin, FL
Jacksonville, FL
Winter Park, FL

Property
Leased
or Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased

*

The Company owns the building and leases the land pursuant to a long-term ground lease.

Item 3.

LEGAL PROCEEDINGS

From time to time, the Company is involved in various disputes and litigation matters that arise in the
ordinary course of business. While litigation is subject to uncertainties and the outcome of litigated matters is not
predictable with assurance, the Company is not aware of any legal proceedings pending or threatened against it
that it expects to have a material adverse effect on its financial condition or results of operations.

The Company sells a considerable number of gift cards, which are issued and administered by a third party

gift card issuer and service provider, consistent with common retail industry practice. The third party gift card

19

issuer is paid a net fee for its services by the Company. The third party gift card issuer and service provider, as
well as a number of other restaurant companies, retailers and gift card issuers, were named as defendants in an
action filed under seal in June 2013 by William French on behalf of the State of Delaware in the Superior Court
of Delaware in and for New Castle County alleging violations of Delaware law. The filing was unsealed in
March 2014. The complaint alleges that approximately $30 million with respect to unused gift cards should be
escheated by the Company to the State of Delaware and seeks interest and penalties, attorneys’ fees and costs,
and an injunction against alleged future violations of Delaware’s unclaimed property laws. The Company has not
yet been served with the complaint. The Company believes that it is in compliance with Delaware’s unclaimed
property laws and intends to defend its position vigorously if served. To protect its interests, the Company has
joined in a notice to remove the case to federal district court, which was filed in May 2014, and a motion to
dismiss filed by all defendants in June 2014. In December 2014, the case was remanded back to Superior Court
of Delaware.

Item 4. MINE SAFETY DISCLOSURES

None.

20

PART II

Item 5. MARKET FOR THE REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is listed on the Nasdaq Global Select Market under the trading symbol

“RUTH.” As of March 1, 2015, there were 136 holders of record of its common stock.

The following table sets forth, for the period indicated, the highest and lowest sale price for its common

stock for fiscal years 2014 and 2013, as reported by the Nasdaq Global Select Market:

Fiscal Year ended December 29, 2013
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year ended December 28, 2014
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

High

Low

$ 9.60
$12.51
$13.57
$15.06

$14.60
$12.79
$12.49
$14.39

$ 7.20
$ 9.02
$11.42
$11.34

$11.48
$11.43
$10.36
$10.76

Dividends and Common Stock Repurchase Program

Between 1999 and April 2013, we had not paid dividends to holders of our common stock. We commenced

paying quarterly cash dividends to holders of our common stock in May 2013. The payment of dividends is
within the discretion of our Board of Directors and will depend upon our earnings, capital requirements and
operating and financial condition, among other factors. In addition, we may not pay a dividend if there is a
default (or if a default would result from such dividend payment) under our senior credit agreement. Our senior
credit agreement was amended in May 2013 to reset the limit applicable to junior stock payments, which include
both cash dividend payments and repurchases of common and preferred stock. Junior stock payments made
subsequent to December 30, 2012 through the end of the agreement are limited to $100 million; $26.8 million of
such payments had been made as of December 28, 2014.

The Company’s Board of Directors declared the following dividends during the periods presented (amounts

in thousands, except per share amounts):

Declaration Date

Dividend per
Share

Record Date

Total Amount

Payment Date

Fiscal Year 2013:
May 3, 2013 . . . . . . . . . . . . . . . . . . . . . .
July 24, 2013 . . . . . . . . . . . . . . . . . . . . .
October 22, 2013 . . . . . . . . . . . . . . . . . .
Fiscal Year 2014:
February 21, 2014 . . . . . . . . . . . . . . . . . .
April 22, 2014 . . . . . . . . . . . . . . . . . . . . .
July 23, 2014 . . . . . . . . . . . . . . . . . . . . .
October 29, 2014 . . . . . . . . . . . . . . . . . .

$0.04
$0.04
$0.04

$0.05
$0.05
$0.05
$0.05

May 16, 2013
August 15, 2013
November 14, 2013

March 13, 2104
May 15, 2014
August 14, 2014
November 20, 2014

$1,430
$1,424
$1,424

$1,798
$1,798
$1,778
$1,764

May 30, 2013
August 29, 2013
November 26, 2013

March 27, 2014
May 29, 2014
August 28, 2014
December 4, 2014

Subsequent to the end of fiscal year 2014, the Company’s Board of Directors declared a $0.06 per share
cash dividend ($2.1 million in total) payable on March 12, 2015. Dividends are paid to holders of common stock
and restricted stock.

21

On November 17, 2014, the Company announced that its Board of Directors has approved a share
repurchase program under which the Company is authorized to repurchase up to $50 million of outstanding
common stock from time to time in the open market, through negotiated transactions or otherwise (including,
without limitation, the use of Rule 10b5-1 plans), depending on share price, market conditions and other factors.
The new share repurchase program replaces the Company’s previous share repurchase program announced in
May 2013, which has been terminated. The previous share repurchase program had permitted the repurchase of
up to $30 million of outstanding common stock, of which approximately $19 million remained unused upon its
termination. The Company intends to conduct any open market share repurchase activities in compliance with the
safe harbor provisions of Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The share repurchase
program does not obligate the Company to repurchase any dollar amount or number of its shares. The program
has no termination date. All shares purchased during the fourth quarter of fiscal year 2014 were made under the
new program. As of December 28, 2014, $44.9 million remained available for further purchases under the new
program.

Stock repurchase activity during the fiscal quarter ended December 28, 2014 was as follows:

Period

September 29, 2014 to November 2, 2014 . . . . . . . . . . . . . . . . . . .
November 3, 2014 to November 30, 2014 . . . . . . . . . . . . . . . . . . .
December 1, 2014 to December 28, 2014 . . . . . . . . . . . . . . . . . . .

Total
Number of
Shares
Purchased
as Part of a
Publicly
Announced
Program

—
—
377,655

Maximum
Dollar
Value that
May Yet be
Purchased
under the
Program –
Amounts in
thousands

$19,716
$50,000
$44,875

Total
Number of
Shares
Purchased

—
—
377,655

Average
Price Paid
per Share

—
—
$13.57

Totals for the fiscal quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

377,655

$13.57

377,655

Unregistered Recent Sales of Securities

None.

Securities Authorized for Issuance Under Equity Compensation Plans

See Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters, of this Annual Report on Form 10-K for information regarding securities authorized for issuance under
the Company’s equity compensation plans.

22

Performance Graph

The following table and graph shows the cumulative total stockholder return on the Company’s Common
Stock with the S&P 500 Stock Index, the S&P Small Cap 600 Index and the Dow Jones U.S. Restaurants & Bars
Index, in each case assuming an initial investment of $100 on December 30, 2009 and full dividend reinvestment.

CUMULATIVE TOTAL RETURN

Assuming an investment of $100 and reinvestment of dividends

$700

$600

$500

$400

$300

$200

$100

12/24/2009

12/23/2010

12/23/2011

12/28/2012

12/27/2013

12/26/2014

Ruth’s Hospitality Group, Inc.

S&P 500 Stock Index

S&P SmallCap 600 Index

Dow Jones U.S. Restaurants & Bars Index

Ruth’s Hospitality Group, Inc.
. . . . . . . . . . . . . . . . . . . .
S&P 500 Stock Index . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P SmallCap 600 Index . . . . . . . . . . . . . . . . . . . . . . . .
Dow Jones U.S. Restaurants & Bars Index . . . . . . . . . . .

$100
$100
$100
$100

$218
$112
$124
$130

$240
$112
$124
$166

$316
$124
$138
$163

$655
$163
$196
$206

$628
$185
$206
$214

12/24/09

12/23/10

12/23/11

12/28/12

12/27/13

12/26/14

All amounts rounded to the nearest dollar.

**********

The stock performance graph should not be deemed filed or incorporated by reference into any other filing

made by us under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we
specifically incorporate the stock performance graph by reference in another filing.

23

Item 6.

SELECTED FINANCIAL DATA

The following table sets forth the Company’s selected financial data for the year indicated and should be

read in conjunction with the disclosures in Item 7, Management’s Discussion and Analysis of Results of
Operations and Financial Condition, and Item 8, Financial Statements and Supplementary Data, of this Annual
Report on Form 10-K. Certain amounts have been revised to reclassify certain operating revenues and expenses
to income from discontinued operations.

Fiscal Year

2014

2013

2012

2011

2010

($ in thousands)

Income Statement Data:
Revenues:

Restaurant sales . . . . . . . . . . . . . . . . . . . . . . . . . .
Franchise income . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . .

$325,437
15,763
4,897

$304,200
15,012
3,142

$292,912
13,836
3,537

$269,697
12,464
3,223

$255,305
11,532
3,408

Total revenues . . . . . . . . . . . . . . . . . . . . . . .

346,097

322,354

310,285

285,384

270,245

Costs and expenses:

Food and beverage costs . . . . . . . . . . . . . . . . . . .
Restaurant operating expenses . . . . . . . . . . . . . . .
Marketing and advertising . . . . . . . . . . . . . . . . . .
General and administrative costs . . . . . . . . . . . . .
Depreciation and amortization expenses . . . . . . .
Pre-opening costs . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairments . . . . . . . . . . . . . . . . . . . . . .
Restructuring benefit
. . . . . . . . . . . . . . . . . . . . . .
Gain on settlements, net . . . . . . . . . . . . . . . . . . . .

Total costs and expenses . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):

103,259
156,242
10,076
24,311
10,917
1,630
—
—
—

306,435
39,662

93,386
145,664
9,341
27,808
10,229
691
—
—
(1,719)

285,400
36,954

92,608
141,227
9,158
25,612
11,050
540
3,262
—
(683)

82,550
134,568
9,347
21,077
11,516
192
436
—
—

74,836
128,799
9,329
20,827
12,182
3
483
(1,457)
—

282,774
27,511

$259,687
25,697

$245,002
25,243

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs written-off
. . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,159)
—
37

(1,640)
—
(77)

(2,364)
(807)
(293)

(2,892)
—
(464)

(4,244)
—
(176)

Income from continuing operations before

income tax expense . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of

38,540
11,830

26,710

35,237
10,744

24,493

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,255)

(2,004)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . .
Accretion of preferred stock redemption value . . . . . .
Excess of redemption value over carrying value of

16,455
—
—

22,489
—
—

24,047
7,855

16,192

187

16,379
514
73

22,341
2,963

19,378

171

19,549
2,493
353

20,823
5,026

15,797

160

15,957
2,178
309

preferred shares redeemed . . . . . . . . . . . . . . . . . . . .

—

—

35,776

—

—

Net income (loss) applicable to preferred and

common shareholders . . . . . . . . . . . . . . . . . . . . . . . .

$ 16,455

$ 22,489

(19,984) $ 16,703

$ 13,470

24

Basic earnings (loss) per share:

Continuing operations . . . . . . . . .
Discontinued operations . . . . . . .

Basic earnings (loss) per share . .

Diluted earnings (loss) per share:

Continuing operations . . . . . . . . .
Discontinued operations . . . . . . .

$

$

$

Diluted earnings (loss) per

2014

2013

2012

2011

2010

($ in thousands, except per share data)

$

$

$

0.76
(0.29)

0.47

0.75
(0.29)

$

$

$

0.71
(0.06)

0.65

0.69
(0.06)

(0.59) $
0.01

(0.58) $

(0.59) $
0.01

$

$

$

0.38
0.01

0.39

0.38
0.01

0.39
0.00

0.39

0.39
0.00

share . . . . . . . . . . . . . . . . . . . .

$

0.46

$

0.63

$

(0.58) $

0.39

$

0.39

Shares used in computing earnings

(loss) per common share:

Basic . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . .

34,955,760
35,415,483

34,761,160
35,784,430

34,313,636
34,313,636

34,093,104
43,252,101

32,513,867
40,239,854

Dividends declared per common

share . . . . . . . . . . . . . . . . . . . . . . . .

$

0.20

$

0.12

$

— $

— $

—

Balance Sheet Data (at end of fiscal

year):

Cash and cash equivalents . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . .
Total long-term debt including current
portion . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . .

$

4,301
218,567

$

10,586
228,081

$

7,909
229,702

$

3,925
238,567

$

5,018
247,416

13,000
96,311

19,000
100,653

45,000
80,733

22,000
97,987

51,000
78,708

Certain prior year amounts have been reclassified to conform with the current year presentation of
discontinued operations and other income. These reclassifications had no effect on previously reported net
income.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS AND

FINANCIAL CONDITION

This discussion and analysis should be read in conjunction with our consolidated financial statements and
related notes to financial statements. We report our financial results on a 52/53-week fiscal year, which ends on
the last Sunday in December. Fiscal years 2014 and 2013 each included of 52 weeks of operations. Fiscal year
2012 included of 53 weeks of operations.

Overview

Ruth’s Hospitality Group, Inc. is a leading restaurant company focused on the upscale dining segment. We
operate Company-owned restaurants and sell franchise rights to Ruth’s Chris Steak House franchisees giving the
franchisees the exclusive right to operate similar restaurants in a particular area designated in the franchise
agreement. As of December 28, 2014, the Company owned the Ruth’s Chris Steak House, Mitchell’s Fish
Market, Columbus Fish Market, Mitchell’s Steakhouse and Cameron’s Steakhouse concepts. As of December 28,
2014, there were 143 Ruth’s Chris Steak House restaurants, including 65 Company-owned restaurants, one
restaurant operating under a management agreement and 77 franchisee-owned restaurants, including 20
international franchisee-owned restaurants in Aruba, Canada, China, Hong Kong, El Salvador, Japan, Mexico,
Panama, Singapore, Taiwan and the United Arab Emirates.

As of December 28, 2014, the Company also operated eighteen Mitchell’s Fish Markets and three

Mitchell’s/Cameron’s Steakhouse restaurants (collectively, the Mitchell’s Restaurants), located primarily in the

25

Midwest and Florida. On January 21, 2015, the Company sold the Mitchell’s Restaurants to a third party. For
financial reporting purposes, the Mitchell’s Restaurants are classified as a discontinued operation for all periods
presented and, as of December 28, 2014, the assets are classified as held for sale.

During 2015, we are celebrating the 50th anniversary of the founding of Ruth’s Chris Steak House. The

Ruth’s Chris menu features a broad selection of high-quality USDA Prime- and Choice-grade steaks and other
premium offerings served in Ruth’s Chris’ signature fashion—“sizzling” and topped with butter—complemented
by other traditional menu items inspired by our New Orleans heritage. The Ruth’s Chris restaurants reflect the
fifty year commitment to the core values instilled by our founder, Ruth Fertel, of caring for our guests by
delivering the highest quality food, beverages and service in a warm and inviting atmosphere.

Our Ruth’s Chris restaurants cater to special occasion diners and frequent customers, in addition to the
business clientele traditionally served by upscale steakhouses, by providing a dining experience designed to
appeal to a wide range of guests. We believe our focus on creating this broad appeal provides us with
opportunities to expand into a wide range of markets, including many markets not traditionally served by upscale
steakhouses. We offer USDA Prime- and Choice-grade steaks that are aged and prepared to exact company
standards and cooked in 1,800-degree broilers. We also offer veal, lamb, poultry and seafood dishes and a broad
selection of appetizers. We complement our distinctive food offerings with an award-winning wine list. During
the fiscal year 2014, the average check was $76 per person at Company-owned Ruth’s Chris Restaurants.

All Company-owned Ruth’s Chris Steak House restaurants are located in the United States. The franchisee-

owned Ruth’s Chris Steak House restaurants include 20 international franchisee-owned restaurants in Aruba,
Canada, China (Hong Kong and Shanghai), El Salvador, Japan, Mexico, Panama, Singapore, Taiwan and the
United Arab Emirates. We opened three new Company-owned Ruth’s Chris Steak House restaurants in 2014 –
one in Denver, CO in January, one in Gaithersburg, MD in October, and one in Marina del Rey, CA in
November. In February 2014, we acquired the franchisee-owned restaurant located in Austin, TX. In February
2015, a new Ruth’s Chris Steak House restaurant opened in St. Petersburg, FL and a restaurant is expected to
open in Dallas, TX in 2015. Three new franchisee-owned restaurants opened in 2014 – one in Boise, ID in
February, one in Panama City, Panama in September and one in Taipei, Taiwan in December. Due to an expiring
lease term, we closed the Ruth’s Chris Steak House in Kansas City, MO in March 2014 after seventeen years of
operation. Kansas City will remain one of the areas that we will evaluate for opportunities for future Ruth’s Chris
Steak House restaurants. Due to local market conditions and disappointing financial results, we negotiated an
early termination of the facility lease for the Providence, RI Ruth’s Chris Steak House restaurant, which closed in
September 2014.

Sale of Mitchell’s Restaurants

The Company acquired the Mitchell’s Restaurants in 2008. Mitchell’s Fish Market is an eighteen-restaurant

upscale seafood concept. Mitchell’s/Cameron’s Steakhouse is a modern American steakhouse three-restaurant
concept.

In November 2014, the Company and Landry’s, Inc. and Mitchell’s Entertainment, Inc., an affiliate of
Landry’s Inc. (together with Landry’s Inc., Landry’s), entered into an asset purchase agreement (the Agreement).
Pursuant to the Agreement, the Company agreed to sell the Mitchell’s Restaurants and related assets to Landry’s
for $10 million. The sale of the Mitchell’s Restaurants closed on January 21, 2015. The assets sold consist
primarily of leasehold interests, leasehold improvements, restaurant equipment and furnishings, inventory, and
related intangible assets, including brand names and trademarks associated with the 21 Mitchell’s Restaurants.
Under the terms of the Agreement, Landry’s assumed the Mitchell’s Restaurants’ facility lease obligations and
the Company will reimburse Landry’s for gift cards sold prior to the closing date and used at the Mitchell’s
Restaurants during the eighteen months following the closing date. Landry’s offered employment to substantially
all of the employees of the Mitchell’s Restaurants. For financial reporting purposes, the Mitchell’s Restaurants
are classified as a discontinued operation for all periods presented and, as of December 28, 2014, the assets are
classified as held for sale.

26

Change in Accounting for Gift Card Breakage

The portion of gift cards sold to customers which are never redeemed is commonly referred to as gift card

breakage. Prior to the fourth quarter of fiscal year 2013, we recognized breakage revenue using the delayed
method of accounting. At the end of the fourth quarter of fiscal year 2013, we elected to change the Company’s
policy for recognizing gift card breakage revenue by changing from the delayed method to the preferable
redemption method of accounting. Under the redemption method, breakage revenue is recognized and the gift
card liability is derecognized for unredeemed gift cards in proportion to actual gift card redemptions. The impact
of the cumulative catch-up adjustment recorded in the fourth quarter of fiscal year 2013 was to reduce gift card
breakage revenue by $2.2 million. Inclusive of this adjustment, the Company recognized $804 thousand of gift
card breakage revenue in fiscal year 2013. Gift card breakage revenue recognized in fiscal years 2014 and 2012
was $2.6 million and $1.9 million, respectively. Consistent with the cumulative catch-up method of accounting
for a change in accounting estimate effected by a change in accounting principle, previously issued financial
statements were not revised.

Recap of Fiscal Year 2014 and Fiscal Year 2013 Operating Results

Operating income for fiscal year 2014 increased from fiscal year 2013 by $2.7 million to $39.7 million.
Operating income for fiscal year 2014 was favorably impacted by a $21.2 million increase in restaurant sales,
which was somewhat offset by increased food and beverage costs and restaurant operating expenses. Higher
restaurant sales were attributable both to an increase in the number of customers, as measured by an increase in
entrées, and an increase in average check. After-tax income from continuing operations during fiscal year 2014
increased from fiscal year 2013 by $2.2 million to $26.7 million. Net income for fiscal year 2014 was adversely
impacted by a $10.3 million loss from discontinued operations. The fiscal year 2014 loss from discontinued
operations was largely attributable to the impairment of the assets of the Mitchell’s Restaurants. Fiscal year 2014
net income decreased from fiscal year 2013 by $6.0 million to $16.5 million.

Operating income for fiscal year 2013 increased from fiscal year 2012 by $9.5 million to $37.0 million.
Operating income for fiscal year 2013 was favorably impacted by a $11.3 million increase in restaurant sales,
which was somewhat offset by increased restaurant operating expenses. It is noteworthy that, because fiscal year
2013 included 52 weeks whereas fiscal year 2012 included 53 weeks, fiscal year 2012 benefited from one more
week of sales. After-tax income from continuing operations during fiscal year 2013 increased from fiscal year
2012 by $8.3 million to $24.5 million. Fiscal year 2013 net income increased from fiscal year 2012 by $6.1
million to $22.5 million.

Key Financial Terms and Metrics

We evaluate our business using a variety of key financial measures:

Restaurant Sales. Restaurant sales consist of food and beverage sales by Company-owned restaurants.

Restaurant sales are primarily influenced by total operating weeks in the relevant period and comparable
restaurant sales growth. Total operating weeks is the total number of Company-owned restaurants multiplied by
the number of weeks each is in operation during the relevant period. Total operating weeks are impacted by
restaurant openings and closings, as well as changes in the number of weeks included in the relevant period.
Comparable restaurant sales growth reflects the change in year-over-year or quarter-over-quarter, as applicable,
sales for the comparable restaurant base. We define the comparable restaurant base to be those Company-owned
restaurants in operation for not less than fifteen months prior to the beginning of the fiscal quarter including the
period being measured. Comparable restaurant sales growth is primarily influenced by customer traffic, which is
measured by the number of entrées sold, and the average guest check. Customer traffic is influenced by the
popularity of our menu items, our guest mix, our ability to deliver a high-quality dining experience and overall
economic conditions. Average guest check, a measure of total restaurant sales divided by the number of entrées,
is driven by menu mix and pricing.

27

Franchise Income. Franchise income includes (1) franchise and development option fees charged to
franchisees and (2) royalty income. Franchise royalties consist of 5.0% of adjusted gross sales from each
franchisee-owned restaurant. In addition, our more recent franchise agreements require up to a 1.0% advertising
fee to be paid by the franchisee, which is applied to national advertising expenditures. Under our prior franchise
agreements, the Company would pay 1.0% out of the 5.0% royalty toward national advertising. We evaluate the
performance of our franchisees by measuring franchisee-owned restaurant operating weeks, which is impacted by
franchisee-owned restaurant openings and closings, and comparable franchisee-owned restaurant sales growth,
which together with operating weeks, drives royalty income.

Other Operating Income. Other operating income consists primarily of breakage income associated with gift

cards, and also includes fees earned from a management agreement, banquet-related guarantee and services
revenue and other incidental guest fees.

Food and Beverage Costs. Food and beverage costs include all restaurant-level food and beverage costs of
Company-owned restaurants. We measure food and beverage costs by tracking cost of sales as a percentage of
restaurant sales and cost per entrée. Food and beverage costs are generally influenced by the cost of food and
beverage items, distribution costs and menu mix.

Restaurant Operating Expenses. We measure restaurant-operating expenses for Company-owned restaurants

as a percentage of restaurant sales. Restaurant operating expenses include the following:

• Labor costs, consisting of restaurant management salaries, hourly staff payroll and other payroll-related
items, including taxes and fringe benefits. We measure our labor cost efficiency by tracking hourly and
total labor costs as a percentage of restaurant sales;

• Operating costs, consisting of maintenance, utilities, bank and credit card charges, and any other

restaurant-level expenses; and

• Occupancy costs, consisting of both fixed and variable portions of rent, common area maintenance

charges, insurance premiums and real property taxes.

Marketing and Advertising. Marketing and advertising includes all media, production and related costs for both

local restaurant advertising and national marketing. We measure the efficiency of our marketing and advertising
expenditures by tracking these costs as a percentage of total revenues. We have historically spent approximately
2.5% to 4.0% of total revenues on marketing and advertising and expect to maintain this level in the near term. All
franchise agreements executed based on our new form of franchise agreement include up to a 1.0% advertising fee
in addition to the 5.0% royalty fee. We spend this designated advertising fee on national advertising and record
these fees as liabilities against which specified advertising and marketing costs will be charged.

General and Administrative. General and administrative costs include costs relating to all corporate and
administrative functions that support development and restaurant operations and provide an infrastructure to
support future Company and franchisee growth. General and administrative costs are comprised of management,
supervisory and staff salaries and employee benefits, travel, performance-based compensation, information
systems, training, corporate rent, professional and consulting fees, technology and market research. We measure
our general and administrative expense efficiency by tracking these costs as a percentage of total revenues.

Depreciation and Amortization. Depreciation and amortization includes depreciation of fixed assets and

certain definite life intangible assets. We depreciate capitalized leasehold improvements over the shorter of the
total expected lease term or their estimated useful life.

Pre-Opening Costs. Pre-opening costs consist of costs incurred prior to opening a Company-owned

restaurant, which are comprised principally of manager salaries and relocation costs, employee payroll and
related training costs for new employees, including practice and rehearsal of service activities as well as lease
costs incurred prior to opening.

28

Results of Operations

The table below sets forth certain operating data expressed as a percentage of restaurant sales and total

revenues for the periods indicated. Our historical results are not necessarily indicative of the operating results
that may be expected in the future. Certain prior year amounts have been reclassified to conform to the current
year presentation of discontinued operations.

RUTH’S HOSPITALITY GROUP, INC AND SUBSIDIARIES
Results of Operations

Fiscal Year

2014

2013

2012

Revenues:

Restaurant sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Franchise income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

94.0% 94.4% 94.4%
4.6% 4.7% 4.5%
1.4% 1.0% 1.1%

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100.0% 100.0% 100.0%

Costs and expenses:

Food and beverage costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restaurant operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pre-opening costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Gain on settlements, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

31.7% 30.7% 31.6%
48.0% 47.9% 48.2%
2.9% 2.9% 3.0%
7.0% 8.6% 8.3%
3.2% 3.2% 3.6%
0.5% 0.2% 0.2%
—
1.1%
(0.5%) (0.2%)

Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):

88.5% 88.5% 91.1%
11.5% 11.5% 8.9%

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs written-off
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

(0.3%) (0.5%) (0.8%)
(0.3%)
(0.1%) (0.1%) (0.1%)

—

Income from continuing operations before income tax expense . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11.1% 10.9% 7.7%
3.4% 3.3% 2.5%

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of income taxes . . . . . . . . . . . . . . . . . . . .

7.7% 7.6% 5.2%
(2.9%) (0.6%) 0.1%

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of preferred stock redemption value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess of redemption value over carrying value of preferred shares redeemed . . . . . . . . .

4.8% 7.0% 5.3%
0.0% 0.0% 0.2%
0.0% 0.0% 0.0%
0.0% 0.0% 11.5%

Net income (loss) applicable to preferred and common shareholders . . . . . . . . . . . . . . . . .

4.8% 7.0% (6.4%)

29

Segment Profitability

Segment profitability information for the Company’s two operating segments is presented in Note 18 of the

consolidated financial statements. Not all operating expenses are allocated to operating segments. The Ruth’s
Chris Steak House Company-owned restaurants, which are all located in North America, are managed as an
operating segment. The Ruth’s Chris concept operates within the full-service dining industry, providing similar
products to similar customers. The franchise operations are reported as a separate operating segment. No costs
are allocated to the franchise operations segment.

Fiscal Year

2014

2013

2012

(Dollar amounts in thousands)

Revenues:

Company-owned steakhouse restaurants . . . . . . . . . . . . . . . . . . . . . . . . . .
Franchise operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated other revenue and revenue discounts . . . . . . . . . . . . . . . . . . .

$327,731
15,763
2,603

$306,539
15,012
803

$294,600
13,836
1,849

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$346,097

$322,354

$310,285

Segment profits:

Company-owned steakhouse restaurants . . . . . . . . . . . . . . . . . . . . . . . . . .
Franchise operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 68,230
15,763

$ 67,489
15,012

$ 60,765
13,836

Total segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and advertising expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Pre-opening costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on settlements, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs written off
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

83,993
2,603
(10,076)
(24,311)
(10,917)
(1,630)
0
0
(1,159)
0
37

82,501
803
(9,341)
(27,808)
(10,229)
(691)
0
1,719
(1,640)
0
(77)

74,601
1,849
(9,158)
(25,612)
(11,050)
(540)
(3,262)
683
(2,364)
(807)
(293)

Income from continuing operations before income tax expense . . . . . . . .

$ 38,540

$ 35,237

$ 24,047

Fiscal year 2014 segment profits for the Company-owned steakhouse restaurant segment increased by $741

thousand to $68.2 million from fiscal year 2013. The increase was driven by increased revenues. The $751
thousand increase in franchise operations segment profitability is attributable to seven new locations which
opened in 2014 and 2013 and to an increase in comparable franchisee-owned restaurant sales.

Fiscal year 2013 segment profits for the Company-owned steakhouse restaurant segment increased by $6.7
million to $67.5 million from fiscal year 2012. The increase was driven by increased revenues. It is noteworthy
that fiscal year 2013 included 52 weeks whereas fiscal year 2012 included 53 weeks. The $1.2 million increase in
franchise operations segment profitability to $15.0 million is attributable to eight new locations which opened in
2013 and 2012 and to an increase in comparable franchisee-owned restaurant sales.

Fiscal Year 2014 Compared to Fiscal Year 2013

Restaurant Sales. Restaurant sales increased $21.2 million, or 7.0%, to $325.4 million during fiscal year 2014

from fiscal year 2013. The increase was attributable to a $11.0 million increase in comparable Company-owned
restaurant sales and $10.2 million from new or relocated restaurants. Excluding discontinued operations, total operating
weeks during fiscal year 2014 increased to 3,283 from 3,169 during fiscal year 2013. Comparable Company-owned
restaurant sales increased 3.7%, which consisted of a traffic increase of 2.5% and an average check increase of 1.2%.

30

Franchise Income. Franchise income increased $751 thousand, or 5.0%, to $15.8 million during fiscal year

2014 from fiscal year 2013. The increase was driven primarily by a $504 thousand increase from seven new
locations which opened during fiscal years 2014 and 2013. The remaining increase is from an increase in
comparable franchisee-owned restaurant sales of 3.4% (which included a 3.5% increase in domestic comparable
franchisee-owned restaurant sales and a 3.1% increase in international comparable franchisee-owned restaurant
sales).

Other Operating Income. Other operating income increased by $1.8 million to $4.9 million during fiscal

year 2014 from fiscal year 2013. Other operating income includes gift card breakage revenue, our share of
income from a managed restaurant and miscellaneous restaurant income. Fiscal year 2014 gift card breakage
revenue increased $1.5 million from the fiscal year 2013 level. Fiscal year 2013 gift card breakage revenue was
reduced by the unfavorable impact of the $2.2 million adjustment for the change in accounting for gift card
breakage revenue, which included a revision in expected redemptions based on consumer redemption patterns.
Our management fee and our share of income from the Cherokee location was $801 thousand during fiscal year
2014 and $706 thousand during fiscal year 2013.

Food and Beverage Costs. Food and beverage costs increased $9.9 million, or 10.6%, to $103.3 million

during fiscal year 2014 from fiscal year 2013. Food and beverage costs, as a percentage of restaurant sales,
increased 103 basis points to 31.7% compared to fiscal year 2013 primarily due to 6.0% higher beef costs,
partially offset by a cumulative menu pricing increase of 2.6%.

Restaurant Operating Expenses. Restaurant operating expenses increased $10.6 million, or 7.3%, to $156.2

million during fiscal year 2014 from fiscal year 2013. Restaurant operating expenses as a percentage of
restaurant sales for fiscal year 2014 was relatively unchanged from fiscal year 2013.

Marketing and Advertising. Marketing and advertising expenses increased $735 thousand to $10.1 million
during fiscal year 2014 from fiscal year 2013. The increase in marketing and advertising expenses during fiscal
year 2014 was attributable to planned spending.

General and Administrative. General and administrative expenses decreased $3.5 million to $24.3 million

during fiscal year 2014 from fiscal year 2013, primarily due to lower incentive-based compensation.

Depreciation and Amortization Expenses. Depreciation and amortization expense increased $688 thousand

to $10.9 million during fiscal year 2014, primarily due to property additions.

Pre-opening costs. Pre-opening costs increased $939 thousand to $1.6 million during fiscal year 2014,

primarily due to three new restaurant openings in 2014 compared to one in 2013.

Gain on Settlements. During fiscal year 2013, the Company settled two loss claims asserted by us which
previously arose and recognized an aggregate gain of $1.7 million, net of fees incurred. The majority of the gain
pertained to compensation for the Company’s lost operating income awarded by the claims administrator
pursuant to the settlement agreement reached in litigation related to the 2010 Deepwater Horizon oil spill in the
Gulf of Mexico.

Interest Expense. Interest expense decreased $481 thousand to $1.2 million during fiscal year 2014 from
fiscal year 2013. The decrease in expense was primarily due to a lower average debt balance during fiscal year
2014.

Income Tax Expense. During fiscal year 2014, we recognized income tax expense of $11.8 million. During
fiscal year 2013, we recognized income tax expense of $10.7 million. The effective tax rate increased to 30.7%
during fiscal year 2014 compared to 30.5% during fiscal year 2013. The increase in the effective tax rate in fiscal
year 2014 was primarily due to a reduction in state employment tax credits.

31

Income from Continuing Operations. Income from continuing operations of $26.7 million during fiscal year

2014 increased by $2.2 million compared to fiscal year 2013 due to the factors noted above.

Income (Loss) from Discontinued Operations, net of income taxes. Income (loss) from discontinued
operations, net of income taxes during fiscal year 2014 was a loss of $10.3 million compared with a loss of $2.0
million during fiscal year 2013. Discontinued operations includes: the recurring revenues and expenses of
restaurants closed or held for sale; impairments and loss on assets of restaurants closed or held for sale; impacts
of remeasurement of lease liabilities associated with closed restaurants; and related income taxes. For financial
reporting purposes, the Mitchell’s Restaurants are classified as a discontinued operation for all periods presented
and, as of December 28, 2014, the assets of the Mitchell’s Restaurants are classified as held for sale.

The fiscal year 2014 loss from discontinued operations is largely attributable to a $15.3 million impairment

loss and a $1.8 million loss on the assets of the Mitchell’s Restaurants held for sale. Fiscal years 2013 includes
impairments related to the Mitchell’s Restaurants aggregating $2.5 million. Discontinued operations in fiscal
year 2013 includes a $1.9 million pre-tax loss attributable to property we lease near the United Nations in
Manhattan. We recognized the loss as a consequence of the re-measurement of our lease exit costs due to the
subtenant abandoning the property subleased from us.

Net Income. Net income applicable to preferred and common shareholders was $16.5 million during fiscal

year 2014 compared to $22.5 million net income during fiscal year 2013.

Fiscal Year 2013 Compared to Fiscal Year 2012

Restaurant Sales. Restaurant sales increased $11.3 million, or 3.9%, to $304.2 million during fiscal year

2013 from fiscal year 2012. The increase was attributable to a $14.9 million increase in comparable Company-
owned restaurant sales and $3.8 million from new or relocated restaurants, which was somewhat offset by the
impact of fewer operating weeks in fiscal year 2013. Because fiscal year 2013 included 52 weeks whereas fiscal
year 2012 included 53 weeks, fiscal year 2012 benefited from one more week of sales; fiscal year 2012 sales
included approximately $7.4 million of sales attributable to the 53rd week. Excluding discontinued operations,
total operating weeks during fiscal year 2013 decreased to 3,169 from 3,191 during fiscal year 2012. Comparable
Company-owned restaurant sales for Ruth’s Chris Steak House increased 5.3% on a 52-week basis, which
consisted of a traffic increase of 3.2% and an average check increase of 2.1%.

Franchise Income. Franchise income increased $1.2 million, or 8.5%, to $15.0 million during fiscal year

2013 from fiscal year 2012. The increase was driven primarily by a $1.1 million increase from eight new
locations which opened during fiscal years 2013 and 2012. The remaining increase is from an increase in
comparable franchisee-owned restaurant sales of 1.8% (which included a 1.6% increase in domestic comparable
franchisee-owned restaurant sales and a 2.6% increase in international comparable franchisee-owned restaurant
sales).

Other Operating Income. Other operating income decreased by $395 thousand to $3.1 million during fiscal

year 2013 from fiscal year 2012. Other operating income includes gift card breakage revenue, our share of
income from a managed restaurant and miscellaneous restaurant income. Fiscal year 2013 gift card breakage
revenue decreased $2.0 million due to the unfavorable impact of the $2.2 million adjustment for the change in
accounting for gift card breakage revenue, which included a revision in expected redemptions based on consumer
redemption patterns. Our management fee and our share of income from the Cherokee location was $706
thousand during fiscal year 2013 and $162 thousand during fiscal year 2012.

Food and Beverage Costs. Food and beverage costs increased $778 thousand, or 0.8%, to $93.4 million

during fiscal year 2013 from fiscal year 2012. Food and beverage costs, as a percentage of restaurant sales,
decreased 92 basis points to 30.7% compared to fiscal year 2012 due to a cumulative menu pricing increase of
2.3%, partially offset by the impact of higher beef costs.

32

Restaurant Operating Expenses. Restaurant operating expenses increased $4.4 million, or 3.1%, to $145.7

million during fiscal year 2013 from fiscal year 2012. Restaurant operating expenses, as a percentage of
restaurant sales, decreased 30 basis points to 47.9% largely due to leveraging higher sales on fixed costs.

Marketing and Advertising. Marketing and advertising expenses increased $183 thousand to $9.3 million

during fiscal year 2013 from fiscal year 2012. The increase in marketing and advertising expenses during fiscal
year 2013 was attributable to planned advertising spending.

General and Administrative. General and administrative expenses increased $2.2 million to $27.8 million

during fiscal year 2013 from fiscal year 2012, primarily due to a $2.2 million increase in performance-based
compensation.

Depreciation and Amortization Expenses. Depreciation and amortization expense decreased $821 thousand

to $10.2 million during fiscal year 2013, primarily due to certain property and equipment becoming fully
depreciated.

Loss on impairments. During fiscal year 2012, the Company recognized a $3.0 million loss due to a decline

in the estimated fair value of a restaurant’s assets (primarily leasehold improvements), a $395 thousand
impairment loss related to a location being sold, partially offset by a $134 thousand gain on asset disposals.

Gain on Settlements. During fiscal year 2013, the Company settled two loss claims asserted by us which
previously arose and recognized an aggregate gain of $1.7 million, net of fees incurred. The majority of the gain
pertained to compensation for the Company’s lost operating income awarded by the claims administrator
pursuant to the settlement agreement reached in litigation related to the 2010 Deepwater Horizon oil spill in the
Gulf of Mexico. During fiscal year 2012, the Company reached an agreement to settle certain liabilities
pertaining to unclaimed property returns which had not been filed timely. A $683 thousand gain was recognized
during the fourth quarter of fiscal year 2012 related to this settlement.

Interest Expense. Interest expense decreased $724 thousand to $1.6 million during fiscal year 2013 from
fiscal year 2012. The decrease in expense was primarily due to a lower average debt balance during fiscal year
2013.

Income Tax Expense. During fiscal year 2013, we recognized income tax expense of $10.7 million. During

fiscal year 2012, we recognized income tax expense of $7.9 million. The effective tax rate decreased to 30.5%
during fiscal year 2013 compared to 32.7% during fiscal year 2012. During fiscal year 2013, the Company
recognized a state income tax benefit for employment-related tax credits aggregating $1.0 million generated
during the years 2006 through 2012. These prior year state tax credits resulted in a discrete $623 thousand
reduction (net of federal and state tax consequences) in income tax expense.

Income from Continuing Operations. Income from continuing operations of $24.5 million during fiscal year

2013 increased by $8.3 million compared to fiscal year 2012 due to the factors noted above.

Income (Loss) from Discontinued Operations, net of income taxes. Income (loss) from discontinued

operations, net of income taxes during fiscal year 2013 was a loss of $2.0 million compared with income of $187
thousand during fiscal year 2012. Discontinued operations includes: the recurring revenues and expenses of
restaurants closed or held for sale; impairments and loss on assets of restaurants closed or held for sale; impacts
of remeasurement of lease liabilities associated with closed restaurants; and related income taxes. For financial
reporting purposes, the Mitchell’s Restaurants are classified as a discontinued operation.

The fiscal year 2013 loss from discontinued operations is largely due to a $2.5 million impairment loss on
the assets of the Mitchell’s Restaurants and a $1.7 million loss from the re-measurement of our lease exit costs
attributable to property we lease near the United Nations in Manhattan. Fiscal year 2012 includes a $1.7 million
impairment loss on the assets of a closed restaurant.

33

Net Income (Loss) Applicable to Preferred and Common Shareholders. Net income applicable to preferred
and common shareholders was $22.5 million during fiscal year 2013 compared to $20.0 million net loss during
fiscal year 2012. Net income applicable to preferred and common shareholders in fiscal year 2012 included
charges for preferred stock dividends of $514 thousand and accretion of preferred stock redemption value of $73
thousand. We also recorded a reduction of net income applicable to shareholders of $35.8 million during fiscal
year 2012 to reflect the excess of the redemption value over the carrying value of the preferred shares redeemed.

Potential Fluctuations in Quarterly Results and Seasonality

Our quarterly operating results may fluctuate significantly as a result of a variety of factors. See “Risk

Factors” for a discussion of certain material risks that could affect our quarterly operating results.

Our business is also subject to seasonal fluctuations. Historically, the percentages of our annual total
revenues during the first and fourth fiscal quarters have been higher due, in part, to the year-end holiday season.
Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other
quarter or for any year, and comparable restaurant sales for any particular period may decrease.

Liquidity and Capital Resources

Overview

Our principal sources of cash during fiscal year 2014 were net cash provided by operating activities and
borrowings under our $100 million senior credit facility. Our principal uses of cash during fiscal year 2014 were
for capital expenditures, debt repayments, common stock repurchases and dividend payments. Capital
expenditures included the February 2014 acquisition of the Austin, TX Ruth’s Chris Steak House from a
franchisee.

Cash flows from discontinued operations are combined with the cash flows from continuing operations
within each of the categories on our statement of cash flows. Except for the receipt of $10 million for the sale of
the Mitchell’s Restaurants during the first quarter of fiscal year 2015, we do not anticipate that the sale of the
Mitchell’s Restaurants or any of our closed restaurants reported in discontinued operations will have a material
impact on the Company’s cash flow during fiscal year 2015.

In May 2013, we announced that our Board of Directors approved a share repurchase program. No shares

were repurchased during fiscal year 2013. During fiscal year 2014, a new share repurchase program was
approved by our Board of Directors under which the Company is authorized to repurchase up to $50 million of
outstanding common stock from time to time. The new share repurchase program replaces the previous share
repurchase program announced in May 2013, which has been terminated. During fiscal year 2014, 1,244,065
shares were repurchased under both programs at an aggregate cost of $15.4 million or an average cost of $12.39
per share. All repurchased shares were retired and cancelled. As of December 28, 2014, $44.9 million remained
available for future purchases under the new program.

During the second quarter of fiscal year 2013, we commenced paying quarterly cash dividends to holders of

common and restricted stock. We paid a quarterly cash dividend of $0.05 per share, or $1.8 million in the
aggregate, during each of the first, second, third and fourth quarters of fiscal year 2014. On February 13, 2015,
we announced that our Board of Directors declared a quarterly cash dividend of $0.06 per share, or $2.1 million
in the aggregate, to be paid on March 12, 2015 to common and restricted stockholders of record as of the close of
business on February 26, 2015. Future dividends will be subject to the approval of our Board of Directors.

We believe that our borrowing ability under our senior credit facility coupled with our anticipated cash flow

from operations should provide us with adequate liquidity in fiscal year 2015.

34

Senior Credit Facility

As of December 28, 2014, the Company had an aggregate of $13.0 million of outstanding indebtedness
under its $100 million senior credit facility at a weighted average interest rate of 4.16% with approximately
$82.8 million of borrowings available, net of outstanding letters of credit of approximately $4.2 million. The
4.16% weighted average interest rate includes a 2.19% interest rate on outstanding indebtedness, plus fees on the
Company’s unused borrowing capacity and outstanding letters of credit. As of December 28, 2014, the Company
was in compliance with all the covenants under its credit facility.

In February 2012, we entered into a Second Amended and Restated Credit Agreement with Wells Fargo
Bank, as administrative agent, and certain other lenders (the Amended and Restated Credit Agreement). The
Amended and Restated Credit Agreement allows for loan advances plus outstanding letters of credit of up to
$100.0 million to be outstanding at any time that the conditions for borrowings are met. The Amended and
Restated Credit Agreement sets the interest rates applicable to borrowings based on the Company’s actual
leverage ratio, ranging (a) from 2.00% to 2.75% above the applicable LIBOR rate or (b) at the Company’s
option, from 1.00% to 1.75% above the applicable base rate.

The Amended and Restated Credit Agreement contains customary covenants and restrictions, including, but
not limited to: (1) prohibitions on incurring additional indebtedness and from guaranteeing obligations of others;
(2) prohibitions on creating, incurring, assuming or permitting to exist any lien on or with respect to any property
or asset; (3) limitations on the Company’s ability to enter into joint ventures, acquisitions and other investments;
(4) prohibitions on directly or indirectly creating or becoming liable with respect to certain contingent liabilities;
and (5) restrictions on directly or indirectly declaring, ordering, paying, or making any restricted junior
payments. The Amended and Restated Credit Agreement requires the Company to maintain a fixed charge
coverage ratio of 1.25:1.00 and the maximum leverage ratio of 2.50:1.00. The agreement was amended in May
2013 to reset the limit applicable to junior stock payments, which include both cash dividend payments and
repurchase of common and preferred stock. Junior stock payments made subsequent to December 30, 2012
through the end of the agreement are limited to $100.0 million; $26.8 million of such payments had been made as
of December 28, 2014. The Company’s obligations under the Amended and Restated Credit Agreement are
guaranteed by each of its existing and future subsidiaries and are secured by substantially all of its assets and a
pledge of the capital stock of its subsidiaries. The Amended and Restated Credit Agreement includes customary
events of default. As of December 28, 2014, the Company was in compliance with the covenants under the
Amended and Restated Credit Agreement.

Capital Expenditures

Capital expenditures in fiscal year 2014, which aggregated $20.1 million, pertained primarily to: $7.7
million for restaurant remodel projects; $9.7 million for new restaurants in Denver, CO, Gaithersburg, MD and
Marina del Rey, CA; and $2.8 million for the acquisition of the Austin, TX Ruth’s Chris Steak House Restaurant
from the owner franchisee. Capital expenditures in fiscal year 2013, which aggregated $15.3 million, pertained
primarily to: $8.0 million for various restaurant remodel projects; $2.9 million for the cost of relocating our
Houston, TX Ruth’s Chris Steak House; $2.4 million for a new Ruth’s Chris Steak House in Denver, CO which
opened in early 2014; and $1.7 million for information technology projects. Capital expenditures in fiscal year
2012, which aggregated $11.5 million, pertained primarily to $7.7 million for various remodel projects and $3.0
million for a new Ruth’s Chris Steak House in Cincinnati, OH.

We anticipate capital expenditures in fiscal year 2015 will be approximately $20 to $23 million. We
currently expect to open two to three Company-owned restaurants at leased locations in fiscal year 2015.

Repurchase of Preferred Stock

On March 8, 2012, we repurchased all of our issued and outstanding shares of preferred stock for $60.2
million in cash. The purchase price, which includes all accrued and unpaid dividends owed on the preferred
stock, was funded using borrowings from our $100 million senior credit facility. We believe the repurchase of all

35

of the outstanding preferred stock enhanced our capital structure by reducing our potentially fully diluted
common share base and eliminating the preferred dividends. As of the date of the repurchase, our potential fully
diluted common share base decreased by approximately 8.6 million shares and the 10% dividend on the preferred
stock, which amounted to $2.5 million in fiscal year 2011, was eliminated subsequent to the redemption.

Cash Flows

The following table summarizes our primary sources and uses of cash (in thousands):

Net cash provided by (used in):

Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 43,348
(20,016)
(29,617)

$ 47,796
(14,207)
(30,912)

$ 53,324
(11,296)
(38,044)

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .

$ (6,285) $ 2,677

$ 3,984

Fiscal Year

2014

2013

2012

Operating Activities. Operating cash inflows pertain primarily to restaurant sales and franchise income.
Operating cash outflows pertain primarily to expenditures for food and beverages, restaurant operating expenses,
marketing and advertising and general and administrative costs. Operating activities provided cash flow all three
fiscal years primarily because operating revenues have exceeded cash-based expenses. Cash provided by
operating activities decreased $4.4 million in fiscal year 2014 compared to fiscal year 2013 primarily due to $2.1
million from the fiscal year 2014 payments of fiscal year 2013 performance-based compensation and $3.8
million from the timing of when credit card sales are received around the end of the fiscal year. Cash provided by
operating activities decreased $5.5 million in fiscal year 2013 compared to fiscal year 2012 primarily due to $2.0
million from the fiscal year 2013 payments of fiscal year 2012 performance-based compensation liabilities and a
$2.5 million payment to settle certain liabilities pertaining to unclaimed property.

Investing Activities. Cash used in investing activities in all three fiscal years pertained primarily to capital

expenditure projects.

Financing Activities. Financing activities used cash in all three years. During fiscal year 2014, we: reduced
the debt outstanding under our senior credit facility by $6.0 million; used $15.4 million to repurchase common
stock; paid $3.1 million in employee taxes in connection with the vesting of restricted stock and the exercise of
stock options; and paid dividends of $7.1 million. We paid $3.1 million in taxes in connection with the vesting of
restricted stock and the exercise of stock options because some recipients elected to satisfy their individual
minimum tax withholding obligations by having us withhold a number of vested shares of restricted stock and/or
a number of shares otherwise issuable pursuant to stock options, in each case in an amount having a value on the
date of vesting or exercise equal to a recipient’s minimum federal and state withholding taxes. During fiscal year
2013, we reduced the debt outstanding under our senior credit facility by $26.0 million and paid dividends of
$4.3 million. Cash used in financing activities in fiscal year 2012 was the net result of $60.2 million cash used to
repurchase all of our outstanding preferred stock and the $23.0 million proceeds from net additional borrowings
under our senior credit facility.

36

Contractual Obligations

The following table summarizes our contractual obligations as of December 28, 2014:

Payments due by period

Total

Less than
1 year

1-2
years

3-5
years

More than
5 years

Long-term debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease obligations - Mitchell’s Restaurants . . . . . . . . . . .
Other operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14.2
67.6
211.0

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$292.8

(in millions)
$ 0.5
5.6
20.3

$13.2
15.0
52.4

$ —
41.5
117.7

$26.4

$80.6

$159.2

$ 0.5
5.5
20.6

$26.6

Long-term debt obligations include principal maturities and expected interest payments. Expected interest
payments were estimated using the weighted average interest rate of 4.16% under our senior credit facility as of
December 28, 2014. Operating lease obligations do not include contingent rent, common area maintenance,
property taxes and other pass through charges from our landlords. The above table does not include recorded
liabilities to vendors or employees nor does it include routine purchase commitments for food and supplies.

Pursuant the terms of the Agreement, upon closing of the sale of the Mitchell’s Restaurants in January 2015,

Landry’s assumed the lease obligations of the Mitchell’s Restaurants. However, the Company has guaranteed
Landry’s lease obligations aggregating $40.2 million under nine of the leases. Landry’s indemnified the
Company in the event of a default under any of the leases.

Off-Balance Sheet Arrangements

As of December 28, 2014, we do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our discussion and analysis of results of operations and financial condition is based upon our audited
consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial statements is based, in part, on our
critical accounting policies that require us to make estimates and judgments that affect the amounts reported in
those financial statements. Our significant accounting policies, which may be affected by our estimates and
assumptions, are more fully described in Note 2 of the consolidated financial statements. Critical accounting
policies are those that we believe are most important to portraying our financial condition and results of
operations and also require the greatest amount of subjective or complex judgments by management. Judgments
or uncertainties regarding the application of these policies may result in materially different amounts being
reported under different conditions or using different assumptions. We consider the following policies to be the
most critical in understanding the judgments that are involved in preparing the consolidated financial statements.

Deferred Gift Card Revenue and Gift Card Breakage Revenue

Revenue from restaurant sales is recognized when food and beverage products are sold. Deferred revenue

primarily represents the Company’s 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, the Company recognizes restaurant
sales and reduces the deferred revenue liability. Company issued gift cards redeemed at franchisee-owned
restaurants reduce the deferred revenue liability but do not result in our restaurant sales. Gift card transactions
involving franchisees are settled on a monthly basis through the Company’s third party gift card provider. The
expected redemption value of gift cards represents the full value of all gift cards issued less the amount the
Company has recognized as other operating income for gift cards that are not expected to be redeemed.

37

The portion of gift cards sold to customers which are never redeemed is commonly referred to as gift card

breakage. Gift card breakage produces a revenue stream which is a key element of the profitability of the
Company’s gift card program and is classified as a component of other operating revenue.

At the end of the fourth quarter of fiscal year 2013, the Company concluded it had accumulated a sufficient

level of historical data from a large pool of homogeneous transactions to allow management to reasonably and
objectively determine an estimated gift card breakage rate and the pattern of gift card redemptions. As a result,
the Company elected to change its policy for recognizing gift card breakage revenue by changing from the
delayed method to the redemption method of accounting. Under the redemption method, breakage revenue is
recognized and the gift card liability is derecognized for unredeemed gift cards in proportion to actual gift card
redemptions. The Company believes that the redemption method is preferable to the delayed method because it
better reflects the gift card earnings process resulting in the recognition of breakage revenue over the period of
gift card redemptions (i.e., over the performance period) and because the new method makes the Company’s
financial statements more comparable with its primary competitors. The Company will continue to review
historical gift card redemption information to assess the reasonableness of projected gift card breakage rates and
patterns of redemption. Future gift card usage may be different than our historical experience and as result our
estimate of cards not expected to be redeemed is subject to inherent uncertainty. If actual redemption activity
differs significantly from our historical experience our deferred revenue liability and results of operations could
be materially impacted.

Impairment of the Assets of the Mitchell’s Restaurants

During the third quarter of fiscal year 2014, the Company reassessed its asset grouping specific to its

Mitchell’s Fish Market and Mitchell’s/Cameron’s Steakhouse restaurants (the Mitchell’s Restaurants) under
FASB ASC Topic 360, “Property, Plant and Equipment,” and concluded that it was appropriate to change the
asset group from the individual restaurant unit to the set of Mitchell’s Restaurants. As a result of the
reassessment, the Company determined that a triggering event had occurred requiring an impairment evaluation
of its trademarks and long-lived assets. Consequently, during the third quarter of fiscal year 2014, the Company
recorded an impairment loss aggregating to $15.3 million. Specifically, the Company recorded a $7.3 million
impairment loss related to trademark intangible assets and an $8.0 million impairment loss related to long-lived
assets (primarily leasehold improvements). The impairment of both the trademark intangible assets and the long-
lived assets was measured based on the amount by which the carrying amount of assets exceeded fair value. Fair
value was estimated based on both the market and income approaches utilizing market participant assumptions
reflecting all available information as of the balance sheet date. In November 2014, the Company agreed to sell
its Mitchell’s Restaurants and related assets to a third party for $10 million. The sale of the Mitchell’s
Restaurants closed on January 21, 2015. The assets sold consist primarily of leasehold interests, leasehold
improvements, restaurant equipment and furnishings, inventory, and related intangible assets, including brand
names and trademarks associated with the Mitchell’s Restaurants. The assets and related liabilities of the
Mitchell’s Restaurants are classified as held for sale in the consolidated balance sheet as of December 28, 2014.
A $1.8 million loss on assets held for sale was recorded in the fourth quarter of fiscal year 2014. The results of
operations and impairment charges pertaining to the Mitchell’s Restaurants have been classified as discontinued
operations in the consolidated statements of income for all periods presented.

Impairment of Long-Lived Assets

We review property and equipment (which includes leasehold improvements) for impairment when events

or circumstances indicate these assets might be impaired. We test impairment using historical cash flow and
other relevant facts and circumstances as the primary basis for our estimates of future cash flows. The analysis is
performed at the restaurant level for indicators of permanent impairment. In determining future cash flows, we
make significant estimates with respect to future operating results of each restaurant over the expected remaining
life of the primary asset in the restaurant. If assets are determined to be impaired, the loss on impairment is
measured by calculating the amount by which the asset-carrying amount exceeds its fair value. This process
requires the use of estimates and assumptions, which are subject to a high degree of judgment. If these

38

assumptions change in the future, we may be required to record additional losses on impairment on these assets.
As noted above, during third quarter of fiscal year 2014, an $8.0 million impairment loss was recorded related to
the long-lived assets of the Mitchell’s Restaurants.

During fiscal year 2013, the Company recognized a $2.1 million impairment loss due to a decline in the
estimated fair value of one restaurant’s assets (primarily leasehold improvements). The decline in estimated fair
value was attributable to decreases in that restaurant’s projected profitability. The fiscal year 2013 impairment
loss related to a Mitchell’s restaurant and has been reclassified to discontinued operations. During fiscal year
2012, we recorded a $395 thousand impairment related to a location being sold and two impairment losses
aggregating $4.7 million due to declines in the estimated fair value of the assets (which consisted primarily of
leasehold improvements). Approximately $1.7 million of 2012 impairment loss, which related to a Mitchell’s
restaurant, has been reclassified to discontinued operations. The declines in estimated fair value were primarily
attributable to management’s assessment that our expected lease term would be shortened. Management
reviewed the lease terms and expected cash flows for these restaurants and determined that we are not likely to
extend our lease terms under certain of our existing lease agreements.

The judgments we make related to the expected useful lives of long-lived assets and our ability to realize

undiscounted cash flows in excess of the carrying amounts of these assets are affected by factors such as the
ongoing maintenance and improvements of the assets, changes in economic conditions, changes in usage or
operating performance and desirability of the restaurant sites. As we assess the ongoing expected cash flows and
carrying amounts of our long-lived assets, significant adverse changes in these factors could cause us to
recognize a material loss on impairment.

Generally, costs for exit or disposal activities, including restaurant closures, are expensed as incurred. The
costs include the cost of disposing of the assets as well as other facility-related expenses from previously closed
restaurants. Additionally, at the date we cease using a property under an operating lease, we record a liability for
the net present value of any remaining lease obligations, net of estimated sublease income. Any subsequent
adjustments to that liability as a result of lease termination or changes in estimates of sublease income are
recorded in the period incurred. Upon disposal of the assets associated with a closed restaurant, any gain or loss
is recorded in the same line within our consolidated statements of income as the original impairment.

Valuation and Recoverability of Goodwill, Franchise Rights and Trademarks

Goodwill, franchise rights and trademarks arose primarily from our acquisition of franchisee-owned Ruth’s

Chris restaurants and our acquisition of Mitchell’s Fish Markets. The most significant acquisitions were
completed in 1996, 1999, 2006, 2007 and 2008. Goodwill, trademarks and franchise rights acquired prior to 2008
are not subject to amortization. Such assets must be tested for impairment annually and whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. A variety of inherently
uncertain estimates, judgments and projections are used in both assessing whether there has been an indicator
that an impairment of an intangible asset may have occurred and estimating fair value of possibly impaired
assets. Management is required to: project future sales and cash flows associated with a specific intangible asset;
assess maintenance and capital improvement requirements; estimate the cost of capital (or discount rate) that a
market participant would use in assessing value for a specific intangible asset; and anticipate changes in usage
and operating performance. Changes in the following will impact future assessments of whether or not our
intangible assets have been impaired: our expectations regarding future sales and profitability; the economic
environment; competitive conditions; the desirability of restaurant sites; and the cost of capital to the restaurant
industry generally and the Company specifically.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred.

Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained,
significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in
the business climate; unanticipated competition; unfavorable results of testing for recoverability of a significant
asset group within a reporting unit; and slower growth rates. Any adverse change in these factors could have a

39

significant impact on the recoverability of these assets which could have a material impact on our consolidated
financial statements. If we determine that an intangible asset may be impaired we are required to estimate its fair
value. Because similar intangible assets are not bought and sold regularly in public markets, estimates of fair
value of our intangible assets are inherently uncertain. Franchise rights and trademarks tend to be bought and
sold as components of the business units being sold. Also, trademarks and franchise rights tend to be unique
assets further complicating the task of estimating the fair value of such assets.

The goodwill impairment test involves a two-step process. The first step is a comparison of the carrying

value of the reporting unit to its fair value. Consistent with the valuation of restaurant operations, the Company
utilizes a multiple of EBITDA to approximate the fair value of the reporting unit for purposes of completing Step
1 of the evaluation. The Company considers EBITDA multiples of publicly held companies, including its own, as
well as other private reporting unit acquisitions. For reporting units whose estimated fair value exceed its
carrying value, no impairment is recorded. As of December 28, 2014, the estimated fair values of all reporting
units exceeded their respective carrying values. If a reporting unit’s fair value had not exceeded its carrying value
as the balance sheet date, the Company would have completed Step 2 of the evaluation by comparing the implied
fair value of goodwill with the net asset value of the reporting unit. The Company would have calculated the
implied fair value by allocating the fair value of a reporting unit to all of its assets and liabilities as if the
reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price
paid to acquire the unit. The fair values of the reporting units with goodwill on the balance sheet as of
December 28, 2014 significantly exceed their financial statement carrying values.

The fair value of our franchise rights are estimated and compared to their carrying value. We estimate the

fair value of these intangible assets using an excess earnings approach, which estimates value based upon the
discounted value of future cash flow expected to be generated by Company-owned restaurants in the acquired
trade area, net of all contributory asset returns. This calculation requires market based assumptions related to
projected cash flows, projected capital expenditures, as well as a discount rate. We recognize an impairment loss
when the estimated fair value of the franchise rights is less than its carrying value. We completed our impairment
test of our franchise rights and concluded as of the date of the test, there was no impairment because the
estimated fair value significantly exceeded the financial statement carrying value as of December 28, 2014.

The fair value of our acquired trademarks are estimated and compared to the financial statement carrying
value. We recognize an impairment loss when the estimated fair value of a trademark is less than its carrying
value. To determine the fair value of trademarks we use a relief-from-royalty valuation approach. This approach
assumes that in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related
benefits of these types of assets. This approach is dependent on a number of factors, including estimates of future
revenue growth and trends, royalty rates in the category of intellectual property, discount rates and other
variables. As noted above, during the third quarter of fiscal year 2014, a $7.3 million impairment loss was
recorded related to the brand names and trademarks of the Mitchell’s Restaurants. The fiscal year 2014
impairment loss has been reclassified to discontinued operations. The decline in estimated fair value and
corresponding impairment of the Mitchell’s trademarks was based on reduced revenue growth expectations, a
reduced assumed royalty rate and an increase in the discount rate. During the fourth quarter of fiscal year 2013, a
$400 thousand loss on the impairment of an ancillary trademark not expected to be used was recorded. The fiscal
year 2013 impairment loss has been reclassified to discontinued operations. The remaining Mitchell’s trademarks
are classified as assets held for sale as of December 28, 2014.

Declines in sales at our restaurants and significant adverse changes in the operating environment for the

restaurant industry may result in future impairment charges. Changes in circumstances, existing at the
measurement date or at other times in the future, or in the estimates associated with management’s judgments
and assumptions made in assessing the fair value of our goodwill, franchise rights and trademarks could result in
an impairment charge.

We evaluate the useful lives of our intangible assets to determine if they are definite or indefinite-lived.
Reaching a determination on useful life requires significant judgments and assumptions regarding the future

40

effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry,
legislative action that results in an uncertain or changing regulatory environment, and expected changes in
distribution channels), the level of required capital expenditures, and the expected lives of other related groups of
assets.

Insurance Liability

We maintain various insurance policies for workers’ compensation, employee health, general liability and

property damage. Pursuant to those policies, we are responsible for losses up to certain limits and are required to
estimate a liability that represents our ultimate exposure for aggregate losses below those limits. The recorded
liabilities are based on management’s estimates of the ultimate costs to be incurred to settle known claims and
claims not reported as of the balance sheet date. We use independent actuaries to develop the estimated workers’
compensation, general and employee health liabilities. Our estimated liability is not discounted and is based on a
number of assumptions and factors, including historical trends, actuarial assumptions and economic conditions. If
actual trends differ from our estimates, our financial results could be impacted.

Income Taxes

We account for income taxes in accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 740, “Income Taxes” (Topic 740). Topic 740 establishes
financial accounting and reporting standards for the effects of income taxes that result from an enterprise’s
activities during the current and preceding years. It requires an asset and liability approach for financial
accounting and reporting of income taxes. We recognize deferred tax liabilities and assets for the future
consequences of events that have been recognized in our consolidated financial statements or tax returns. In the
event the future consequences of differences between financial reporting bases and tax bases of our assets and
liabilities resulted in a net deferred tax asset, an evaluation is made of the probability of our ability to realize the
future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is recorded when it is
more likely than not that some portion or the entire deferred tax asset will not be realized. The realization of such
net deferred tax will generally depend on whether we will have sufficient taxable income of an appropriate
character within the carry-forward period permitted by the tax law. Without sufficient taxable income to utilize
the deductible amounts and carry forwards, the related tax benefits will expire unused. We have evaluated both
positive and negative evidence in making a determination as to whether it is more likely than not that all or some
portion of the deferred tax asset will not be realized. Measurement of deferred items is based on enacted tax laws.

Recent Accounting Pronouncements for Future Application

Accounting standards that have been issued by the FASB or other standards-setting bodies that do not
require adoption until a future date are not expected to have a material impact on the consolidated financial
statements upon adoption.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The Company is exposed to market risk from fluctuations in interest rates. For fixed rate debt, interest rate

changes affect the fair market value of such debt but do not impact earnings or cash flows. Conversely for
variable rate debt, including borrowings under the Company’s senior credit facility, interest rate changes
generally do not affect the fair market value of such debt, but do impact future earnings and cash flows, assuming
other factors are held constant. At December 28, 2014, the Company had $13.0 million of variable rate debt
outstanding. The Company currently does not use financial instruments to hedge its risk to market fluctuations in
interest rates. Holding other variables constant (such as debt levels), a hypothetical 100 basis point change in
interest rates as of December 28, 2014 would be expected to have an impact on pre-tax earnings and cash flows
for fiscal year 2014 of approximately $0.1 million.

41

Foreign Currency Risk

The Company believes that fluctuations in foreign exchange rates do not present a material risk to its
operations. Franchise fee revenue from international locations aggregated $3.2 million and $3.0 million in fiscal
years 2014 and 2013, respectively.

Commodity Price Risk

The Company is exposed to market price fluctuations in beef and other food product prices. Given the
historical volatility of beef and other food product prices, this exposure can impact the Company’s food and
beverage costs. As the Company typically sets its menu prices in advance of its beef and other food product
purchases, the Company cannot quickly react to changing costs of beef and other food items. To the extent that
the Company is unable to pass the increased costs on to its guests through price increases, the Company’s results
of operations would be adversely affected. As of December 28, 2014, we have not negotiated set pricing for any
beef requirements for 2015. The market for USDA Prime grade beef is particularly volatile. If prices increase, or
the supply of beef is reduced, operating margin could be materially adversely affected. Ceteris paribus, a
hypothetical 10% fluctuation in beef prices would have an approximate impact on pre-tax earnings ranging from
$4 million to $5 million for fiscal year 2015.

From time to time, the Company enters into purchase price agreements for other lower-volume food
products, including seafood. In the past, certain types of seafood have experienced fluctuations in availability.
Seafood is also subject to fluctuations in price based on availability, which is often seasonal. If certain types of
seafood are unavailable, or if the Company’s costs increase, the Company’s results of operations could be
adversely affected.

Effects of Inflation

Components of the Company’s operations subject to inflation include food, beverage, lease and labor costs.

The Company’s leases require it to pay taxes, maintenance, repairs, insurance and utilities, all of which are
subject to inflationary increases. The Company believes that general inflation, excluding increases in food and
employee health plan costs, has not had a material impact on its results of operations in recent years.
Additionally, increases in statutory minimum wage rates may increase our operating costs. During 2014,
governmental entities acted to increase minimum wage rates in several states wherein Company-owned
restaurants are located. The increased minimum wage rates are expected to increase employee compensation and
related taxes by approximately $800 thousand in fiscal year 2015 compared to fiscal year 2014. Also, the U.S.
government may act to increase the federal minimum wage rate.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company’s consolidated financial statements, together with the related notes and report of independent

registered public accounting firm, are set forth in the pages indicated in Item 15, Exhibits and Financial
Statement Schedules, of this Annual Report on Form 10-K.

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Chief
Executive Officer and the Chief Financial Officer, the Company conducted an evaluation of the effectiveness of

42

the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) as of December 28, 2014. Based on that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of
December 28, 2014 to ensure that information required to be disclosed in reports filed or submitted by the
Company under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms and that information required to be disclosed by the Company is
accumulated and communicated to the Company’s management to allow timely decisions regarding the required
disclosure.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial

reporting (as defined in Rule 13a-15(f) under the Exchange Act).

Management, including the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness
of the Company’s internal control over financial reporting as of December 28, 2014. In making this assessment,
management applied the criteria based on the “Internal Control—Integrated Framework (1992)” set forth by the
Committee of Sponsoring Organizations of the Treadway Commission. The Company’s assessment included
documenting, evaluating and testing the design and operating effectiveness of the Company’s internal control
over financial reporting. Based upon this evaluation, management concluded that the Company’s internal control
over financial reporting was effective as of December 28, 2014.

KPMG LLP, the Company’s independent registered public accounting firm, has audited the financial
statements included herein and issued an audit report on the Company’s internal control over financial reporting
as of December 28, 2014, which follows.

Our system of internal control over financial reporting was designed to provide reasonable assurance
regarding the preparation and fair presentation of published financial statements in accordance with accounting
principles generally accepted in the United States. All internal control systems, no matter how well designed,
have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ending December 28, 2014, there was no change in the Company’s internal control

over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that in the Company’s judgment
has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial
reporting.

43

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Ruth’s Hospitality Group, Inc.:

We have audited Ruth’s Hospitality Group, Inc.’s internal control over financial reporting as of

December 28, 2014, based on criteria established in Internal Control—Integrated Framework (1992) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Ruth’s Hospitality Group,
Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, Ruth’s Hospitality Group, Inc. maintained, in all material respects, effective internal control

over financial reporting as of December 28, 2014, based on criteria established in Internal Control—Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board

(United States), the consolidated balance sheets of Ruth’s Hospitality Group, Inc. and subsidiaries as of
December 28, 2014 and December 29, 2013, and the related consolidated statements of income, shareholders’
equity and cash flows for each of the years in the three-year period ended December 28, 2014, and our report
dated March 10, 2015 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Orlando, Florida
March 10, 2015
Certified Public Accountants

44

Item 9B. OTHER INFORMATION

None.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated by reference to the Company’s Proxy Statement for
the 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120
days after the end of the fiscal year covered by this Annual Report on Form 10-K.

We have adopted a Code of Conduct and Ethics Policy that applies to our principal executive officer,
principal financial officer and principal accounting officer. The text of our Code of Conduct and Ethics Policy is
posted on our website: www.rhgi.com. We intend to disclose future amendments to, or waivers from, certain
provisions of the Code of Conduct and Ethics Policy on our website within four business days following the date
of such amendment or waiver. Stockholders may request a free copy of the Code of Conduct and Ethics Policy
from: Ruth’s Hospitality Group, Inc., Attention: Corporate Secretary, 1030 W. Canton Avenue, Suite 100, Winter
Park, Florida 32789.

Item 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to the Company’s Proxy Statement for
the 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120
days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

Information about security ownership is incorporated by reference to the Company’s Proxy Statement for
the 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120
days after the end of the fiscal year covered by this Annual Report on Form 10-K.

The following table summarizes the number of stock options issued and shares of restricted stock granted,

net of forfeitures and sales, the weighted-average exercise price of such stock options and the number of
securities remaining to be issued under all outstanding equity compensation plans as of December 28, 2014:

Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

Number of Securities
Remaining Available for
Future Issuance Under an
Equity Compensation Plan
(Excluding Securities
Reflected in Column (a))

(a)

(b)

(c)

Plan Category

Equity compensation plans approved by

stockholders:

2005 Long-Term Equity Incentive

Plan . . . . . . . . . . . . . . . . . . . . . . . . .

1,009,155

$11.62

2,788,943

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE

The information required by this Item is incorporated by reference to the Company’s Proxy Statement for
the 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120
days after the end of the fiscal year covered by this Annual Report on Form 10-K.

45

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference to the Company’s Proxy Statement for
the 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120
days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements and Financial Statement Schedules.

PART IV

See Index to Consolidated Financial Statements appearing on page F-1. All schedules have been
omitted because they are not required or applicable or the information is included in the consolidated
financial statements or notes thereto.

(b) Exhibits.

See Exhibit Index appearing on page E-1 for a list of exhibits filed with or incorporated by reference as

part of this Annual Report on Form 10-K.

46

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

March 10, 2015

RUTH’S HOSPITALITY GROUP, INC.

By:

/s/ MICHAEL P. O’DONNELL

Michael P. O’Donnell
Chairman of the Board, President and Chief Executive
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the

following persons on behalf of Ruth’s Hospitality Group, Inc. and in the capacities and on the dates indicated.

Signatures

Title

/s/ MICHAEL P. O’DONNELL

Michael P. O’Donnell

Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)

Dates

March 10, 2015

/s/ ARNE G. HAAK

Arne G. Haak

Executive Vice President and Chief

March 10, 2015

Financial Officer (Principal
Financial Officer)

/s/ MARK W. OSTERBERG

Vice President of Accounting and

March 10, 2015

Mark W. Osterberg

/s/ ROBIN P. SELATI

Robin P. Selati

/s/ CARLA R. COOPER

Carla R. Cooper

Chief Accounting Officer
(Principal Accounting Officer)

Lead Director

March 10, 2015

Director

March 10, 2015

/s/ BANNUS B. HUDSON

Director

March 10, 2015

Bannus B. Hudson

/s/ ROBERT S. MERRITT

Director

March 10, 2015

Robert S. Merritt

/s/ ALAN VITULI

Alan Vituli

Director

March 10, 2015

47

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RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

F-2

F-3

F-4

F-5

F-6

F-7

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Ruth’s Hospitality Group, Inc.:

We have audited the accompanying consolidated balance sheets of Ruth’s Hospitality Group, Inc.
and subsidiaries as of December 28, 2014 and December 29, 2013, and the related consolidated statements of
income, shareholders’ equity and cash flows for each of the years in the three-year period ended December 28,
2014. These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,

the financial position of Ruth’s Hospitality Group, Inc. and subsidiaries as of December 28, 2014 and
December 29, 2013, and the results of their operations and their cash flows for each of the years in the three-year
period ended December 28, 2014, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board

(United States), Ruth’s Hospitality Group, Inc.’s internal control over financial reporting as of December 28,
2014, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 2015
expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

As discussed in Note 2 to the consolidated financial statements, the Company elected to change its method

of accounting for the recognition of gift card breakage income in 2013. That change was effected by and is
inseparable from the effects of the Company’s 2013 changes in estimated gift card breakage rates and the
estimated pattern of actual gift card redemptions.

/s/ KPMG LLP

Orlando, Florida
March 10, 2015
Certified Public Accountants

F-2

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)

December 28,
2014

December 29,
2013

Current assets:

Assets

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts receivable, less allowance for doubtful accounts 2014 - $760; 2013 -

4,301

$ 10,586

$779 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property and equipment, net of accumulated depreciation 2014 - $114,708; 2013 -

20,458
7,206
15,119
1,291
3,775

52,150

$122,691 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Franchise rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles, net of accumulated amortization 2014 - $2,920; 2013 - $2,703 . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80,354
24,293
32,418
118
2,476
25,054
1,704
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $218,567

Current liabilities:

Liabilities and Shareholders’ Equity

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities associated with assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,414
15,304
11,065
34,552
4,869
7,277

86,481
13,000
19,990
2,785

13,409
7,913
—
2,484
4,598

38,990

91,470
22,097
32,200
10,276
5,804
24,984
2,260
$228,081

$ 14,965
18,128
8,457
31,836
—
7,217

80,603
19,000
23,235
4,590

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

122,256

127,428

Commitments and contingencies (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

Shareholders’ equity:
Common stock, par value $.01 per share; 100,000,000 shares authorized, 34,333,858
shares issued and outstanding at December 28, 2014 34,990,170 shares issued and
outstanding at December 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost; 71,950 shares at December 28, 2014 and December 29, 2013 . .

343
155,455
(59,487)
—

350
169,107
(68,804)
—

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96,311

100,653

Total liabilities, and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $218,567

$228,081

See accompanying notes to consolidated financial statements.

F-3

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income
(Dollar amounts in thousands, except share and per share data)

Fiscal Year Ended

December 28,
2014

December 29,
2013

December 30,
2012

Revenues:

Restaurant sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Franchise income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Costs and expenses:

Food and beverage costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restaurant operating expenses . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative costs . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expenses . . . . . . . . . . . . . . . . .
Pre-opening costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on settlements, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs written-off . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Income from continuing operations before income tax expense . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations:

Income (loss) from discontinued operations, net of income

tax benefit: 2014 ($7,472); 2013-($2,426);
2012-($1,236)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of preferred stock redemption value . . . . . . . . . . . . . . . . . . . .
Excess of redemption value over carrying value of preferred shares

redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) applicable to preferred and common shareholders . .

Basic earnings (loss) per common share:

Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings (loss) per common share:

Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . .

$

$

$

$

$

325,437
15,763
4,897
346,097

103,259
156,242
10,076
24,311
10,917
1,630
—
—
306,435
39,662

(1,159)
—
37
38,540
11,830
26,710

(10,255)
16,455
—
—

—
16,455

0.76
(0.29)
0.47

0.75
(0.29)
0.46

$

$

$

$

$

$

$

304,200
15,012
3,142
322,354

93,386
145,664
9,341
27,808
10,229
691
—
(1,719)
285,400
36,954

(1,640)
—
(77)
35,237
10,744
24,493

(2,004)
22,489
—
—

—
22,489

0.71
(0.06)
0.65

0.69
(0.06)
0.63

$

$

$

$

$

292,912
13,836
3,537
310,285

92,608
141,227
9,158
25,612
11,050
540
3,262
(683)
282,774
27,511

(2,364)
(807)
(293)
24,047
7,855
16,192

187
16,379
514
73

35,776
(19,984)

(0.59)
0.01
(0.58)

(0.59)
0.01
(0.58)

Shares used in computing earnings (loss) per common share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per common share . . . . . . . . . . . . . . . . . . . . . . . . . .

34,955,760
35,415,483
0.20

$

34,761,160
35,784,430
0.12

$

34,313,636
34,313,636
—

$

See accompanying notes to consolidated financial statements.

F-4

RUTH’S HOSPITALITY GROUP, INC AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity
(Amounts in thousands)

Common Stock

Shares Value

Additional
Paid-in
Capital

Accumulated
Deficit

Treasury
Stock
Shares Value

Shareholders’
Equity

Balance at December 25, 2011 . . . . . . . . . . . . 34,150 $341 $200,525 $(102,880)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Preferred stock dividends . . . . . . . . . . . . . . . . — —
Accretion of preferred stock redemption

—
—

16,379 —
(514) —

72

$— $ 97,986
16,379
—
(514)
—

value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

(73)

Excess of redemption value over carrying

value of Preferred Shares redeemed . . . . . . — — (35,776)

Shares issued under stock compensation

plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

284

3

Stock-based compensation . . . . . . . . . . . . . . . — —

406
2,322

—

—

—
—

—

—

—
—

—

—

—
—

Balance at December 30, 2012 . . . . . . . . . . . . 34,434

344

167,404

(87,015)

72 —

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . — —
Shares issued under stock compensation plan
net of shares withheld for tax effects . . . . .

556

6

Excess tax benefit from stock based

compensation . . . . . . . . . . . . . . . . . . . . . . . — —
Stock-based compensation . . . . . . . . . . . . . . . — —

—
—

22,489 —
(4,278) —

(1,772)

1,132
2,343

—

—
—

—

—
—

—
—

—

—
—

(73)

(35,776)

409
2,322

80,733

22,489
(4,278)

(1,766)

1,132
2,343

Balance at December 29, 2013 . . . . . . . . . . . . 34,990

350

169,107

(68,804)

72 —

100,653

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . — —
Repurchase of common stock . . . . . . . . . . . . .
Shares issued under stock compensation plan
net of shares withheld for tax effects . . . . .

(1,244)

588

6

(12)

—
—
(15,397)

(2,945)

Excess tax benefit from stock based

compensation . . . . . . . . . . . . . . . . . . . . . . . — —
Stock-based compensation . . . . . . . . . . . . . . . — —

1,868
2,821

16,455 —
(7,138) —
—

—

—

—
—

—

—
—

—
—
—

—

—
—

16,455
(7,138)
(15,409)

(2,939)

1,868
2,821

Balance at December 28, 2014 . . . . . . . . . . . . 34,334 $343 $155,455 $ (59,487)

72

$— $ 96,311

See accompanying notes to consolidated financial statements.

F-5

RUTH’S HOSPITALITY GROUP, INC AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(Dollar amounts in thousands)

Fiscal Year Ended

December 28, December 29, December 30,
2013

2012

2014

Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:

$ 16,455

$ 22,489

$ 16,379

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs written-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairment and asset disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of below market lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on the settlement of unclaimed property liabilities . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,185
753
421
—
15,805
129
—
2,821

(7,049)
(151)
1,193
200
(2,669)
2,717
50
(512)

13,060
6,093
421
—
3,262
129
—
2,343

(2,114)
8
(621)
225
3,036
622
(1,123)
(34)

14,556
3,224
476
807
4,955
129
(683)
2,322

1,420
(563)
(415)
48
7,931
1,132
1,321
285

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43,348

47,796

53,324

Cash flows from investing activities:

Acquisition of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of franchise restaurant, net of cash acquired . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Proceeds on disposal of property and equipment

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from financing activities:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal repayments on long-term debt
Principal borrowings on long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of Series A 10% redeemable convertible preferred stock . . . . . . . .
Cash dividend payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax payments from the vesting of restricted stock and option exercises . . . . . .
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .

Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(17,365)
(2,800)
149

(20,016)

(32,000)
26,000
(15,409)
—
(7,138)
1,868
(3,121)
—
183

(29,617)

(6,285)

10,586

(15,311)
—
1,104

(14,207)

(32,500)
6,500
—
—
(4,278)
1,132
(1,974)
—
208

(30,912)

2,677

7,909

(11,457)
—
161

(11,296)

(47,000)
70,000
—
(59,740)
(1,103)
16
—
(610)
393

(38,044)

3,984

3,925

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,301

$ 10,586

$ 7,909

Supplemental disclosures of cash flow information:
Cash paid during the period for:

Interest, net of capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
709
$ 2,135

$ 1,272
$ 2,383

$ 1,983
$ 2,643

Noncash investing and financing activities:

Excess accrual-based acquisition of property and equipment . . . . . . . . . . . . . . .

$ 1,243

$ 1,213

$

(117)

See accompanying notes to consolidated financial statements.

F-6

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) The Company, Organization and Description of Business

Ruth’s Hospitality Group, Inc. and its subsidiaries (the Company) operate Ruth’s Chris Steak House
restaurants and sell franchise rights to Ruth’s Chris Steak House franchisees giving the franchisees the exclusive
right to operate similar restaurants in a particular area designated in the franchise agreement.

At December 28, 2014, there were 143 Ruth’s Chris Steak House restaurants, of which 65 were Company-

owned, 77 were franchisee-owned, and one location was operating under a management agreement. All
Company-owned restaurants are located in the United States. The franchisee-owned restaurants include 20
international restaurants in Aruba, Canada, China (Hong Kong and Shanghai), El Salvador, Japan, Mexico,
Panama, Singapore, Taiwan and the United Arab Emirates. A Ruth’s Chris Steak House located at Harrah’s
Casino in Cherokee, NC operates under a management agreement between the Company and the Eastern Band of
Cherokee Indians. Six new Ruth’s Chris Steak House locations opened during fiscal year 2014, including three
Company-owned restaurants and three franchisee-owned restaurants. The Company opened three new Company-
owned Ruth’s Chris Steak House restaurants in 2014 – one in Denver, CO in January, one in Gaithersburg, MD
in October, and one in Marina del Rey, CA in November. In February 2014, the Company acquired a franchisee-
owned restaurant located in Austin, TX.

As of December 28, 2014, the Company also operated eighteen Mitchell’s Fish Markets and three

Mitchell’s/Cameron’s Steakhouse restaurants (collectively, the Mitchell’s Restaurants), located primarily in the
Midwest and Florida. On January 21, 2015, the Company sold the Mitchell’s Restaurants to a third party. For
financial reporting purposes, the Mitchell’s Restaurants are classified as a discontinued operation for all periods
presented and, as of December 28, 2014, the assets and liabilities are classified as held for sale. See Notes 3, 4
and 5 for additional information regarding the Mitchell’s Restaurants and the sale.

The following table summarizes the changes in the number of Company-owned Ruth’s Chris Steak House
restaurants and franchisee-owned restaurants during the thirteen and fifty-two weeks ended December 28, 2014.

13 Weeks Ending
December 28, 2014

52 Weeks Ending
December 28, 2014

Ruth’s Chris Steak House . . . . . . Company Franchised Managed Total Company Franchised Managed Total
139
1
1
6
2

Beginning of period . . . . . . .
Acquired . . . . . . . . . . .
Sold . . . . . . . . . . . . . . .
New . . . . . . . . . . . . . . .
Closed . . . . . . . . . . . . .

140
0
0
3
0

76
0
0
1
0

63
1
0
3
2

75
0
1
3
0

63
0
0
2
0

1
0
0
0
0

1
0
0
0
0

End of period . . . . . . . . . . . .

% of total . . . . . . . . . . .

65

45%

77

54%

1

143

1% 100%

65

45%

77

54%

1

143

1% 100%

F-7

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation

The Company utilizes a 52- or 53-week reporting period ending on the last Sunday of December. The
periods ended December 28, 2014 (fiscal year 2014) and December 29, 2013 (fiscal year 2013) each had a 52-
week reporting period. The period ended December 30, 2012 (fiscal year 2012) had a 53-week reporting period.
The consolidated financial statements are prepared in conformity with accounting principles generally accepted
in the United States of America and include the financial statements of Ruth’s Hospitality Group, Inc. and its
wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated in
consolidation.

The preparation of consolidated financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.

Certain prior year amounts have been reclassified to conform to the current year presentation. Most
significantly, the results of the Mitchell’s Restaurants have been reclassified as a discontinued operation.

(b) Change in Accounting for Gift Card Breakage

The portion of gift cards sold to customers which are never redeemed is commonly referred to as gift card

breakage. Prior to the fourth quarter of fiscal year 2013, the Company recognized breakage revenue using the
delayed method of accounting. At the end of the fourth quarter of fiscal year 2013, the Company elected to
change its policy for recognizing gift card breakage revenue by changing from the delayed method to the
preferable redemption method of accounting. Under the redemption method, breakage revenue is recognized and
the gift card liability is derecognized for unredeemed gift cards in proportion to actual gift card redemptions. The
impact of the cumulative catch-up adjustment recorded in the fourth quarter of fiscal year 2013 was to reduce gift
card breakage revenue by $2.2 million. Inclusive of this adjustment, the Company recognized $804 thousand of
gift card breakage revenue in fiscal year 2013. Gift card breakage revenue recognized in fiscal years 2014 and
2012 was $2.6 million and $1.9 million, respectively. Consistent with the cumulative catch-up method of
accounting for a change in accounting estimate effected by a change in accounting principle, previously issued
financial statements were not revised.

(c) Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update

(ASU) No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an
Entity,” (ASU 2014-08), which changes the criteria for reporting discontinued operations and requires additional
disclosures about discontinued operations. ASU 2014-08 requires that an entity report as a discontinued operation
only a disposal that represents a strategic shift in operations that has a major effect on its operations and financial
results. ASU 2014-08 is effective for public business entities for annual periods, and interim periods within those
annual periods, beginning on or after December 15, 2014. The Company believes that the new guidance will not
have a material impact on the consolidated results of operations or on the financial position, except that individual
restaurants closed after the adoption of the guidance will generally not be classified as discontinued operations.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” (ASU 2014-
09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer
of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in

F-8

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

U.S. generally accepted accounting principles when it becomes effective. The new standard is effective for
interim and annual periods in fiscal years beginning after December 15, 2016. Early application is not permitted.
The standard permits the use of either the retrospective or cumulative effect transition method. The Company is
evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures.
The Company has not yet selected a transition method nor has it determined the effect of the standard on its
ongoing financial reporting.

(d) Contingencies

The Company recognizes liabilities for contingencies when there is an exposure that indicates it is both
probable that an asset has been impaired or that a liability has been incurred and that the amount of impairment
or loss can be reasonably estimated.

(e) Cash Equivalents

For purposes of the consolidated financial statements, the Company considers all highly liquid investments

purchased with an original maturity of three months or less to be cash equivalents. The Company has included
outstanding checks totaling $7.6 million and $10.1 million at December 28, 2014 and December 29, 2013,
respectively, in “Accounts payable” and “Accrued payroll” in the consolidated balance sheets. Changes in such
amounts are reflected in cash flows from operating activities in the consolidated statements of cash flows.

(f) Accounts Receivable

Accounts receivable consists primarily of bank credit cards receivable, landlord contributions, franchise

royalty payments receivable, banquet billings receivable and other miscellaneous receivables.

(g) Allowance for Doubtful Accounts

The Company performs a specific review of account balances and applies historical collection experience to

the various aging categories of receivable balances in establishing an allowance.

(h) Inventories

Inventories consist of food, beverages and supplies and are stated at the lower of cost or market. Cost is

determined using the first-in, first-out method.

(i) Property and Equipment, net

Property and equipment are stated at cost. Expenditures for improvements and major renewals are

capitalized and minor replacement, maintenance and repairs are charged to expense. Depreciation is computed on
a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized on the
straight-line basis over the shorter of the lease term or the estimated useful lives of the assets. The estimated
useful lives for assets are as follows: Building and Building Improvements, 20 to 40 years; Equipment, 5 years;
Furniture and Fixtures, 5 to 7 years; Computer Equipment, 3 to 5 years; and Leasehold Improvements, 5 to 20
years (limited by the lease term).

(j) Goodwill, Franchise Rights and Trademarks

Goodwill and trademarks acquired in a purchase business combination that are determined to have an

indefinite useful life are not amortized, but tested for impairment at least annually in accordance with the

F-9

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

provisions of FASB ASC Topic 350, “Intangibles-Goodwill and Other.” Goodwill and trademarks are tested
annually for impairment on a reporting unit basis and more frequently if events and circumstances indicate that
the asset might be impaired. For purposes of testing goodwill impairment, a reporting unit is defined as a group
of restaurants with similar economic characteristics. For purposes of testing trademark impairment, a reporting
unit is defined as a group of acquired restaurants sharing a common trade name. An impairment loss is
recognized to the extent that the financial statement carrying amount exceeds the asset’s fair value.

Franchise rights acquired prior to 2008 in a purchase business combination that are determined to have an
indefinite useful life are not amortized, but are tested for impairment at least annually on a reporting unit basis,
which is defined as a group of reacquired restaurants, and more frequently if events and circumstances indicate
that the asset might be impaired. The Company allows and expects franchisees to renew agreements indefinitely
ensuring consistent cash flows. As a result, acquired franchise rights are determined to have indefinite useful
lives. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.
Franchise rights acquired after 2007 are no longer considered to have indefinite useful lives and are amortized in
accordance with FASB ASC Topic 350.

(k) Impairment or Disposal of Long-Lived Assets

In accordance with FASB ASC Topic 360-10, “Property, Plant and Equipment—Impairment or Disposal of

Long-Lived Assets,” (Topic 360-10), long lived assets, such as property and equipment and purchased
intangibles subject to amortization, are reviewed for impairment on a restaurant-by-restaurant basis whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated by the asset. If the financial statement
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the
amount by which the carrying amount of the asset exceeds the fair value of the asset. Key assumptions in the
determination of fair value are the future after-tax cash flows of the restaurant and discount rate. The after-tax
cash flows incorporate reasonable sales growth and margin improvement assumptions that would be expected by
a franchisee in the determination of a purchase price for the restaurant. Estimates of future cash flows are highly
subjective judgments and can be significantly impacted by changes in the business or economic conditions. The
discount rate used in the fair value calculations is our estimate of the required rate of return that a market
participant would expect to receive when purchasing a similar restaurant or groups of restaurants and the related
long-lived assets. The discount rate incorporates rates of returns for historical refranchising market transactions
and is commensurate with the risks and uncertainty inherent in the forecasted cash flows.

The assets and liabilities of a disposed group classified as held for sale are presented separately in the
appropriate asset and liability sections of the consolidated balance sheets. Assets are classified as held for sale
when certain criteria are met, including the requirement that it is probable that the assets will be disposed of
within one year. Assets classified as held for sale are separately presented in the balance sheet and reported at the
lower of the carrying amount or the fair value less costs to sell, and are no longer depreciated. We account for
exit or disposal activities, including restaurant closures, in accordance with Topic 360-10. Such costs include the
cost of disposing of the assets as well as other facility-related expenses from previously closed restaurants. These
costs are generally expensed as incurred. Additionally, at the date we cease using a property under an operating
lease, we record a liability under FASB ASC Topic 420, “Exit and Disposal Cost Obligations” for the net present
value of any remaining lease obligations, net of estimated sublease income. Any subsequent adjustments to that
liability as a result of lease termination or changes in estimates of sublease income are recorded in the period
incurred. Upon disposal of the assets associated with a closed restaurant, any gain or loss is recorded in the same
line within our consolidated statements of income as the original impairment.

F-10

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(l) Deferred Financing Costs

Deferred financing costs represent fees paid in connection with obtaining bank and other long-term financing.
The Company paid financing costs of $0, $0, and $610 thousand in fiscal years 2014, 2013 and 2012, respectively,
and amortizes these costs using a method that approximates the effective interest method over the term of the
related financing. Amortization of deferred financing costs was $421 thousand, $421 thousand, and $476 thousand
in fiscal years 2014, 2013 and 2012, respectively, and is included in interest expense on the consolidated statements
of income. As a result of the February 2012 amendment to the senior credit facility, $807 thousand of previously
deferred financing costs were written off because of a change in the participants of the lending group.

(m) Revenues

Revenues are derived principally from food and beverage sales. The Company does not rely on any major

customers as a source of revenue.

Revenue from restaurant sales is recognized when food and beverage products are sold. Restaurant sales are
presented net of sales taxes and discounts. Gratuities remitted by customers for the benefit of restaurant staff are
not included in either revenues or operating expenses. Deferred revenue primarily represents the Company’s
liability for gift cards that have been sold but not yet redeemed. When the gift cards are redeemed, the Company
recognizes restaurant sales and reduces the deferred revenue liability. Company issued gift cards redeemed at
franchisee-owned restaurants reduce the deferred revenue liability but do not result in Company restaurant sales.
Gift card transactions involving franchisees are settled on a monthly basis through the Company’s third party gift
card provider. The expected redemption value of gift cards represents the full value of all gift cards issued less
the amount the Company has recognized as other operating income for gift cards that are not expected to be
redeemed. Gift card breakage revenue is classified as a component of other operating income.

(n) International Revenues

The Company currently has 20 international franchisee-owned restaurants in Aruba, Canada, China, El
Salvador, Japan, Mexico, Panama, Singapore, Taiwan and the United Arab Emirates. In accordance with its
franchise agreements relating to these international restaurants, the Company receives royalty revenue from these
franchisees in U.S. dollars. Franchise fee revenues from international restaurants were $3.2 million, $3.0 million
and $2.7 million in fiscal years 2014, 2013 and 2012, respectively.

(o) Rent

Certain of the Company’s operating leases contain predetermined fixed escalations of the minimum rent
during the term of the lease. For these leases, the Company recognizes the related rent expense on a straight-line
basis over the life of the lease and records the difference between amounts charged to operations and amounts
paid as deferred rent.

Additionally, certain of the Company’s operating leases contain clauses that provide additional contingent

rent based on a percentage of sales greater than certain specified target amounts. The Company recognizes
contingent rent expense prior to the achievement of the specified target that triggers the contingent rent, provided
achievement of that target is considered probable.

(p) Marketing and Advertising

Marketing and advertising expenses in the accompanying consolidated statements of income include

advertising expenses of $6.1 million, $6.1 million and $5.8 million in fiscal years 2014, 2013 and 2012,
respectively. Advertising costs are expensed as incurred.

F-11

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(q) Insurance Liability

The Company maintains various policies for workers’ compensation, employee health, general liability and

property damage. Pursuant to those policies, the Company is responsible for losses up to certain limits. The
Company records liabilities for the estimated exposure for aggregate losses below those limits. The recorded
liabilities are based on estimates of the ultimate costs to be incurred to settle known claims and claims incurred
but not reported as of the balance sheet date. The estimated liabilities are not discounted and are based on a
number of assumptions and factors, including historical trends, actuarial assumptions and economic conditions.
Independent actuaries are used to develop estimates of the workers’ compensation, general and employee health
care liabilities.

(r) Stock-Based Compensation

The Company recognizes stock-based compensation in accordance with FASB ASC Topic,

“Compensation—Stock Compensation, (Topic 718). Stock-based compensation cost includes compensation cost
for all share-based payments granted based on the grant date fair value estimated in accordance with the
provisions of Topic 718. Compensation cost is recognized on a straight-line basis, net of estimated forfeitures,
over the requisite service period of each award.

(s) Pre-Opening Costs

Pre-opening costs incurred with the opening of new restaurants are expensed as incurred. These costs
include rent expense, wages, benefits, travel and lodging for the training and opening management teams, and
food, beverage and other restaurant operating expenses incurred prior to a restaurant opening for business.

(t) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. 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. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date.

The Company applies the provisions of FASB ASC Topic 740, “Income Taxes” (Topic 740). Topic 740

requires that a position taken or expected to be taken in a tax return be recognized (or derecognized) in the
financial statements when it is more likely than not 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 ultimate settlement. The Company’s continuing practice is to recognize interest and
penalties related to uncertain tax positions in income tax expense.

(u) Earnings Per Share

Basic earnings per common share is computed under the two-class method in accordance with ” FASB ASC

Topic 260, “Earnings Per Share”. Under the two-class method, a portion of net income is allocated to
participating securities, such as the Company’s preferred stock, and therefore is excluded from the calculation of
basic earnings per share allocated to common shares. Diluted earnings per common share is computed by
dividing the net income applicable to preferred and common shareholders for the period by the weighted average
number of common and potential common shares outstanding during the period. Net income, in both the basic

F-12

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

and diluted earnings per common share calculations, is reduced by the Company’s preferred stock dividends and
accretion of the Company’s preferred stock to its redemption value to arrive at net income applicable to common
and preferred shareholders.

(v) Restaurant Acquisition

In February 2014, the Company acquired the Austin, TX Ruth’s Chris Steak House restaurant and franchise

rights from the franchisee owner for $2.8 million in cash. The acquisition price was allocated as follows:
goodwill $2.2 million; property and equipment $259 thousand; and other assets $368 thousand. Allocation of the
purchase price for the acquisition was based on estimates of the fair value of the net assets acquired. The
revenues and expenses of the acquired restaurant are included in the consolidated statement of income from the
date of the acquisition.

(3) Mitchell’s Restaurants

As of December 28, 2014, the Company operated eighteen Mitchell’s Fish Markets and three Mitchell’s/

Cameron’s Steakhouse restaurants (collectively, the Mitchell’s Restaurants).

During the third quarter of fiscal year 2014, the Company reassessed its asset grouping specific to the
Mitchell’s Restaurants under Topic 360 and concluded that it was appropriate to change the asset group from the
individual restaurant unit to the set of Mitchell’s Restaurants. As a result of the reassessment, the Company
determined that a triggering event had occurred requiring an impairment evaluation of its trademarks and long-
lived assets. Consequently, during the third quarter of fiscal year 2014, the Company recorded an impairment
loss aggregating to $15.3 million. Specifically, the Company recorded a $7.3 million impairment loss related to
trademark intangible assets and an $8.0 million impairment loss related to long-lived assets (primarily leasehold
improvements). The impairment of both the trademark intangible assets and the long-lived assets was measured
based on the amount by which the carrying amount of assets exceeded fair value. Fair value was estimated based
on both the market and income approaches utilizing market participant assumptions reflecting all available
information as of the September 28, 2014 balance sheet date. These impairment losses have been reclassified to
discontinued operations.

In November 2014, the Company and Landry’s, Inc. and Mitchell’s Entertainment, Inc., an affiliate of
Landry’s Inc. (together with Landry’s Inc., Landry’s), entered into an asset purchase agreement (the Agreement).
Pursuant to the Agreement, the Company agreed to sell the Mitchell’s Restaurants and related assets to Landry’s
for $10 million. The sale of the Mitchell’s Restaurants closed on January 21, 2015. The assets sold consisted
primarily of leasehold interests, leasehold improvements, restaurant equipment and furnishings, inventory, and
related intangible assets, including brand names and trademarks associated with the 21 Mitchell’s Restaurants.
The assets and related liabilities of the Mitchell’s Restaurants are classified as held for sale in the consolidated
balance sheet as of December 28, 2014. The results of operations, impairment charges and loss on assets held for
sale have been classified as discontinued operations in the consolidated statements of income for all periods
presented. No amounts for shared general and administrative costs or interest expense were allocated to
discontinued operations. Substantially all direct cash flows related to operating these restaurants were eliminated
at the closing date of the sale. The Company’s continuing involvement will be limited to transition services up to
four months with minimal impact on cash flows.

F-13

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

During the fourth quarter of fiscal year 2014, the Company recorded a loss on assets held for sale calculated

as follows (in thousands):

Selling price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reduction of deferred rent liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets sold

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,000
4,869

(8,910)
(2,847)
(2,670)
(952)
(350)
(965)

Loss on pending sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (1,825)

Under the terms of the Agreement, Landry’s assumed the Mitchell’s Restaurants’ facility lease obligations

and the Company will reimburse Landry’s for gift cards that are sold prior to the closing date and used at the
Mitchell’s Restaurants during the eighteen months following the closing date. In the Agreement, the Company
and Landry’s have made customary representations and warranties and have agreed to customary covenants
relating to the sale of the Mitchell’s Restaurants. Specifically, (i) before the closing date, the Company was
subject to certain business conduct restrictions with respect to its operation of the Mitchell’s Restaurants, and
(ii) for eighteen months following the closing date, neither the Company nor Landry’s will knowingly solicit or
employ, or seek to solicit or employ, certain key employees of the other party, subject to certain limited
exceptions. Landry’s offered employment to substantially all of the employees of the Mitchell’s Restaurants. The
Company and Landry’s have agreed to indemnify each other for losses arising from certain breaches of the
Agreement and for certain other liabilities.

The following summarizes the financial statement carrying amounts of assets and liabilities associated with

the Mitchell’s Restaurants which are classified as held for sale as of December 28, 2014 (in thousands):

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

952
8,775
2,847
2,545

Total assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,119

Deferred rent liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,869

Total liabilities associated with assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,869

(4) Discontinued Operations

The Company accounts for its closed restaurants in accordance with the provisions of Topic 360-10.

Therefore, when a restaurant is closed or the restaurant is either held for sale or abandoned, the restaurant’s
operations are eliminated from the ongoing operations. Accordingly, the operations of such restaurants, net of
applicable income taxes, are presented as discontinued operations and prior period operations of such restaurants,
net of applicable income taxes, are reclassified. Upon the adoption of ASU 2014-08, effective with fiscal year
2015 financial reporting, individual restaurants which are closed after December 2014 will not be classified as
discontinued operations. For fiscal years 2014, 2013 and 2012, all impairment charges, loss on disposal and

F-14

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

remeasurement of lease liabilities along with restaurant sales, direct recurring costs and expenses and income
taxes attributable to restaurants classified as discontinued operations have been aggregated to a single caption
entitled income (loss) from discontinued operations, net of tax expense (benefit) in the consolidated statements of
income for all periods presented. Income (loss) from discontinued operations, net of tax expense (benefit) is
comprised of the following (in thousands):

Fiscal Year

2014

2013

2012

Revenues

Mitchell’s Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 73,974
3,386

$75,925
9,176

$77,197
11,107

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

77,360

85,101

88,304

Costs and expenses

Recurring costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitchell’s Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitchell’s Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on pending sale of Mitchell’s Restaurants . . . . . . . . . . . . . . . . . . . . . . .
Gain on settlement - Mitchell’s Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . .
Remeasurement of lease exit liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73,852
4,115

75,396
9,594

76,502
11,157

15,295
—
1,825
—
—

2,512
750
—
(437)
1,716

—
1,693
—
—
—

Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

95,087

89,531

89,352

Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(17,727)
(7,472)

(4,430)
(2,426)

(1,048)
(1,236)

Income (loss) from discontinued operations, net of income taxes . . . . . . . . . . . . .

$(10,255) $ (2,004) $

187

In addition to the Mitchell’s Restaurants, discontinued operations for fiscal years 2014, 2013 and 2012 also

includes the results of the other closed restaurants. Due to an expiring lease term, the Company closed the
Company-owned Ruth’s Chris Steak House in Kansas City, MO in March 2014 after seventeen years of
operation. Due to an expiring lease term, the Company closed the Company-owned Ruth’s Chris Steak House
restaurant in Phoenix, AZ in March 2013 after 27 years of operation. As the closing of these restaurants
coincided with the termination of the lease agreements, the Company did not incur significant expenses related to
closing these locations. Due to local market conditions and disappointing financial results, the Company
negotiated early terminations of the facility leases for the Stamford, CT Mitchell’s Fish Market restaurant, which
closed in March 2014, and the Providence, RI Ruth’s Chris Steak House restaurant, which closed in September
2014. The Company recognized impairment losses of $750 thousand and $1.7 million in fiscal years 2013 and
2012, respectively, related to the Stamford, CT Mitchell’s Fish Market restaurant.

The Company accounts for the exit costs in accordance with the provisions of FASB ASC Topic 420, “Exit

or Disposal Cost Obligations,” which requires that such costs be expensed in the periods when such costs are
incurred. All of the losses incurred are included in discontinued operations in the accompanying consolidated
statements of income. In August 2005, the Company ceased operations at its location near the United Nations in
Manhattan. The Company has remaining lease commitments of $0.6 million per fiscal year through September
2016. The Company entered into a sublease agreement in April 2011 in order to recover some of the amounts due
under the remaining lease term. As of December 30, 2012, the Company had recorded a contingent lease liability
of $0.8 million related to this property which was net of a contra-liability for the present value of anticipated

F-15

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

sublease income. In March 2013, the subtenant vacated the property. The Company has commenced legal
proceedings to recover all amounts due from the subtenant. Loss from discontinued operations for fiscal year
2013 includes the impact of the re-measurement of the Company’s lease exit costs. The re-measurement included
(a) the write-off of the contra liability for the present value of anticipated sublease income and (b) the write-off
of past due rent and utility amounts owed by the subtenant. The loss before income taxes on discontinued
operations for fiscal year 2013 includes $1.2 million from the location near the United Nations in Manhattan. As
of December 28, 2014, the recorded contingent lease liability was $1.2 million.

(5) Fair Value Measurements

Fair value is defined under FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (Topic
820), as the price that would be received to sell an asset or paid to transfer a liability in the principal or most
advantageous market in an orderly transaction between market participants on the measurement date. Topic 820
also establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on

the measurement date. The three levels of inputs are:

• Level 1—quoted prices (unadjusted) for an identical asset or liability in an active market.

• Level 2—quoted prices for a similar asset or liability in an active market or model-derived valuations
in which all significant inputs are observable for substantially the full term of the asset or liability.

• Level 3—unobservable and significant to the fair value measurement of the asset or liability.

The following were used to estimate the fair value of each class of financial instruments:

• The carrying amount of cash and cash equivalents, receivables, prepaid expenses, accounts payable and
accrued expenses and other current liabilities are a reasonable estimate of their fair values due to their
short duration.

• Borrowings under the senior credit facility as of December 28, 2014 and December 29, 2013 have

variable interest rates that reflect currently available terms and conditions for similar debt. The carrying
amount of this debt is a reasonable estimate of its fair value (Level 2).

The Company’s non-financial assets measured at fair value on a non-recurring basis as of the end of fiscal

years 2014 and 2013 were as follows (in thousands):

Fair Value as of
December 28, 2014

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)

Total Losses
on Impairment

Valuation
Method

Long-lived assets held for
sale . . . . . . . . . . . . . . .

$11,320

$—

$11,320

$9,809

Market approach

Fair Value as of
December 29, 2013

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)

Total Losses
on Impairment

Valuation
Method

Long-lived assets held

and used . . . . . . . . . . .

$—

$—

$—

$2,112

Income approach

F-16

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Fair Value as of
December 28, 2014

Significant
Unobservable Inputs
(Level 3)

Total Losses
on Impairment

Valuation
Method

Trademarks held for

sale . . . . . . . . . . . . . .

$2,847

$2,847

$7,311

Income approach

Fair Value as of
December 29, 2013

Significant
Unobservable Inputs
(Level 3)

Total Losses
on Impairment

Valuation
Method

Trademarks . . . . . . . . . .

$ —

$ —

$ 400

Income approach

Losses on these assets are recorded as loss on impairment in the accompanying consolidated statements of
income. When the operating results of closed or sold restaurants are reclassified to discontinued operations, the
impairment losses related to the assets of those closed or sold restaurants are also reclassified to discontinued
operations. See Notes 6 and 7 for a description of the valuation techniques used to measure fair value of
intangibles and long-lived assets, as well as information used to develop the inputs to the fair value
measurements. Total losses on impairment include losses recognized from all non-recurring fair value
measurements during each of the fiscal years.

(6) Goodwill, Franchise Rights and Trademarks

During the fourth quarter of each year, the Company completes an analysis to determine if goodwill and
certain intangible assets are impaired as of the balance sheet date. The Company bases its fair value estimates on
assumptions it believes to be reasonable, but which are inherently uncertain.

Franchise Rights

In accordance with FASB ASC Topic 350, owned franchise rights that have been determined to have
indefinite lives must be reviewed for potential impairment annually and when triggering events are detected. No
impairment charges related to franchise rights were recognized in fiscal years 2014, 2013 or 2012.

To determine the fair value of acquired franchise rights, the Company used a multi-period excess earnings
approach. This approach involves projecting after-royalty future earnings, discounting those earnings using an
appropriate market discount rate and subtracting a contributory charge for net working capital, property and
equipment, assembled workforce and customer relationships to arrive at excess earnings attributable to these
franchise rights. The Company calculated the present value of cash flows generated from future excess earnings
and determined that the fair values exceeded the financial statement carrying value as of December 28, 2014.

Trademarks

In accordance with FASB ASC Topic 350, owned trademarks that have been determined to have indefinite
lives must be reviewed for potential impairment annually and when triggering events are detected. To determine
the fair value of the Mitchell’s trademarks, including Mitchell’s Fish Market, Columbus Fish Market, Mitchell’s
Steakhouse and Cameron’s Steakhouse, the Company used a relief-from-royalty valuation approach. This
approach assumes that in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the
related benefits of these types of assets. This approach is dependent on a number of factors, including estimates
of future revenue growth and trends, royalty rates in the category of intellectual property, discount rates and other
variables. The Company did not perform an impairment test as of December 28, 2014, as the Mitchell’s
trademarks were recorded as assets held for sale (lower of carrying amount or fair value, less costs to sell).

F-17

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

As discussed in Note (3), during the third quarter of fiscal year 2014, a $7.3 impairment loss related to the

trademarks of the Mitchell’s Restaurants was recorded. During the fourth quarter of fiscal year 2013, a $400
thousand loss on impairment of an ancillary trademark not expected to be used was recorded. No impairment
charge related to trademarks was recognized in fiscal year 2012.

Goodwill

No impairment charges related to goodwill were recognized in fiscal years 2014, 2013 or 2012. Goodwill

increased $2.2 million during fiscal year 2014 due to the acquisition of the Austin, TX Ruth’s Chris Steak House
restaurant.

In performing the fiscal year 2014 evaluation of goodwill impairment under FASB ASC Topic 350-20 Step

1, the Company compared the carrying value of the reporting unit, which is considered to be the steakhouse
operating segment, to its fair value. Consistent with the valuation of restaurant operations, the Company utilized
a multiple of EBITDA to approximate the fair value of the reporting unit for purposes of completing Step 1 of the
evaluation. The Company considered EBITDA multiples of publicly held companies, including its own, as well
as recent industry acquisitions. For reporting units whose estimated fair value exceeded its carrying value, no
impairment is recorded. As of December 28, 2014, the estimated fair values of all reporting units substantially
exceeded their respective carrying values.

If a reporting unit’s fair value did not exceed its carrying value as the balance sheet date, the Company
would have completed Step 2 of the evaluation by comparing the implied fair value of goodwill with the net asset
value of the reporting unit. The Company would have calculated the implied fair value by allocating the fair
value of a reporting unit to all of its assets and liabilities as if the reporting unit had been acquired in a business
combination and the fair value of the reporting unit was the price paid to acquire the unit.

The financial statement carrying values of the Company’s franchise rights, trademarks and goodwill were as

follows (amounts in thousands):

Balance as of December 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$32,200

$10,276

Balance as of December 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$32,418

$

118

Franchise
Rights

Trademarks

Gross
Goodwill

Accumulated
Impairment
Losses

Net Carrying
Value of
Goodwill

Balance as of December 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$55,469

$(33,372)

$22,097

Balance as of December 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$57,665

$(33,372)

$24,293

Any losses are included in “loss on impairment” in the accompanying consolidated statements of income.

When the operating results of closed or sold restaurants are reclassified to discontinued operations, the
impairment losses related to the assets of those closed or sold restaurants are also reclassified to discontinued
operations.

F-18

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(7) Property and Equipment, net

Property and equipment consists of the following (amounts in thousands):

December 28,
2014

December 29,
2013

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building and building improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

917
24,175
31,458
9,735
16,583
27
108,061
4,106

$

917
23,760
33,066
11,518
18,946
27
121,768
4,159

Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

195,062
(114,708)

214,161
(122,691)

$ 80,354

$ 91,470

As discussed in Note (3), during the third quarter of fiscal year 2014, the Company recognized an $8.0

million impairment loss on long-lived assets (primarily leasehold improvements) related to Mitchell’s
Restaurants. In addition, during the fourth quarter of fiscal year 2014, the Company recognized a $1.8 million
loss on the pending sale related to Mitchell’s Restaurants. During fiscal year 2013, the Company recognized a
$2.1 million impairment loss due to a decline in the estimated fair value of one restaurant’s assets (primarily
leasehold improvements). The decline in estimated fair value was attributable to decreases in that restaurant’s
projected profitability. During fiscal year 2012, the Company recognized an impairment loss on two restaurants
aggregating $4.7 million. These impairments were recorded due to declines in the estimated fair value of the
assets (which consist primarily of leasehold improvements). The declines in estimated fair value were primarily
attributable to management’s assessment that the expected remaining lease terms would be shortened.
Management reviewed the lease terms and cash flows of these restaurants and determined that it was not likely
that the lease terms would be extended under the existing lease agreements. Additionally, a $395 thousand
impairment loss was recognized during fiscal year 2012 on an owned property which was sold to a third party in
February 2013. Impairment losses are reclassified to discontinued operations when the restaurant is closed, sold
or held for sale.

(8) Long-term Debt

Long-term debt consists of the following (amounts in thousands):

Senior Credit Facility:

Revolving credit facility . . . . . . . . . . . . . . . . . .
Less current maturities . . . . . . . . . . . . . . . . . . . .

December 28,
2014

December 29,
2013

$13,000
—

$13,000

$19,000
—

$19,000

As of December 28, 2014, the Company had an aggregate of $13 million of outstanding indebtedness under

its senior credit facility at a weighted average interest rate of 4.16% with approximately $82.8 million of
borrowings available, net of outstanding letters of credit of approximately $4.2 million. The 4.16% weighted

F-19

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

average interest rate includes a 2.19% interest rate on outstanding indebtedness, plus fees on the Company’s
unused borrowing capacity and outstanding letters of credit.

On February 14, 2012, the Company entered into a Second Amended and Restated Credit Agreement with

Wells Fargo Bank, as administrative agent, and certain other lenders (the Amended and Restated Credit
Agreement). The Amended and Restated Credit Agreement allows for loan advances plus outstanding letters of
credit of up to $100.0 million to be outstanding at any time that the conditions for borrowings are met. The
Amended and Restated Credit Agreement has a maturity date of February 14, 2017. The Amended and Restated
Credit Agreement sets the interest rates applicable to borrowings based on the Company’s actual leverage ratio,
ranging (a) from 2.00% to 2.75% above the applicable LIBOR rate or (b) at the Company’s option, from 1.00%
to 1.75% above the applicable base rate.

The Amended and Restated Credit Agreement contains customary covenants and restrictions, including, but
not limited to: (1) prohibitions on incurring additional indebtedness and from guaranteeing obligations of others;
(2) prohibitions on creating, incurring, assuming or permitting to exist any lien on or with respect to any property
or asset; (3) limitations on the Company’s ability to enter into joint ventures, acquisitions and other investments;
(4) prohibitions on directly or indirectly creating or becoming liable with respect to certain contingent liabilities;
and (5) restrictions on directly or indirectly declaring, ordering, paying, or making any restricted junior
payments. The Amended and Restated Credit Agreement requires the Company to maintain a fixed charge
coverage ratio of 1.25:1.00 and the maximum leverage ratio of 2.50:1.00. The agreement was amended in May
2013 to reset the limit applicable to junior stock payments, which include both cash dividend payments and
repurchase of common and preferred stock. Junior stock payments made subsequent to December 30, 2012
through the end of the agreement are limited to $100 million; $26.8 million of such payments had been made as
of December 28, 2014. The Company’s obligations under the Amended and Restated Credit Agreement are
guaranteed by each of its existing and future subsidiaries and are secured by substantially all of its assets and a
pledge of the capital stock of its subsidiaries. The Amended and Restated Credit Agreement includes customary
events of default. As of December 28, 2014, the Company was in compliance with the covenants under the
Amended and Restated Credit Agreement.

As a result of the February 2012 amendment, $100 thousand of legal fees were incurred in the first quarter

of fiscal year 2012. In addition, $807 thousand of previously deferred debt issuance costs were written off
because of a change in the participants of the lending group.

(9) Leases

At December 28, 2014, all of the Company-owned Ruth’s Chris Steak House restaurants operated in leased

premises, with the exception of the restaurants in Columbus, OH and Ft. Lauderdale, FL, which were owned
properties, and the restaurants in Anaheim, CA, Lake Mary, FL, Princeton, NJ and South Barrington, IL, which
operate on leased land. The Mitchell’s Fish Market and Mitchell’s Steakhouse restaurants all operated in leased
premises. The leases generally provide for minimum annual rental payments and are subject to escalations based,
in some cases, upon increases in the Consumer Price Index, real estate taxes and other costs. In addition, certain
leases contain contingent rental provisions based upon the sales at the underlying restaurants. Certain leases also
provide for rent deferral during the initial term of such lease and/or scheduled minimum rent increases during the
terms of the leases. For financial reporting purposes, rent expense is recorded on a straight-line basis over the life
of the lease. Accordingly, included in liabilities in the accompanying consolidated balance sheets at
December 28, 2014 and December 29, 2013 are accruals related to such rent deferrals and the pro rata portion of
scheduled rent increases of approximately $20.0 million and $23.2 million, respectively, net of the current
portion included in other current liabilities $2.0 million and $2.1 million, respectively.

F-20

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

In December 2013, the Company entered into an agreement to terminate a restaurant facility operating lease

in March 2014. The $750 thousand agreed-upon payment, which was made in January 2014, was accounted for
as lease termination penalty expense during the fourth quarter of fiscal year 2013.

The Company also leases certain restaurant-related equipment under non-cancellable operating lease

agreements with third parties, which are included with leased premises in future minimum annual rental
commitments.

Future minimum annual rental commitments under operating leases as of December 28, 2014 are as follows

(in thousands):

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mitchell’s
Restaurants

All
Other

$ 5,487
5,568
5,109
4,986
4,894
41,542

$ 20,638
20,341
18,873
17,310
16,055
117,735

Company
Total

$ 26,125
25,910
23,982
22,296
20,949
159,277

$67,586

$210,952

$278,539

The recognized financial accounting lease liabilities pertaining to the Mitchell’s Restaurants are included in
the liabilities associated with assets held for sale caption. Pursuant to the terms of the Agreement, upon closing of
the sale of the Mitchell’s Restaurants, Landry’s assumed the lease obligations of the Mitchell’s Restaurants.
However, the Company has guaranteed Landry’s lease obligations aggregating $40.2 million under nine of the
leases. The Company did not record a financial accounting liability for the lease guarantees, because the
likelihood of Landry’s defaulting on the lease agreements was deemed to be remote. Landry’s also indemnified
the Company in the event of a default under any of the leases. The Company did record a $250 thousand liability
for its letter of credit obligation related to one of the leases.

Rental expense consists of the following and is included in restaurant operating expenses in the

accompanying consolidated statements of income (in thousands):

Minimum rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17,647
2,558

$16,424
2,456

$16,732
2,335

$20,205

$18,880

$19,067

Fiscal Year

2014

2013

2012

(10) Franchise Operations

The Company franchises Ruth’s Chris Steak House restaurants. The Company executes franchise

agreements for each franchisee-owned restaurant, which sets out the terms of its arrangement with the franchisee.
The franchise agreements typically require the franchisee to pay an initial, non-refundable fee and continuing
fees based upon a percentage of sales. The Company collects ongoing royalties of 5% of sales at franchisee-
owned restaurants plus a 1% advertising fee applied to national advertising expenditures. The Company is not
required to perform any services for the ongoing royalties and thus these royalties are recognized when the
royalties are due from the franchisee on a monthly basis. These ongoing royalties are reflected in the

F-21

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

accompanying consolidated statements of income as franchise income. The 1% advertising fee is not recorded as
revenue, but rather is recorded as a liability against which specified advertising and marketing costs are charged.

The Company executes an area development agreement with franchisees that gives each franchisee
exclusive rights to develop a specific number of restaurants within a specified area. The Company receives a
development fee at the time that an area development agreement is executed. The development fee is recognized
as revenue as franchisee-owned restaurants are opened. The Company also executes separate, site-specific
franchise agreements for each restaurant developed by a franchisee under an area development agreement. The
Company charges a site-specific fee at the time the franchise agreement is executed. This fee is related to
construction assistance and consulting regarding operating procedures and purchasing. These services are
performed prior to the restaurant opening. The Company recognizes the site-specific franchise fee when the
related restaurant opens.

The Company currently has 77 franchisee-owned Ruth’s Chris Steak House restaurants, including 20

international restaurants. In January 2013, the Company signed an agreement with the Ko Group for the
development of four new franchised Ruth’s Chris Steak House restaurants to be opened in the People’s Republic
of China over three years. Three new franchisee-owned restaurants opened in fiscal year 2014 – one in Boise, ID
in February, one in Panama City, Panama in September and one in Taipei, Taiwan in December. During fiscal
year 2013, four new Ruth’s Chris Steak House franchise locations opened, including a second franchisee-owned
restaurant located in San Juan in April 2013, a franchisee-owned restaurant located in Chattanooga, TN in July
2013, a location in Las Vegas, NV operating under a license agreement with the Company and a franchisee-
owned restaurant located in Shanghai in December 2013. One of two franchisee-owned restaurants located in
Dubai was closed in July 2013. During fiscal year 2012, the Company opened four franchisee-owned restaurants
in Dubai, Singapore, San Salvador and Niagara Falls, Ontario. In February 2014, the Company acquired a
franchisee-owned restaurant located in Austin, TX. No franchisee-owned restaurants were sold or purchased
during fiscal years 2013 or 2012. Franchise income includes opening and development fees and income
generated from existing franchisee-owned restaurants. The Company classifies franchise income separately in the
consolidated statements of income (in thousands):

Franchise income:

Income from existing franchise locations . . . . . . . . .
Opening and development fee income . . . . . . . . . . . .

$15,598
165

$14,612
400

$13,436
400

Total franchise income:

. . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,763

$15,012

$13,836

Fiscal Year

2014

2013

2012

(11) Gain on Settlements, Commitments and Contingencies

During the third quarter of fiscal year 2013, the Company settled two loss claims asserted by the Company

which previously arose and recognized an aggregate gain of $2.2 million, net of fees incurred. Approximately
$437 thousand of the gain related to Mitchell’s Restaurants and has been reclassified to discontinued operations.
The majority of the gain pertained to compensation for the Company’s lost operating income awarded by the
claims administrator pursuant to the settlement agreement reached in litigation related to the 2010 Deepwater
Horizon oil spill in the Gulf of Mexico.

The Company is subject to various claims, possible legal actions and other matters arising in the normal
course of business. Management does not expect disposition of these other matters to have a material adverse
effect on the financial position, results of operations or liquidity of the Company. The Company expenses legal
fees as incurred.

F-22

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The legislation and regulations related to tax and unclaimed property matters are complex and subject to
varying interpretations by both government authorities and taxpayers. The Company remits a variety of taxes and
fees to various governmental authorities, including excise taxes, property taxes, sales and use taxes, and payroll
taxes. The taxes and fees remitted by the Company are subject to review and audit by the applicable
governmental authorities which could assert claims for additional assessments. Although management believes
that the tax positions are reasonable and consequently there are no accrued liabilities for claims which may be
asserted, various taxing authorities may challenge certain of the positions taken by the Company which may
result in additional liability for taxes and interest. These tax positions are reviewed periodically based on the
availability of new information, the lapsing of applicable statutes of limitations, the conclusion of tax audits, the
identification of new tax contingencies, or the rendering of relevant court decisions. An unfavorable resolution of
assessments by a governmental authority could negatively impact the Company’s results of operations and cash
flows in future periods.

The Company is subject to unclaimed or abandoned property (escheat) laws which require the Company to

turn over to certain state governmental authorities the property of others held by the Company that has been
unclaimed for specified periods of time. The Company is subject to audit by individual U.S. states with regard to
its escheatment practices. During fiscal year 2012, the Company agreed to pay $2.5 million to settle certain
potential liabilities pertaining to unclaimed property returns which had not been filed timely, which was paid
during the first quarter of fiscal year 2013. Prior to fiscal year 2014 the Company had not filed unclaimed
property returns. During fiscal year 2014, the Company filed unclaimed property returns, provided additional
information to the applicable governmental entities and remitted amounts due for unclaimed property liabilities.
The settlement of unclaimed property liabilities did not have a material adverse impact on the financial position,
results of operations or liquidity of the Company.

The Company sells a considerable number of gift cards, which are issued and administered by a third party

gift card issuer and service provider, consistent with common retail industry practice. The third party gift card
issuer is paid a net fee for its services by the Company. The third party gift card issuer and service provider, as
well as a number of other restaurant companies, retailers and gift card issuers, were named as defendants in an
action filed under seal in June 2013 by William French on behalf of the State of Delaware in the Superior Court
of Delaware in and for New Castle County alleging violations of Delaware law. The filing was unsealed in
March 2014. The complaint alleges that approximately $30 million with respect to unused gift cards should be
escheated by the Company to the State of Delaware and seeks interest and penalties, attorneys’ fees and costs,
and an injunction against alleged future violations of Delaware’s unclaimed property laws. The Company has not
yet been served with the complaint. The Company believes that it is in compliance with Delaware’s unclaimed
property laws and intends to defend its position vigorously if served. To protect its interests, the Company has
joined in a notice to remove the case to federal district court, which was filed in May 2014, and a motion to
dismiss filed by all defendants in June 2014. In December 2014, the case was remanded back to Superior Court
of Delaware.

The Company currently buys a majority of its beef from two suppliers. Although there are a limited number
of beef suppliers, management believes that other suppliers could provide similar product on comparable terms.
A change in suppliers, however, could cause supply shortages and a possible loss of sales, which would affect
operating results adversely.

(12) Redeemable Convertible Preferred Stock

In February 2010, the Company issued and sold 25,000 shares of preferred stock to Bruckmann, Rosser,
Sherrill & Co. Management, L.P. and affiliates (BRS) in a private placement transaction. The Company received
proceeds of $23.2 million, net of approximately $1.8 million in closing and issuance costs. The preferred stock

F-23

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

was classified as temporary shareholders’ equity since the shares had certain conditions that allow the holder to
redeem the preferred stock for cash, and for which redemption was not solely within the control of the Company.

On March 8, 2012, the Company repurchased all of the outstanding preferred stock for $60.2 million. The
purchase price, which includes payment of all accrued and unpaid dividends owed on the preferred stock, was
funded using borrowings from the Company’s $100 million senior credit facility. After the repurchase and
retirement of the preferred stock, the Company’s fully diluted common share base decreased by approximately
8.6 million shares and the 10% annual dividend on the preferred stock, which amounted to $2.5 million in fiscal
year 2011, was eliminated. The Company recorded a reduction of net income applicable to shareholders of
approximately $35.8 million in the first fiscal quarter of 2012 to reflect the excess of the redemption value over
the financial statement carrying value of the preferred shares redeemed. In connection with the repurchase of
preferred shares, the BRS director designee resigned his position as a member of the Company’s Board of
Directors.

Each share of the preferred stock had an initial liquidation preference of $1,000. The holders of the preferred

stock were entitled to quarterly dividends accruing at a 10% annual rate. The preferred stock was also
convertible, under certain circumstances, into the number of shares of the Company’s common stock equal to the
quotient of the liquidation preference, including accrued dividends, divided by the conversion price. Using the
liquidation preference of $25.0 million as of December 25, 2011, a conversion of preferred stock into the
Company’s common stock would have resulted in the issuance of 8,620,690 additional common shares. The
preferred stock was convertible at any time, at the option of the holders. The Company had the option to convert
the preferred stock, in whole or in part, after February 12, 2012 if the closing price of the Company’s common
stock equaled or exceeded 225% of the then applicable conversion price for a period of 20 trading days over any
30 consecutive trading day period. At the option of the Company, the preferred stock could have been redeemed
on or after February 12, 2015 without regard to the Company’s stock price. At the option of the holders, the
preferred stock could have been redeemed on or after February 12, 2017. The redemption price per share was to
equal the liquidation preference, including any accrued dividends. The Company was accreting the carrying
value of preferred stock to its redemption value of $25 million from the date of issuance to the earliest
redemption date, February 12, 2015.

(13) Shareholders’ Equity

The holders of the Company’s common stock are entitled to one vote per share on all matters to be voted on

by the Company’s shareholders.

In May 2013, the Company announced that the Board of Directors approved a share repurchase program.

Under the program the Company was authorized from time to time purchase up to $30 million of its outstanding
common stock. No shares were repurchased during fiscal year 2013. During fiscal year 2014, 866,410 shares
were repurchased under this program at an aggregate cost of $10.3 million or an average cost of $11.87 per share.
The share repurchases were made at the Company’s discretion, within pricing parameters set by the Board of
Directors, in the open market.

On November 17, 2014, the Company announced that its Board of Directors has approved a new share
repurchase program under which the Company is authorized to repurchase up to $50 million of outstanding
common stock from time to time in the open market, through negotiated transactions or otherwise, depending on
share price, market conditions and other factors. The new share repurchase program replaces the Company’s
previous share repurchase program announced in May 2013, which has been terminated. The share repurchase
program does not obligate the Company to repurchase any dollar amount or number of its shares. The program
has no termination date. During the fourth quarter of fiscal year 2014, 377,655 shares were repurchased under

F-24

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

this new program at an aggregate cost of $5.1 million or an average cost of $13.57 per share. As of December 28,
2014, $44.9 million remained available for future purchases under the new program. Share repurchases under
both programs were accounted for under the cost method and all repurchased shares were retired and cancelled.
The excess of the purchase price over the par value of the shares was recorded as a reduction in additional paid-in
capital.

The Company’s Board of Directors declared the following dividends during the periods presented (amounts

in thousands, except per share amounts):

Declaration Date

Fiscal Year 2013:
May 3, 2013 . . . . . . . . . . . . . . . . . . . . . .
July 24, 2013 . . . . . . . . . . . . . . . . . . . . .
October 22, 2013 . . . . . . . . . . . . . . . . . .
Fiscal Year 2014:
February 21, 2014 . . . . . . . . . . . . . . . . . .
April 22, 2014 . . . . . . . . . . . . . . . . . . . . .
July 23, 2014 . . . . . . . . . . . . . . . . . . . . .
October 29, 2014 . . . . . . . . . . . . . . . . . .

Dividend per
Share

Record Date

Total Amount

Payment Date

$0.04
$0.04
$0.04

$0.05
$0.05
$0.05
$0.05

May 16, 2013
August 15, 2013
November 14, 2013

March 13, 2104
May 15, 2014
August 14, 2014
November 20, 2014

$1,430
$1,424
$1,424

$1,798
$1,798
$1,778
$1,764

May 30, 2013
August 29, 2013
November 26, 2013

March 27, 2014
May 29, 2014
August 28, 2014
December 4, 2014

Subsequent to the end of fiscal year 2014, the Company’s Board of Directors declared a $0.06 per share
cash dividend ($2.1 million in total) payable on March 12, 2015. Dividends are paid to holders of common stock
and restricted stock.

(14) Employee Benefit Plan

In 2000, the Company established a 401(k) and Profit Sharing Plan. The Company may make matching
contributions in an amount determined by the Board of Directors. In addition, the Company may contribute each
period, at its discretion, an additional amount from profits. The Company matches the employees’ contributions
at year end. Employees vest in the Company’s contributions based upon their years of service. The Company’s
expenses relating to matching contributions were approximately $307 thousand, $305 thousand and $298
thousand for fiscal years 2014, 2013 and 2012, respectively.

(15) Incentive and Stock Option Plans

As of December 28, 2014, the Company had the following share-based compensation plans.

2000 Stock Option Plan

The Company established a stock option plan (the 2000 Stock Option Plan) which allowed the Company’s

Board of Directors to grant stock options to directors, officers, key employees and other key individuals
performing services for the Company. The 2000 Stock Option Plan authorized grants of options to purchase up to
1,765,981 shares of authorized but unissued shares of common stock. The Plan provided for granting of options
to purchase shares of common stock at an exercise price not less than the fair value of the stock on the date of
grant. Options were exercisable at various periods ranging from one to ten years from date of grant. Under the
Company’s 2000 Stock Option Plan, there are no shares of common stock issuable upon exercise of currently
outstanding options and there are no shares available for future grants at December 28, 2014.

F-25

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

2005 Long-Term Equity Incentive Plan

In connection with the initial public offering, the Company adopted the Ruth’s Chris Steak House, Inc. 2005

Long-Term Equity Incentive Plan (the 2005 Equity Incentive Plan), which allows the Company’s Board of
Directors to grant stock options, restricted stock, restricted stock units, deferred stock units and other equity-
based awards to directors, officers, key employees and other key individuals performing services for the
Company. Initially, 2.4 million shares were authorized for issuance under the 2005 Equity Incentive Plan. The
2005 Equity Incentive Plan provides for granting of options to purchase shares of common stock at an exercise
price not less than the fair value of the stock on the date of grant. Options are exercisable, and restricted stock
vests, at various periods ranging from one to five years from date of grant. Effective May 22, 2008, the 2005
Equity Incentive Plan was amended, with stockholder approval, to increase the number of shares authorized for
issuance under the plan by 1.5 million shares. The Amended and Restated 2005 Equity Incentive Plan was
adopted on October 26, 2012. The number of shares covered by the 2005 Long-Term Equity Incentive Plan was
increased by 2.0 million shares at the 2013 annual meeting of stockholders. Under the 2005 Equity Incentive
Plan, as amended and restated, there are 1.0 million shares of common stock issuable upon exercise of currently
outstanding options and restricted stock awards at December 28, 2014, and 2.8 million shares available for future
grants.

During fiscal year 2012, the Company issued 230,585 shares of restricted stock to certain employees and

executive officers from available shares under its 2005 Equity Incentive Plan, as amended. The shares were
issued with a grant date fair market value equal to the closing price of the stock on the date of the grants. One-
third of the restricted stock grant vests on each of the three anniversary dates following the grant date.

During fiscal year 2013, the Company issued 247,225 shares of restricted stock to certain employees and

executive officers from available shares under its 2005 Equity Incentive Plan, as amended. The shares were
issued with a grant date fair market value equal to the closing price of the stock on the date of the grants. Of the
247,225 shares of restricted stock issued during 2013, 155,441 shares vest on the second anniversary of the grant
date and the remaining shares vest one-third on each of the three anniversary dates following the grant date.

During fiscal year 2014, the Company issued 275,794 shares of restricted stock to certain employees and

executive officers from available shares under its 2005 Equity Incentive Plan, as amended. The shares were
issued with a grant date fair market value equal to the closing price of the stock on the date of the grants. Of the
275,794 shares of restricted stock issued during 2014, 125,932 shares vest on the second anniversary of the grant
date and the remaining shares vest one-third on each of the three anniversary dates following the grant date.

The Company recorded $2.8 million, $2.3 million and $2.3 million in total stock option and restricted stock

compensation expense during fiscal years 2014, 2013 and 2012, respectively that was classified primarily as
general and administrative costs. The Company recognized $2.1 million, $0.9 million and $0.9 million in income
tax benefit related to stock-based compensation plans during fiscal years 2014, 2013 and 2012, respectively. As
of December 28, 2014, the Company had a $7.1 million hypothetical Additional Paid-in Capital Pool (APIC
Pool) balance. The hypothetical APIC Pool balance represents the tax benefit of the cumulative excess of
corporate income tax deductions over financial accounting compensation expense recognized for equity based
compensation awards which have fully vested. The hypothetical APIC Pool will increase or decrease each year,
dependent upon both the vesting of restricted stock awards and the stock options exercised and/or cancelled.
Shortfalls generated by the excess of compensation expense for financial accounting purposes over the
corresponding corporate income tax deduction will be charged to the hypothetical APIC Pool balance rather than
income tax expense. Once the hypothetical APIC Pool is fully depleted, the tax effect of any excess of financial
accounting expense over the corresponding corporate income tax deduction beyond that point will be treated as
income tax expense in the consolidated statement of income.

F-26

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

A summary of the status of non-vested restricted stock as of December 28, 2014 and changes during fiscal

year 2014 is presented below.

Non-vested shares at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares

625,945
275,794
(332,464)

Non-vested shares at end of year

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

569,275

2014

Weighted-
Average Grant-
Date Fair Value
Per Share

$ 7.04
12.46
5.72

$10.46

As of December 28, 2014, there was $3.1 million of total unrecognized compensation cost related to
569,275 shares of non-vested restricted stock. This cost is expected to be recognized over a weighted-average
period of approximately 1.59 years. The total grant date fair value of restricted stock vested in fiscal years 2014,
2013 and 2012 was $1.9 million, $3.3 million and $0.7 million, respectively.

The following table summarizes stock option activity for fiscal year 2014:

2014

Weighted-
Average
Exercise Price

Weighted-
Average
Remaining
Contractual
Term

Aggregate
Intrinsic Value
($000’s)

Outstanding at beginning of year . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares

1,344,079
—

(872,158)
(32,041)

Outstanding at end of year . . . . . . . . . . . . . . . . . . . . . . . . .

439,880

$ 8.09
—
5.36
13.17

$13.12

Options exercisable at year end . . . . . . . . . . . . . . . . . . . . .

439,880

$13.12

2.44

2.44

$1,757,215

$1,757,215

As of December 28, 2014, there was no unrecognized compensation cost related to non-vested stock

options. The total intrinsic value of options exercised in fiscal years 2014, 2013 and 2012 was $6.3 million, $273
thousand and $944 thousand, respectively.

During fiscal years 2014, 2013 and 2012, the Company received $183 thousand, $208 thousand and $393

thousand, respectively, in cash related to the exercise of options. The exercise of shares were fulfilled from
shares reserved for issue under the stock option plans and resulted in an increase in issued shares outstanding.

F-27

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(16) Income Taxes

Total income tax expense (benefit) for fiscal years 2014, 2013 and 2012 was (amounts in thousands):

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,830
(7,472)

$10,744
(2,426)

$ 7,855
(1,236)

Total consolidated income tax expense . . . . . . . . . . . . . . . . . . . . . . .

$ 4,358

$ 8,318

$ 6,619

2014

2013

2012

Income tax expense from continuing operations consists of the following:

Year ended December 28, 2014

U.S. Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended December 29, 2013

U.S. Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended December 30, 2012

U.S. Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current

Deferred

Total

$3,475
562
385

$4,422

$2,056
136
349

$2,541

$2,466
1,284
307

$4,057

$6,447
961
0

$7,408

$6,708
1,495
0

$8,203

$2,815
983
0

$3,798

$ 9,922
1,523
385

$11,830

$ 8,764
1,631
349

$10,744

$ 5,281
2,267
307

$ 7,855

Income tax expense differs from amounts computed by applying the federal statutory income tax rate to

income from continuing operations before income taxes as follows (amounts in thousands):

Income tax expense at statutory rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in income taxes resulting from:

2014

2013

2012

$13,489

$12,333

$ 8,416

State income taxes at state statutory rate, net of federal benefit . . . . . . . . . . . .
Federal FICA tip credit net benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State employment tax credits generated in prior years . . . . . . . . . . . . . . . . . . .
Increase to valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,813
(2,814)
(331)
0
(327)

1,444
(2,634)
(623)
243
(19)

1,228
(2,449)
0
253
407

$11,830

$10,744

$ 7,855

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30.7%

30.5% 32.7%

The Company utilizes the federal FICA tip credit to reduce its periodic federal income tax expense. A
restaurant company employer may claim a credit against the company’s federal income taxes for FICA taxes paid

F-28

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

on certain tip wages (the FICA tip credit). The credit against income tax liability is for the full amount of eligible
FICA taxes. Employers cannot deduct from taxable income the amount of FICA taxes taken into account in
determining the credit.

Income taxes applicable to discontinued operations are comprised of (a) taxes calculated at the composite
federal and state statutory tax rate times the pre-tax loss plus (b) the FICA tip credit benefit attributable to the
restaurant sales of the Mitchell’s Restaurants. A reconciliation of the U.S. statutory tax rate to the effective tax
rate applicable to operations for the Mitchell’s Restaurants fiscal years 2014, 2013 and 2012 follows (amounts in
thousands):

Income tax benefit at statutory rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in income taxes resulting from:

2014

2013

2012

$(6,204) $(1,550) $ (367)

State income taxes at state statutory rate, net of federal impact
Other, primarily federal FICA tip credit net benefit

. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .

(701)
(567)

(198)
(678)

(54)
(815)

$(7,472) $(2,426) $(1,236)

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42.2% 54.8% 117.9%

In fiscal years 2014, 2013 and 2012, the FICA tip credit net benefit had a disproportionate impact on the
income tax rate applicable to discontinued operations due to the Mitchell’s Restaurants generally operating near
breakeven from operations before income taxes.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are

presented below (amounts in thousands):

2014

2013

Deferred tax assets:

Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net state operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,775
9,911
2,923
6,236
10,589
335

$ 4,371
10,046
3,623
7,364
9,209
423

Total gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33,769
(947)

35,036
(1,108)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32,822

33,928

Deferred tax liabilities:

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,993)

(3,993)

(4,346)

(4,346)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$28,829

$29,582

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not

that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and
projected future taxable income in making this assessment. Based upon the level of historical taxable income and

F-29

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

projections for future taxable income over the periods in which the deferred tax assets are deductible,
management believes it is more likely than not that the Company will realize the benefits of the net deferred tax
assets.

As of December 28, 2014, the Company has state net operating loss carry-forwards of $74 million and
federal and state tax credit carry-forwards of $6.2 million, which are available to offset federal and state taxable
income with the last of such benefit expiring in 2032.

As of December 28, 2014, the Company’s gross unrecognized tax benefits totaled approximately $958

thousand, of which $622 thousand, if recognized, would impact the effective tax rate. The Company does not
anticipate there will be any material changes in the unrecognized tax benefits within the next 12 months. Our
continuing practice is to recognize interest and penalties related to uncertain tax positions in income tax expense.

A reconciliation of the beginning and ending amount of unrecognized tax benefits follows (amounts in

thousands):

Unrecognized tax benefits balance at December 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross increases for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,210
217
(469)

Unrecognized tax benefits balance at December 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 958

The Company files consolidated and separate income tax returns in the United States Federal jurisdiction
and many state jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal or state and
local income tax examinations for fiscal years before 2010.

(17) Earnings Per Share

Basic earnings per common share is computed under the two-class method in accordance with FASB ASC
Topic 260. Under the two-class method, a portion of net income is allocated to participating securities, such as
the Company’s preferred stock, and therefore is excluded from the calculation of basic earnings per share
allocated to common shares. Diluted earnings per common share is computed by dividing the net income
applicable to preferred and common shareholders for the period by the weighted average number of common and
potential common shares outstanding during the period. Net income, in both the basic and diluted earnings per
common share calculations, is reduced by the Company’s preferred stock dividends and accretion of the
Company’s preferred stock to its redemption value.

F-30

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The following table sets forth the computation of basic earnings per common share (amounts in thousands,

except share and per share data):

Income from continuing operations . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of

2014

2013

2012

$

26,710

$

24,493

$

16,192

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,255)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . .
Accretion of preferred stock redemption value . . . . . . .
Excess of redemption value over carrying value of

preferred shares redeemed . . . . . . . . . . . . . . . . . . . . .

Undistributed net income (loss)

. . . . . . . . . . . . . . . . . .

Net income (loss) applicable to preferred and common
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares:

Weighted average number of common shares

16,455
—
—

—

16,455

(2,004)

22,489
—
—

—

22,489

187

16,379
514
73

35,776

(19,984)

$

16,455

$

22,489

$

(19,984)

outstanding—basic . . . . . . . . . . . . . . . . . . . . . .

34,955,760

34,761,160

34,313,636

Basic earnings per common share:

Continuing operations . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . .

Basic earnings per common share . . . . . . . . . . . . .

$

$

0.76
(0.29)

0.47

$

$

0.71
(0.06)

0.65

$

$

(0.59)
0.01

(0.58)

Diluted earnings (loss) per share for fiscal years 2014, 2013 and 2012 excludes 153,613 stock options and
restricted shares at a weighted-average price of $18.70, 202,824 stock options and restricted shares at a weighted-
average price of $18.67 and 824,850 stock options and restricted shares at a weighted-average price of $11.37,
respectively, which were outstanding during the periods but were anti-dilutive. Diluted earnings per share for
fiscal year 2012 also excludes the 8,620,690 shares of common stock issuable upon the conversion of 25,000
shares of preferred stock, which were outstanding until their repurchase and retirement on March 8, 2012, but
were anti-dilutive.

F-31

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The following table sets forth the computation of diluted earnings per share (amounts in thousands, except

share and per share data):

Income from continuing operations . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of

2014

2013

2012

$

26,710

$

24,493

$

16,192

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,255)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . .
Accretion of preferred stock redemption value . . . . . . .
Excess of redemption value over carrying value of

preferred stock redeemed . . . . . . . . . . . . . . . . . . . . .

Net income (loss) applicable to preferred and common
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares:

Weighted average number of common shares

16,455
—
—

(2,004)

22,489
—
—

—

—

187

16,379
514
73

35,776

$

16,455

$

22,489

$

(19,984)

outstanding—basic . . . . . . . . . . . . . . . . . . . . . .
Dilutive shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34,955,760
459,723

34,761,160
1,023,270

34,313,636

—

Weighted-average number of common shares

outstanding—diluted . . . . . . . . . . . . . . . . . . . . . . . . .

35,415,483

35,784,430

34,313,636

Diluted earnings per common share:

Continuing operations . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . .

Diluted earnings per common share . . . . . . . . . . .

$

$

0.75
(0.29)

0.46

$

$

0.69
(0.06)

0.63

$

$

(0.59)
0.01

(0.58)

(18) Segment Information

Previously, the Company provided financial information for three operating segments: the Company-owned
steakhouse restaurant segment, the Company-owned fish market restaurant segment and the franchise operations
segment. As a consequence of the sale of the Mitchell’s Restaurants, management has determined that the
Company has two reportable segments—the Company-owned steakhouse segment and the franchise operations
segment. Previously reported segment information has been revised to exclude the Mitchell’s Restaurants. The
Company does not rely on any major customers as a source of revenue.

The Company-owned Ruth’s Chris Steak House restaurants, all of which are located in North America,
operate within the full-service dining industry, providing similar products to similar customers. Revenues are
derived principally from food and beverage sales. As of December 28, 2014, (i) the Company-owned steakhouse
restaurant segment included 65 Ruth’s Chris Steak House restaurants and one Ruth’s Chris Steak House
restaurant operating under a management agreement and (ii) the franchise operations segment included 77
franchisee-owned Ruth’s Chris Steak House restaurants. Segment profits for the Company-owned steakhouse
restaurant segments equal segment revenues less segment expenses. Segment revenues for the Company-owned
steakhouse restaurants include restaurant sales, management agreement income and other restaurant income. Gift
card breakage revenue is not allocated to operating segments. Not all operating expenses are allocated to
operating segments. Segment expenses for the Company-owned steakhouse segment include food and beverage
costs and restaurant operating expenses. No other operating costs are allocated to the segments for the purpose of
determining segment profits because such costs are not directly related to the operation of individual restaurants.

F-32

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The accounting policies applicable to each segment are consistent with the policies used to prepare the
consolidated financial statements. The profit of the franchise operations segment equals franchise income, which
consists of franchise royalty fees and franchise opening fees. No costs are allocated to the franchise operations
segment. Segment information related to the Company’s two reportable business segments follows.

Fiscal Year

2014

2013

2012

(Dollar amounts in thousands)

Revenues:

Company-owned steakhouse restaurants . . . . . . . . . . . . . . .
Franchise operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated other revenue and revenue discounts . . . . . . . .

$327,731
15,763
2,603

$306,539
15,012
803

$294,600
13,836
1,849

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$346,097

$322,354

$310,285

Segment profits:

Company-owned steakhouse restaurants . . . . . . . . . . . . . . .
Franchise operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 68,230
15,763

$ 67,489
15,012

$ 60,765
13,836

Total segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated operating income . . . . . . . . . . . . . . . . . . . . . . .
Marketing and advertising expenses . . . . . . . . . . . . . . . . . .
General and administrative costs . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expenses . . . . . . . . . . . . . . .
Pre-opening costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on settlements, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs written off
. . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before income tax

83,993
2,603
(10,076)
(24,311)
(10,917)
(1,630)
0
0
(1,159)
0
37

82,501
803
(9,341)
(27,808)
(10,229)
(691)
0
1,719
(1,640)
0
(77)

74,601
1,849
(9,158)
(25,612)
(11,050)
(540)
(3,262)
683
(2,364)
(807)
(293)

expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 38,540

$ 35,237

$ 24,047

Capital expenditures:

Company-owned steakhouse restaurants . . . . . . . . . . . . . . .
Corporate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitchell’s Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14,867
1,097
1,401

$ 11,242
1,723
2,346

$

9,667
621
1,169

Total capital expenditures . . . . . . . . . . . . . . . . . . . . . .

$ 17,365

$ 15,311

$ 11,457

December 28,
2014

December 29,
2013

(Dollar amounts in thousands)

Total assets:

Company-owned steakhouse restaurants . . . . . . . . . . . . . .
Franchise operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate assets—unallocated . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes—unallocated . . . . . . . . . . . . . . . . .
Mitchell’s Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$155,757
2,151
16,711
28,829
15,119

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$218,567

$143,388
2,253
22,479
29,582
30,379

$228,081

F-33

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(19) Supplemental Consolidated Financial Statement Information

(a) Accounts Receivable, net

Accounts receivable, net consists of the following (amounts in thousands):

Bank credit card receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Landlord contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Franchise fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refundable income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable from gift card issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) Other Assets

Other assets consist of the following (amounts in thousands):

Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

December 28,
2014

December 29,
2013

$11,262
443
2,116
682
2,335
2,216
2,164
(760)

$20,458

$ 7,664
104
2,120
1,106
955
934
1,305
(779)

$13,409

December 28,
2014

December 29,
2013

$ 764
901
39

$1,704

$ 899
1,322
39

$2,260

F-34

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(20) Quarterly Financial Data (Unaudited)

Summarized unaudited quarterly financial data (amounts in thousands, except per share information):

Quarter Ended

March 30,
2014

June 29,
2014

September 28,
2014

December 28,
2014

Total

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost and expenses . . . . . . . . . . . . . . . . . . . . . . . .

$ 90,354
(76,400)

$ 83,006
(73,172)

$ 73,795
(69,833)

$ 98,941
(87,029)

$ 346,097
(306,435)

Operating income . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before

income tax expense . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . .
Discontinued operations, net of income tax . . . . .

13,954
(287)
9

13,676
4,686

8,990
(125)

9,834
(298)
12

9,548
2,880

6,668
236

3,962
(297)
5

3,670
1,472

2,198
(9,496)

11,912
(278)
12

11,646
2,791

8,855
(870)

39,662
(1,159)
37

38,540
11,830

26,710
(10,255)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,865

$ 6,904

$ (7,298)

$ 7,985

$ 16,455

Basic earnings per share:

Continuing operations . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . .

Basic earnings per share . . . . . . . . . . . . . . . .

Diluted earnings per share:

Continuing operations . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . .

Diluted earnings per share . . . . . . . . . . . . . .

Dividends declared per common share . . . . . . . .

$

$

$

$

$

0.25
(0.00)

0.25

0.25
(0.00)

0.25

0.05

$

$

$

$

$

0.19
0.01

0.20

0.18
0.01

0.19

0.05

$

0.06
(0.27)

$ (0.21)

$

0.06
(0.27)

$ (0.21)

$

0.05

$

$

$

$

$

0.26
(0.03)

0.23

0.26
(0.03)

0.23

0.05

$

$

$

$

$

0.76
(0.29)

0.47

0.75
(0.29)

0.46

0.20

F-35

RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Quarter Ended

March 31,
2013

June 30,
2013

September 29,
2013

December 29,
2013

Total

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost and expenses . . . . . . . . . . . . . . . . . . . . . . . .

$ 85,879
(73,091)

$ 80,193
(70,184)

$ 68,651
(63,588)

$ 87,631
(78,537)

$ 322,354
(285,400)

Operating income . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,787
(516)
25

10,010
(415)
(1)

Income from continuing operations before

income tax expense . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . .
Discontinued operations, net of income tax . . . . .

12,297
3,881

8,416
(755)

9,593
2,452

7,141
626

5,062
(414)
(101)

4,548
1,623

2,925
(38)

9,094
(295)
(1)

8,798
2,787

6,011
(1,836)

36,953
(1,640)
(77)

35,237
10,744

24,493
(2,004)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,661

$ 7,767

$ 2,887

$ 4,175

$ 22,489

Basic earnings per share:

Continuing operations . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . .

Basic earnings per share . . . . . . . . . . . . . . . .

Diluted earnings per share:

Continuing operations . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . .

Diluted earnings per share . . . . . . . . . . . . . .

$

$

$

$

0.24
(0.02)

0.22

0.24
(0.02)

0.22

$

$

$

$

0.20
0.02

0.22

0.20
0.02

0.22

Dividends declared per common share . . . . . . . .

$ — $

0.04

$

$

$

$

$

0.08
(0.00)

0.08

0.08
(0.00)

0.08

0.04

$

$

$

$

$

0.17
(0.05)

0.12

0.17
(0.05)

0.12

0.04

$

$

$

$

$

0.71
(0.06)

0.65

0.69
(0.06)

0.63

0.12

During the third quarter of fiscal year 2014, the Company recorded an impairment loss aggregating $15.3

million pertaining to the assets of the Mitchell’s Restaurants. During the fourth quarter, the Company recorded a
$1.8 million loss on the assets of the Mitchell’s Restaurants held for sale. The impairments and loss on assets
held for sale are classified as discontinued operations.

During the third quarter of fiscal year 2013, the Company settled two loss claims asserted by the Company

which previously arose and recognized an aggregate gain of $2.2 million, net of fees incurred. The majority of
the gain pertained to compensation for the Company’s lost operating income awarded by the claims administrator
pursuant to the settlement agreement reached in litigation related to the 2010 Deepwater Horizon oil spill in the
Gulf of Mexico. Of the total $2.2 million settlement gain, $437 thousand applied to Mitchell’s Restaurants and
has been reclassified to discontinued operations. During the fourth quarter of fiscal year 2013, the Company
recorded impairment losses aggregating $3.3 million and also recorded a $2.2 million reduction in other
operating income attributable to a change in accounting method for gift card breakage revenue. The fiscal year
2013 impairment loss was primarily attributable to a $400 thousand impairment of an ancillary trademark, a $2.1
million impairment loss due to a decline in the estimated fair value of one restaurant’s assets (primarily leasehold
improvements) and a $750 thousand lease termination penalty. The impairment losses and the legal termination
penalty have been reclassified to discontinued operations.

F-36

Board of Directors

Senior Officers

Michael P. O’Donnell (Chairman)
President and Chief Executive Officer
Ruth’s Hospitality Group, Inc.

Michael P. O’Donnell
Chairman of the Board,
President and Chief Executive Officer

Robin P. Selati (Lead Independent Director)
Managing Director
Madison Dearborn Partners, LLC

Arne G. Haak
Executive Vice President, Chief Financial
Officer, and Secretary

Carla R. Cooper
President and Chief Executive Officer
Daymon Worldwide

Bannus B. Hudson
Director

Robert S. Merritt
Director

Alan Vituli
Director

Kevin W. Toomy
President and Chief Operating Officer of
Ruth’s Chris Steak House

Peter J. Beaudrault
President and Chief Operating Officer of
Mitchell’s Fish Market

Cheryl J. Henry
Chief Branding Officer and
Senior Vice President

STOCK LISTING
Ruth’s Hospitality Group, Inc. Common Stock is listed on
the NASDAQ Global Select Market under the symbol “RUTH”.

TRANSFER AGENT
American Stock Transfer
and Trust Company
59 Maiden Lane
New York, New York 10038

INVESTOR RELATIONS
Integrated Corporate Relations
450 Post Road East
Westport, Connecticut 06880

INDEPENDENT AUDITORS
KPMG LLP
111 North Orange Avenue, Suite 1600
Orlando, Florida 32801

For additional financial documents and information, please visit our website at www.rhgi.com
Corporate Office: 1030 West Canton Avenue, Suite 100, Winter Park, FL 32789
Phone: (407) 333-7440 (cid:129) Fax: (407) 833-9625

Corporate Office: 1030 West Canton Avenue, Suite 100, Winter Park, FL 32789
Phone: (407) 333-7440