Former name, former address and former fiscal year, if changed since last report

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate ~~Web site,~~website, 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “accelerated filer,” “large accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock as of ~~October 31, 2017~~August 3, 2018 was ~~31,278,209,~~30,675,560, which includes ~~1,184,629~~947,906 shares of unvested restricted stock.

	September 24,				December 25,			July 1,		December 31,
	2017				2016			2018		2017
Assets
Current assets:
Cash and cash equivalents	$	4,862			$	3,788		$	3,045	$	4,051
Accounts receivable, less allowance for doubtful accounts 2017 - $236; 2016 - $729		9,789				20,790
Accounts receivable, less allowance for doubtful accounts 2018 - $358; 2017 - $361									10,800		21,626
Inventory		7,247				7,396			8,105		8,688
Prepaid expenses and other		2,232				2,446			2,971		2,680
Total current assets		24,130				34,420			24,921		37,045
Property and equipment, net of accumulated depreciation 2017 - $143,034; 2016 - $132,817		103,518				103,041
Property and equipment, net of accumulated depreciation 2018 - $152,481; 2017 - $144,373									114,748		112,212
Goodwill		24,293				24,293			36,522		36,522
Franchise rights, net of accumulated amortization 2017 - $218; 2016 - $218		32,200				32,200
Other intangibles, net of accumulated amortization 2017 - $1,238; 2016 - $1,179		2,836				2,895
Franchise rights, net of accumulated amortization 2018 - $1,338; 2017 - $396									45,880		46,822
Other intangibles, net of accumulated amortization 2018 - $1,288; 2017 - $1,181									4,968		3,904
Deferred income taxes		5,452				9,924			5,754		4,947
Other assets		643				699			603		644
Total assets	$	193,072		��	$	207,472		$	233,396	$	242,096
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	7,642			$	7,064		$	8,118	$	10,510
Accrued payroll		11,709				14,902			13,326		15,903
Accrued expenses		6,545				11,672			8,045		11,203
Deferred revenue		27,483				38,155			33,812		42,596
Other current liabilities		4,962				7,622			4,751		8,313
Total current liabilities		58,341				79,415			68,052		88,525
Long-term debt		30,000				25,000			50,000		50,000
Deferred rent		22,230				21,737			22,741		21,993
Unearned franchise fees									2,859		—
Other liabilities		2,132				2,311			1,955		2,074
Total liabilities		112,703				128,463			145,607		162,592
Commitments and contingencies (Note 11)		—				—			—		—
Shareholders' equity:
Common stock, par value $.01 per share; 100,000,000 shares authorized, 30,093,180 shares issued and outstanding at September 24, 2017, 30,549,283 shares issued and outstanding at December 25, 2016		301				305

Common stock, par value $.01 per share; 100,000,000 shares authorized, 29,696,429 shares issued and outstanding at July 1, 2018, 29,645,790 shares issued and outstanding at December 31, 2017									297		296
Additional paid-in capital		84,643				95,266			71,194		77,017
Accumulated deficit		(4,575	)			(16,562	)
Treasury stock, at cost; 71,950 shares at September 24, 2017 and December 25, 2016		—				—
Retained earnings									16,298		2,191
Treasury stock, at cost; 71,950 shares at July 1, 2018 and December 31, 2017									—		—
Total shareholders' equity		80,369				79,009			87,789		79,504
Total liabilities and shareholders' equity	$	193,072			$	207,472		$	233,396	$	242,096

													13 Weeks Ended						26 Weeks Ended
	13 Weeks Ended						39 Weeks Ended						July 1,			June 25,			July 1,			June 25,
	September 24,			September 25,			September 24,			September 25,			2018			2017			2018			2017
	2017			2016			2017			2016
Revenues:
Restaurant sales	$	79,442		$	78,760		$	273,042		$	261,941		$	103,538		$	94,145		$	213,902		$	193,600
Franchise income		4,218			3,928			12,865			12,463			4,457			4,257			8,874			8,647
Other operating income		1,507			1,086			4,813			3,914			1,640			1,613			3,384			3,306

Total revenues		85,167			83,774			290,720			278,318			109,635			100,015			226,160			205,553

Costs and expenses:
Food and beverage costs		25,319			23,723			82,012			78,022			29,049			28,114			60,454			56,693
Restaurant operating expenses		42,595			40,549			133,046			127,026			50,022			45,005			101,702			90,452
Marketing and advertising		3,197			2,546			9,056			7,134			4,640			3,412			8,117			5,859
General and administrative costs		7,096			7,346			23,267			22,068			9,274			8,035			18,248			16,171
Depreciation and amortization expenses		3,852			3,435			11,089			9,907			4,673			3,731			9,134			7,236
Pre-opening costs		121			574			1,473			1,665			272			173			412			1,352

Total costs and expenses		82,180			78,173			259,943			245,822			97,930			88,470			198,067			177,763

Operating income		2,987			5,601			30,777			32,496			11,705			11,545			28,093			27,790

Other income (expense):
Interest expense, net		(197	)		(333	)		(521	)		(799	)		(403	)		(144	)		(783	)		(324	)
Other		(6	)		(92	)		33			60			22			14			34			39

Income from continuing operations before income tax expense		2,784			5,176			30,289			31,757			11,324			11,415			27,344			27,505
Income tax expense		1,017			1,668			9,632			10,410			1,763			3,611			4,147			8,616

Income from continuing operations		1,767			3,508			20,657			21,347			9,561			7,804			23,197			18,889
Income (loss) from discontinued operations, net of income taxes		(71	)		75			(101	)		(94	)		12			7			22			(30	)

Net income	$	1,696		$	3,583		$	20,556		$	21,253		$	9,573		$	7,811		$	23,219		$	18,859
Basic earnings (loss) per common share:

Basic earnings per common share:
Continuing operations	$	0.06		$	0.11		$	0.68		$	0.67		$	0.32		$	0.26		$	0.78		$	0.62
Discontinued operations		—			—			(0.01	)		—			—			—			—			—
Basic earnings per share	$	0.06		$	0.11		$	0.67		$	0.67		$	0.32		$	0.26		$	0.78		$	0.62
Diluted earnings (loss) per common share:

Diluted earnings per common share:
Continuing operations	$	0.06		$	0.11		$	0.67		$	0.66		$	0.32		$	0.25		$	0.76		$	0.60
Discontinued operations		(0.01	)		—			(0.01	)		—			—			—			—			—
Diluted earnings per share	$	0.05		$	0.11		$	0.66		$	0.66		$	0.32		$	0.25		$	0.76		$	0.60
Shares used in computing net income (loss) per common share:

Shares used in computing earnings per common share:
Basic		30,348,180			31,305,952			30,490,554			32,023,814			29,713,825			30,548,258			29,701,847			30,561,741
Diluted		30,877,192			31,737,036			31,040,640			32,437,142			30,375,306			31,264,266			30,377,194			31,255,441

Cash dividends declared per common share	$	0.09		$	0.07		$	0.27		$	0.21		$	0.11		$	0.09		$	0.22		$	0.18

							Additional																			Additional			Retained Earnings
	Common Stock						Paid-in			Accumulated			Treasury Stock				Shareholders'			Common Stock						Paid-in			(Accumulated			Treasury Stock				Shareholders'
																				Shares			Value			Capital			Deficit)			Shares		Value		Equity
Balance at December 31, 2017																					29,646		$	296		$	77,017		$	2,191			72	$	—	$	79,504
Net income																					—			—			—			23,219			—		—		23,219
Cash dividends																					—			—			—			(6,787	)		—		—		(6,787	)
Repurchase of common stock																					(225	)		(2	)		(5,941	)		—			—		—		(5,943	)
Shares issued under stock compensation plan net of shares withheld for tax effects																					275			3			(3,752	)		—			—		—		(3,749	)
Stock-based compensation																					—			—			3,870			—			—		—		3,870
Cumulative effect of a change in accounting principle (Note 2)																					—			—			—			(2,324	)		—		—		(2,324	)
Balance at July 1, 2018																					29,696		$	297		$	71,194		$	16,298			72	$	—	$	87,789
	Shares			Value			Capital			Deficit			Shares		Value		Equity
Balance at December 25, 2016		30,549		$	305		$	95,266		$	(16,562	)		72	$	—	$	79,009			30,549		$	305		$	95,266		$	(16,562	)		72	$	—	$	79,009
Net income		—			—			—			20,556			—		—		20,556			—			—			—			18,859			—		—		18,859
Cash dividends		—			—			—			(8,568	)		—		—		(8,568	)		—			—			—			(5,724	)		—		—		(5,724	)
Repurchase of common stock		(719	)		(7	)		(14,536	)		—			—		—		(14,543	)		(400	)		(4	)		(8,428	)									(8,432	)
Shares issued under stock compensation plan net of shares withheld for tax effects		263			3			(1,167	)		—			—		—		(1,164	)		211			3			(527	)		—			—		—		(524	)
Stock-based compensation		—			—			5,080			—			—		—		5,080			—			—			3,369			—			—		—		3,369
Balance at September 24, 2017		30,093		$	301		$	84,643		$	(4,575	)		72	$	—	$	80,369

Balance at December 27, 2015		33,146		$	331		$	135,403		$	(37,832	)		72	$	—	$	97,902
Net income		—			—			—			21,253			—		—		21,253
Cash dividends		—			—			—			(6,969	)		—		—		(6,969	)
Repurchase of common stock		(2,477	)		(25	)		(39,948	)		—			—		—		(39,973	)
Shares issued under stock compensation plan net of shares withheld for tax effects		213			3			(1,430	)		—			—		—		(1,427	)
Excess tax benefit from stock based compensation		—			—			395			—			—		—		395
Stock-based compensation		—			—			4,259			—			—		—		4,259
Balance at September 25, 2016		30,882		$	309		$	98,679		$	(23,548	)		72	$	—	$	75,440
Balance at June 25, 2017																					30,360		$	304		$	89,680		$	(3,427	)		72	$	—	$	86,557

	39 Weeks Ended						26 Weeks Ended
	September 24,			September 25,			July 1,			June 25,
	2017			2016			2018			2017
Cash flows from operating activities:
Net income	$	20,556		$	21,253		$	23,219		$	18,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,089			9,907			9,134			7,236
Deferred income taxes		4,472			6,065			(61	)		916
Non-cash interest expense		97			315			41			76
Debt issuance costs written-off		16			—			—			16
Gain on the disposal of property and equipment, net		—			(128	)
Amortization of below market lease								39			—
Stock-based compensation expense		5,080			4,259			3,870			3,369
Changes in operating assets and liabilities:
Accounts receivable		11,002			9,793			10,826			12,004
Inventories		149			341			583			(158	)
Prepaid expenses and other		217			(2,012	)		(291	)		(220	)
Other assets		356			198			—			356
Accounts payable and accrued expenses		(6,064	)		(10,731	)		(8,600	)		(4,531	)
Deferred revenue		(10,671	)		(11,736	)		(8,996	)		(9,198	)
Deferred rent		493			978			630			283
Other liabilities		(1,702	)		623			(1,861	)		2,176
Net cash provided by operating activities		35,090			29,125			28,533			31,184
Cash flows from investing activities:
Acquisition of property and equipment		(14,326	)		(19,094	)		(11,889	)		(10,649	)
Proceeds from sale of property and equipment		—			802
Acquisition of intangible assets								(1,171	)		—
Net cash used in investing activities		(14,326	)		(18,292	)		(13,060	)		(10,649	)
Cash flows from financing activities:
Principal borrowings on long-term debt		26,000			47,000			15,000			18,000
Principal repayments on long-term debt		(21,000	)		(9,000	)		(15,000	)		(22,000	)
Repurchase of common stock		(14,543	)		(39,973	)		(5,943	)		(8,432	)
Cash dividend payments		(8,568	)		(6,969	)		(6,787	)		(5,724	)
Tax payments from the vesting of restricted stock and option exercises		(2,079	)		(1,503	)		(3,759	)		(1,364	)
Excess tax benefits from stock compensation		—			395
Proceeds from the exercise of stock options		913			76			10			838
Deferred financing costs		(413	)		—			—			(413	)
Net cash used in financing activities		(19,690	)		(9,974	)		(16,479	)		(19,095	)
Net increase in cash and cash equivalents		1,074			859
Net (decrease) increase in cash and cash equivalents								(1,006	)		1,440
Cash and cash equivalents at beginning of period		3,788			3,095			4,051			3,788
Cash and cash equivalents at end of period	$	4,862		$	3,954		$	3,045		$	5,228
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of capitalized interest	$	405		$	461		$	753		$	141
Income taxes	$	6,539		$	2,223		$	6,123		$	5,840
Noncash investing and financing activities:
Accrued acquisition of property and equipment	$	1,023		$	389		$	1,229		$	838

The accompanying unaudited condensed consolidated financial statements of Ruth’s Hospitality Group, Inc. and its subsidiaries (collectively, the Company) as of ~~September 24, 2017~~July 1, 2018 and December ~~25, 2016~~31, 2017 and for the thirteen and ~~thirty-nine~~twenty-six week periods ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~ have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The condensed consolidated financial statements include the financial statements of Ruth’s Hospitality Group, Inc. and its wholly owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Ruth’s Hospitality Group, Inc. is a restaurant company focused on the upscale dining segment. Ruth’s Hospitality Group, Inc. operates Company-owned Ruth’s Chris Steak House restaurants and sells 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 ~~September 24, 2017,~~July 1, 2018, there were ~~153~~154 Ruth’s Chris Steak House restaurants, including 7077 Company-owned restaurants, two restaurants operating under contractual agreements and 8175 franchisee-owned restaurants, including 2120 international franchisee-owned restaurants in Aruba, Canada, China, Hong Kong, Indonesia, Japan, Mexico, Panama, Singapore ~~Taiwan~~ and ~~the United Arab Emirates.~~Taiwan. All Company-owned restaurants are located in the United States. New Company-owned Ruth’s Chris Steak House restaurants opened in Waltham, MA in January 2017 and Cleveland, OH in March 2017 and a new frachisee-owned Ruth’s Chris Steak House restaurant opened in Chengdu, China in September 2017. A new ~~restaurant operated by the Company under a contractual agreement also opened in Tulsa, OK in January 2017. A~~ franchisee-owned Ruth’s Chris Steak House restaurant was ~~closed permanently~~opened in ~~San Juan, Puerto Rico~~Ft. Wayne, IN in ~~September 2017 as a result of severe damage from Hurricane Maria.~~May 2018.

The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. The interim results of operations for the periods ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~ are not necessarily indicative of the results that may be achieved for the full year. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the SEC’s rules and regulations. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December ~~25, 2016.~~31, 2017.

The Company operates on a 52- or 53-week fiscal year ending on the last Sunday in December. The fiscal quarters ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~ each contained thirteen weeks and are referred to herein as the ~~third~~second quarter of fiscal year 2018 and the second quarter of fiscal year 2017, ~~and the third quarter of fiscal year 2016,~~ respectively. Fiscal year ~~2017~~2018 is a ~~53-week~~52-week year. Fiscal year ~~2016 is~~2017 was a ~~52-week~~53-week year.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reporting of revenue and expenses during the periods to prepare these condensed consolidated financial statements in conformity with ~~U.S. generally accepted accounting principles.~~GAAP. Significant items subject to such estimates and assumptions include the carrying amounts of property and equipment, goodwill, franchise rights, and obligations related to gift cards, incentive compensation, workers’ compensation and medical insurance. Actual results could differ from those estimates.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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, and ~~will replace~~replaces most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for interim and annual periods in fiscal years beginning after December 15, 2017, which will require the Company to adopt these provisions in the first quarter of fiscal year 2018. The standard permits the use of either the retrospective or cumulative effect transition method and is expected to impact the Company’s recognition of revenue related to franchise development and site specific fees.GAAP. The Company ~~currently recognizes franchise development and site specific fees when~~adopted this new ~~franchisee-owned restaurants open. Under ASU 2014-09, development and site specific fees will be recognized over the life of the applicable franchise agreements. The Company expects that the~~revenue recognition standard on January 1, 2018. See Note 2 for further information about our transition to this new standard will have a material effect on the consolidated financial statements. The Company now expects that the most significant change relates to an increase of approximately $3 million to $4 million to the deferred revenue ~~liability on the consolidated balance sheet~~recognition standard.

Recent Accounting Pronouncements for previously recognized franchise development and site specific fees that will be recognized over the life of the applicable franchise agreements under the new standard. In addition, ASU 2014-09 is expected to impact the classification of advertising contributions from franchisees. TheFuture Application

Company currently records advertising contributions from franchisees as a liability against which specified advertising and marketing costs are charged. Under the new standard, advertising contributions from franchisees will be classified as franchise income on the consolidated statements of income. The Company recognized advertising contributions from franchisees totaling $1.3 million and $1.4 million during fiscal years 2016 and 2015, respectively, as a reduction to marketing and advertising expense on the consolidated statements of income. The Company is evaluating other potential effects that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update requires a lessee to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. This update is effective for annual and interim periods beginning after December 15, 2018, which will require the Company to adopt these provisions in the first quarter of fiscal year ~~2019~~2019. In July 2018, the FASB issued ASU 2018-11 which provides an alternative transition method that allows entities to apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This transition method option is in addition to the existing transition method of using a modified retrospective ~~approach.~~transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating which transition method it will use. The Company’s restaurants operate under facility lease agreements that provide for material future lease payments. The restaurant facility leases comprise the

majority of the Company’s material lease agreements. The Company is currently evaluating the effect of the standard on its ongoing financial reporting, but expects that the adoption of ASU 2016-02 will have a material effect on its consolidated financial statements. The Company expects that the most significant changes relate to 1) the recognition of new right–of–use assets and lease liabilities on the consolidated balance sheet for restaurant facility operating leases; and 2) the derecognition of existing lease liabilities on the consolidated balance sheet related to scheduled rent increases.

The Company adopted FASB Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606) with an initial date of application of January 1, 2018. As a result, the ~~FASB issued ASU 2016-15, Statement~~Company has changed its accounting policy for revenue recognition. The Company applied Topic 606 using the cumulative effect method to contracts that were not completed at January 1, 2018, which resulted in the recognition of ~~Cash Flows: Classification~~the cumulative effect of ~~Certain Cash Receipts~~initially adopting Topic 606 as an adjustment to the opening balance of shareholders’ equity at January 1, 2018. Therefore, the comparative information has not been adjusted and ~~Cash Payments (Topic 230). This update was issued~~continues to ~~standardize how certain transactions~~be reported under the Company’s revenue recognition policy in effect prior to the adoption of Topic 606. The Company adopted Topic 606 using the practical expedient in paragraph 606-10-65-1(f)(4), under which the Company aggregated all contract modifications that occurred before January 1, 2018 to identify the satisfied and unsatisfied performance obligations, to determine the transaction price, and to allocate the transaction price to the satisfied and unsatisfied performance obligations. The details of the significant changes as a result of adopting Topic 606 are ~~classified on~~provided below.

Franchise Income. Prior to the ~~statement~~adoption of ~~cash flows. This update is effective~~Topic 606, the Company recognized franchise development and opening fees when a franchisee-owned restaurant opened. Under Topic 606, the Company now recognizes franchise development and opening specific fees over the life of the applicable franchise agreements. The Company increased its deferred revenue liability by $3.1 million, increased its deferred tax assets by $746 thousand and decreased the opening balance of shareholders’ equity by $2.3 million for ~~fiscal years beginning after December 15, 2017. Early adoption is permitted.~~previously recognized franchise development and opening fees that will now be recognized over the life of the applicable franchise agreements. The adoption of ~~ASU 2016-15 is not expected~~Topic 606 also impacts the classification of advertising contributions from franchisees. Prior to ~~have a significant impact of the Company’s ongoing financial reporting.~~

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740). This update addresses the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice over the years for transfers of certain intangible and tangible assets. The amendments in the update will require recognition of current and deferred income taxes resulting from an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective for annual and interim periods beginning after December 15, 2017, which will require us to adopt these provisions in the first quarter of fiscal year 2018 using a modified retrospective approach. Early adoption is permitted. We do not expect the adoption of ~~this guidance to have a material impact on our consolidated financial statements.~~

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350). This update eliminates the current two-step approach used to test goodwill for impairment and requires an entity to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019 (upon the first goodwill impairment test performed during that fiscal year). Early adoption is permitted for interim or annual goodwill impairment tests after January 1, 2017. The Company does not expect the adoption of ASU 2017-04 to have a material impact on our consolidated financial statements.

~~As of December 28, 2014,~~Topic 606, the Company ~~operated eighteen Mitchell’s Fish Markets~~recorded advertising contributions from franchisees as a liability against which specific marketing and ~~three Mitchell’s/Cameron’s Steakhouse restaurants (collectively,~~advertising costs were charged, which reduced the ~~Mitchell’s Restaurants).~~

~~In November 2014,~~Company’s marketing expense on the ~~Company and Landry’s, Inc. and Mitchell’s Entertainment, Inc., an affiliate~~consolidated statements 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 results of operations have beenincome. Under Topic 606, advertising contributions from franchisees are classified as ~~discontinued operations in~~franchise income on 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 atin fiscal year 2018. The Company recognized $764 thousand of advertising contributions from franchisees in the ~~closing date~~twenty-six weeks of fiscal year 2018. Because of the ~~sale.~~offsetting adjustments, the reclassification of advertising contributions from franchisees will have no impact to the Company’s net income for fiscal year 2018.

Gift Cards. Under Topic 606, the Company now classifies certain discounts recognized on the sale of gift cards, historically recognized as marketing expense, as a reduction to restaurant sales on the consolidated statements of income. The reclassification of discounts recognized on the sale of gift cards from marketing expense to restaurant sales on the consolidated statements of income totaled $470 thousand in the first twenty-six weeks of fiscal year 2018. Because of the offsetting adjustments, the reclassification of discounts recognized on the sale of gift cards will have no impact to the Company’s net income for fiscal year 2018.

The following tables summarize the impacts of adopting Topic 606 on the Company’s consolidated financial statements for the first twenty-six weeks of fiscal year 2018.

	July 1, 2018 As Reported		Adjustments			Balances without adoption of Topic 606
Assets
Current assets:
Cash and cash equivalents	$	3,045	$	—		$	3,045
Accounts receivable, less allowance for doubtful accounts 2018 - $358; 2017 - $361		10,800		—			10,800
Inventory		8,105		—			8,105
Prepaid expenses and other		2,971		—			2,971
Total current assets		24,921		—			24,921
Property and equipment, net of accumulated depreciation 2018 - $152,481; 2017 - $144,373		114,748		—			114,748
Goodwill		36,522		—			36,522
Franchise rights, net of accumulated amortization 2018 - $1,338; 2017 - $396		45,880		—			45,880
Other intangibles, net of accumulated amortization 2018 - $1,288; 2017 - $1,181		4,968		—			4,968
Deferred income taxes		5,754		(725	)		5,029
Other assets		603		—			603
Total assets	$	233,396	$	(725	)	$	232,671
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	8,118	$	—		$	8,118
Accrued payroll		13,326		—			13,326
Accrued expenses		8,045		—			8,045
Deferred revenue		33,812		(126	)		33,686
Other current liabilities		4,751		—			4,751
Total current liabilities		68,052		(126	)		67,926
Long-term debt		50,000		—			50,000
Deferred rent		22,741		—			22,741
Unearned franchise fees		2,859		(2,859	)		—
Other liabilities		1,955		—			1,955
Total liabilities		145,607		(2,985	)		142,622
Commitments and contingencies		—		—			—
Shareholders' equity:
Common stock, par value $.01 per share; 100,000,000 shares authorized, 29,696,429 shares issued and outstanding at July 1, 2018, 29,645,790 shares issued and outstanding at December 31, 2017		297		—			297
Additional paid-in capital		71,194		—			71,194
Retained earnings		16,298		2,260			18,558
Treasury stock, at cost; 71,950 shares at July 1, 2018 and December 31, 2017		—		—			—
Total shareholders' equity		87,789		2,260			90,049

Total liabilities and shareholders' equity	$	233,396	$	(725	)	$	232,671

	13 Weeks Ended July 1, 2018										26 Weeks Ended July 1, 2018
								Balances without										Balances without
	As Reported			Adjustments				adoption of Topic 606			As Reported			Adjustments				adoption of Topic 606
Revenues:
Restaurant sales	$	103,538		$	244		(1)	$	103,782		$	213,902		$	470		(1)	$	214,372
Franchise income		4,457			(410	)	(2)		4,047			8,874			(849	)	(2)		8,025
Other operating income		1,640			—				1,640			3,384			—				3,384

Total revenues		109,635			(166	)			109,469			226,160			(379	)			225,781

Costs and expenses:
Food and beverage costs		29,049			—				29,049			60,454			—				60,454
Restaurant operating expenses		50,022			—				50,022			101,702			—				101,702
Marketing and advertising		4,640			(138	)	(3)		4,502			8,117			(294	)	(3)		7,823
General and administrative costs		9,274			—				9,274			18,248			—				18,248
Depreciation and amortization expenses		4,673			—				4,673			9,134			—				9,134
Pre-opening costs		272			—				272			412			��				412
Total costs and expenses		97,930			(138	)			97,792			198,067			(294	)			197,773

Operating income		11,705			(28	)			11,677			28,093			(85	)			28,008

Other income (expense):
Interest expense, net		(403	)		—				(403	)		(783	)		—				(783	)
Other		22			—				22			34			—				34

Income from continuing operations before income tax expense		11,324			(28	)			11,296			27,344			(85	)			27,259
Income tax expense		1,763			(7	)	(4)		1,756			4,147			(20	)	(4)		4,127

Income from continuing operations		9,561			(21	)			9,540			23,197			(65	)			23,132
Income from discontinued operations, net of income taxes		12			—				12			22			—				22

Net income	$	9,573		$	(21	)		$	9,552		$	23,219		$	(65	)		$	23,154

	26 Weeks Ended July 1, 2018 As Reported			Adjustments			Balances without adoption of Topic 606
Cash flows from operating activities:
Net income	$	23,219		$	(65	)	$	23,154
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,134			—			9,134
Deferred income taxes		(61	)		—			(61	)
Non-cash interest expense		41			—			41
Debt issuance costs written-off		—			—			—
Amortization of below market lease		39			—			39
Stock-based compensation expense		3,870			—			3,870
Changes in operating assets and liabilities:
Accounts receivable		10,826			—			10,826
Inventories		583			—			583
Prepaid expenses and other		(291	)		—			(291	)
Other assets		—			—			—
Accounts payable and accrued expenses		(8,600	)		—			(8,600	)
Deferred revenue		(8,996	)		85			(8,911	)
Deferred rent		630			—			630
Other liabilities		(1,861	)		(20	)		(1,881	)
Net cash provided by operating activities		28,533			—			28,533

Net cash used in investing activities		(13,060	)		—			(13,060	)

Net cash used in financing activities		(16,479	)		—			(16,479	)

Net decrease in cash and cash equivalents	$	(1,006	)		—		$	(1,006	)

Restaurant Sales. Restaurant sales consist of food and beverage sales by Company-owned restaurants. 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. 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. Comparable restaurant sales growth reflects the change in year-over-year or quarter-over-quarter, as applicable, sales for the comparable restaurants. The Company defines comparable restaurants to be those Company-owned restaurants in operation for not less than eighteen months prior to the beginning of the fiscal year.

Franchise Income. Franchise income includes (1) royalty income and (2) franchise and development fees charged to franchisees. 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% of adjusted gross sales advertising fee to be paid by the franchisee, which is applied to national advertising expenditures. Effective in fiscal year 2018, both the 5.0% royalty and the sales based advertising fees are included in franchise income on the consolidated statements of income. Prior to the adoption of Topic 606, the Company recorded advertising contributions from franchisees as a liability against which specific marketing and advertising costs were charged, which reduced the Company’s marketing expense on the consolidated statements of income. Effective with fiscal year 2018, the Company recognizes franchise development and opening fees over the life of the applicable franchise agreements. Prior to the adoption of Topic 606, the Company recognized franchise development and opening fees when a franchisee-owned restaurant opened.

Other Operating Income. Other operating income consists primarily of breakage income associated with gift cards, and also includes fees earned from management agreements, banquet-related guarantee and services revenue and other incidental guest fees. The Company’s ~~continuing involvement was limited~~accounting method for recognizing gift card breakage revenue is the redemption method. Under the redemption method, gift card breakage revenue is recognized and the gift card liability is derecognized for unredeemed gift cards in proportion to ~~transition services up to four months with minimal impact~~actual gift card redemptions based on ~~cash flows.~~historical breakage rates.

~~Under~~Deferred Revenue. Deferred revenue primarily includes (1) the ~~terms of the Agreement, Landry’s assumed the Mitchell’s Restaurants’ facility lease obligations and the Company reimbursed Landry’s~~Company’s liability for gift cards that ~~were~~have been sold ~~prior~~but not yet redeemed and (2) the Company’s liability for franchise development and opening fees that will be recognized over the life of the applicable franchise agreements. When gift cards are redeemed (typically within five years), the Company recognizes restaurant sales and reduces the deferred revenue liability. A portion of gift cards redeemed are used by customers to pay for sales taxes and

gratuities, neither of which results in Company restaurant sales. Company issued gift cards redeemed at franchisee-owned restaurants result in royalty based franchise income and reduce the ~~closing date and used at~~deferred revenue liability. The expected redemption value of gift cards represents the ~~Mitchell’s Restaurants during~~full consideration received for all gift cards issued less the ~~eighteen months following~~amount the ~~closing date.~~ Company has recognized as other operating income for gift cards that are not expected to be redeemed (gift card breakage).

In the ~~Agreement, the Company and Landry’s made customary representations and warranties and~~

agreed to customary covenants relating to the sale 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 Company guaranteed Landry’s lease obligations aggregating $33.8 million under nine of the Mitchell’s Restaurants’ 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 accounts for its closed restaurants in accordance with the provisions of FASB ASC Topic 360-10, “Property, Plant and Equipment.” As of December 29, 2014, the Company adopted ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which changed 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. Therefore, individual restaurants which are closed after December 28, 2014 will not be classified as discontinued operations. Prior tofollowing tables, the Company’s ~~adoption of ASU 2014-08, when a restaurant was closed or~~revenue is disaggregated by major component for each category on the restaurant was either held for sale or abandoned, the restaurant’s operations were 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, were reclassified. For the thirteen and thirty-nine week periods ended September 24, 2017 and September 25, 2016, all restaurant sales, direct costs and expenses and income taxes attributable to restaurants classified as discontinued operations have been aggregated to a single caption entitled results from discontinued operations, net of income taxes in the condensed consolidated statements of ~~income~~income.


13 Weeks Ended July 1, 2018:	Domestic		International		Total Revenue
Restaurant sales	$	103,538	$	—	$	103,538
Franchise income		3,754		703		4,457
Other operating income		1,640		—		1,640
Total revenue	$	108,932	$	703	$	109,635


13 Weeks Ended June 25, 2017:	Domestic		International		Total Revenue
Restaurant sales	$	94,145	$	—	$	94,145
Franchise income		3,567		690		4,257
Other operating income		1,613		—		1,613
Total revenue	$	99,325	$	690	$	100,015


26 Weeks Ended July 1, 2018:	Domestic		International		Total Revenue
Restaurant sales	$	213,902	$	—	$	213,902
Franchise income		7,457		1,417		8,874
Other operating income		3,384		—		3,384
Total revenue	$	224,743	$	1,417	$	226,160


26 Weeks Ended June 25, 2017:	Domestic		International		Total Revenue
Restaurant sales	$	193,600	$	—	$	193,600
Franchise income		7,203		1,444		8,647
Other operating income		3,306		—		3,306
Total revenue	$	204,109	$	1,444	$	205,553

The following table provides information about receivables and deferred revenue liabilities from contracts with customers (in thousands).

Significant changes in the deferred revenue balance during the first twenty-six weeks of fiscal year 2018 are presented in the following table (in thousands).

The projected recognition of revenue related to deferred franchise development and opening fees is as follows (in thousands).

On December 12, 2017 the Company completed the acquisition of substantially all of the assets of six franchisee-owned Ruth’s Chris Steak House restaurants located in Hawaii (the “Hawaiian Restaurants”) for ~~all periods presented. Results from discontinued operations,~~a cash purchase price of $35.4 million. The acquisition was funded with borrowings under the Company’s senior credit facility.

The assets and liabilities of the Hawaiian Restaurants were recorded at their respective fair values as of the date of the acquisition. The fair values recorded for the assets of the Hawaiian Restaurants, including working capital, restaurant related fixed assets, leasehold improvements, franchise rights and goodwill, are based on preliminary valuations and are subject to adjustments as additional information is obtained. The Company is in the process of confirming the fair values using a combination of internal analysis and third party valuations. Once the process is complete, any adjustments to fair value of assets acquired or liabilities assumed may also result in adjustments to goodwill. The preliminary allocation of the purchase price did not change during the first twenty-six weeks of fiscal year 2018.

Goodwill was measured as the excess of the consideration transferred over the net of ~~income taxes is comprised~~the amounts assigned the identifiable assets acquired and the liabilities assumed as of the ~~following (in thousands):~~

13 Weeks Ended

39 Weeks Ended

September 24,

September 25,

September 24,

September 25,

2017

2016

2017

2016

Revenues

Mitchell's Restaurants

$
—

$
—

$
—

$
—

Other Restaurants

—

—

—

—

Total revenues

—

—

—

—

Costs and expenses

Recurring costs and expenses

Mitchell's Restaurants

131

(448
)

220

(408
)
Other Restaurants

(17
)

325

(57
)

562

Total costs and expenses

114

(123
)

163

154

(Loss) income before income taxes

(114
)

123

(163
)

(154
)

Income tax (benefit) expense

(43
)

48

(62
)

(60
)

(Loss) income from discontinued operations, net of income taxes

$
(71
)

$
75

$
(101
)

$
(94
)

~~Cash flows from discontinued operations are combined~~acquisition date. The goodwill for the Hawaiian Restaurants, which is included with the ~~cash flows from continuing operations within each~~goodwill for the reporting unit identified as the steakhouse operating segment, will be reviewed for potential impairment annually or more frequently if triggering events are detected. Reacquired franchise rights will be amortized over the remaining terms of the ~~categories on our condensed~~related franchise agreements, not including renewal options. Property and equipment will be depreciated over a period of three to twenty years.

As a result of the acquisition and related integration efforts, we incurred expenses of approximately $861 thousand during the first twenty-six weeks of fiscal year 2018, which are included in general and administrative expenses in the Company’s consolidated statements of cash flows. We do not anticipate that the sale of the Mitchell’s Restaurants or any of our closed restaurants reported as discontinued operations will have a material impact on the Company’s cash flow during fiscal year 2017.income.

	September 24,		December 25,		July 1,		December 31,
	2017		2016		2018		2017
Senior Credit Facility:
Revolving credit facility	$	30,000	$	25,000	$	50,000	$	50,000
Less current maturities		—		—		—		—
	$	30,000	$	25,000	$	50,000	$	50,000

As of ~~September 24, 2017,~~July 1, 2018, the Company had ~~$30.0~~$50.0 million of outstanding indebtedness under its senior credit facility with approximately ~~$55.4~~$35.8 million of borrowings available, net of outstanding letters of credit of approximately ~~$4.6~~$4.2 million. As of ~~September 24, 2017,~~July 1, 2018, the

weighted average interest rate on the Company’s outstanding debt was ~~2.7%~~3.6% and the weighted average interest rate on ~~our~~its outstanding letters of credit was 1.6%. In addition, the fee on the Company’s senior credit facility was 0.2%. ~~As of September 24, 2017, the Company was in compliance with all the covenants under its senior credit facility.~~

On February 2, 2017, the Company entered into a credit agreement with Wells Fargo Bank, National Association as administrative agent, and certain other lenders (the Credit Agreement). The Credit Agreement provides for a revolving credit facility of $90.0 million with a $5.0 million subfacility for letters of credit and a $5.0 million subfacility for swingline loans. Subject to the satisfaction of certain conditions and lender consent, the revolving credit facility may be increased up to a maximum of $150.0 million. The Credit Agreement has a maturity date of February 2, 2022. At the Company’s option, revolving loans may bear interest at (i) LIBOR, plus an applicable margin or (ii) the highest of (a) the rate publicly announced by Wells Fargo as its prime rate, (b) the average published federal funds rate in effect on such day plus 0.50% and (c) one month LIBOR plus 1.00%, plus an applicable margin. The applicable margin is based on the Company’s actual leverage ratio, ranging (a) from 1.50% to 2.25% above the applicable LIBOR rate or (b) at the Company’s option, from 0.50% to 1.25% above the applicable base rate.

The Credit Agreement contains customary representations and affirmative and negative covenants (including limitations on indebtedness and liens) as well as financial covenants requiring a minimum fixed coverage charge ratio and limiting the Company’s consolidated leverage ratio. The Credit Agreement also contains events of default customary for credit facilities of this type (with customary grace periods, as applicable), including nonpayment of principal or interest when due; material incorrectness of representations and warranties when made; breach of covenants; bankruptcy and insolvency; unsatisfied ERISA obligations; unstayed material judgment beyond specified periods; default under other material indebtedness; and certain changes of control of the Company. If any event of default occurs and is not cured within the applicable grace period, or waived, the outstanding loans may be accelerated by lenders holding a majority of the commitments under the Credit Agreement and the lenders’ commitments may be terminated. The obligations under the Credit Agreement are guaranteed by certain of the Company’s subsidiaries (the Guarantors), and are secured by a lien on substantially all of the Company’s personal property assets other than any equity interest in current and future subsidiaries of the Company.

~~Subsequent to the end of the third quarter of fiscal year~~In October 2017, ~~the Company’s~~our Board of Directors approved a ~~new~~ share repurchase program ~~under which~~authorizing the Company ~~is authorized~~ to repurchase up to $60 million of outstanding common stock from time to time. The ~~new~~ share repurchase program ~~replaces~~replaced the previous share repurchase program announced in April 2016, which ~~has been~~was terminated. ~~The Company spent $48.0 million to repurchase 2.8 million shares of its common stock, at an average price of $17.05 per share, under its previous share repurchase program.~~ During the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017, 719,442~~2018, 224,605 shares were repurchased at an aggregate cost of ~~$14.5~~$5.9 million, or an average cost of ~~$20.21~~$26.46 per share. ~~Share repurchases were accounted~~As of July 1, 2018, $44.7 million remained available for future purchases 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.~~share repurchase program.

The Company’s Board of Directors declared the following dividends during the periods presented (amounts in thousands, except per share amounts):

Subsequent to the end of the ~~third~~second quarter of fiscal year ~~2017,~~2018, the Company’s Board of Directors declared a regular quarterly cash dividend of ~~$0.09~~$0.11 per common and restricted share, or approximately ~~$2.8~~$3.4 million in the aggregate based on the number of shares currently outstanding, payable on ~~November 22, 2017~~September 6, 2018 to stockholders of record as of the close of business on ~~November 9, 2017.~~August 23, 2018.

Outstanding unvested restricted stock is not included in common stock outstanding amounts. Restricted stock outstanding as of ~~September 24, 2017~~July 1, 2018 aggregated ~~1,184,629~~997,906 shares.

The carrying amounts of cash and cash equivalents, receivables, prepaid expenses, accounts payable and accrued expenses and other current liabilities are reasonable estimates of their fair values due to their short duration. Borrowings classified as long-term debt as of ~~September 24, 2017~~July 1, 2018 and December ~~25, 2016~~31, 2017 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 ~~had no~~did not have any non-financial assets ~~or liabilities~~ measured at fair value on a ~~recurring or nonrecurring~~non-recurring basis ~~subject to the disclosure requirements~~as of ~~“Fair Value Measurements and Disclosures,” FASB ASC Topic 820.~~July 1, 2018. The Company’s non-financial assets measured at fair value on a non-recurring basis as of December 31, 2017 were as follows:

The Company has two reportable segments – the Company-owned steakhouse segment and the franchise operations segment. 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 ~~September 24, 2017,~~July 1, 2018, (i) the Company-owned steakhouse restaurant segment included 7077 Ruth’s Chris Steak House restaurants and two Ruth’s Chris Steak House restaurants operating under contractual agreements and (ii) the franchise operations segment included 8175 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 Company-owned steakhouse segment for the purpose of determining segment profits because such costs are not directly related to the operation of individual restaurants. 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 (in thousands):

	13 Weeks Ended						39 Weeks Ended						13 Weeks Ended						26 Weeks Ended
	September 24,			September 25,			September 24,			September 25,			July 1,			June 25,			July 1,			June 25,
	2017			2016			2017			2016			2018			2017			2018			2017
Revenues:
Company-owned steakhouse restaurants	$	80,390		$	79,360		$	275,732		$	263,907		$	104,499		$	95,168		$	215,700		$	195,342
Franchise operations		4,218			3,928			12,865			12,463			4,457			4,257			8,874			8,647
Unallocated other revenue and revenue discounts		559			486			2,123			1,948			679			590			1,586			1,564
Total revenues	$	85,167		$	83,774		$	290,720		$	278,318		$	109,635		$	100,015		$	226,160		$	205,553

Segment profits:
Company-owned steakhouse restaurants	$	12,476		$	15,088		$	60,674		$	58,859		$	25,428		$	22,049		$	53,544		$	48,197
Franchise operations		4,218			3,928			12,865			12,463			4,457			4,257			8,874			8,647
Total segment profit		16,694			19,016			73,539			71,322			29,885			26,306			62,418			56,844

Unallocated operating income		559			486			2,123			1,948			679			590			1,586			1,564
Marketing and advertising expenses		(3,197	)		(2,546	)		(9,056	)		(7,134	)		(4,640	)		(3,412	)		(8,117	)		(5,859	)
General and administrative costs		(7,096	)		(7,346	)		(23,267	)		(22,068	)		(9,274	)		(8,035	)		(18,248	)		(16,171	)
Depreciation and amortization expenses		(3,852	)		(3,435	)		(11,089	)		(9,907	)		(4,673	)		(3,731	)		(9,134	)		(7,236	)
Pre-opening costs		(121	)		(574	)		(1,473	)		(1,665	)		(272	)		(173	)		(412	)		(1,352	)
Interest expense, net		(197	)		(333	)		(521	)		(799	)		(403	)		(144	)		(783	)		(324	)
Other income		(6	)		(92	)		33			60			22			14			34			39
Income from continuing operations before income tax expense	$	2,784		$	5,176		$	30,289		$	31,757		$	11,324		$	11,415		$	27,344		$	27,505

Capital expenditures:
Company-owned steakhouse restaurants	$	3,600		$	5,238		$	13,592		$	18,351		$	6,162		$	3,120		$	11,041		$	9,993
Corporate assets		77			387			734			743			222			359			848			656
Total capital expenditures	$	3,677		$	5,625		$	14,326		$	19,094		$	6,384		$	3,479		$	11,889		$	10,649

As of December 26, 2016 (the first day of fiscal year 2017), the Company adopted ASU 2016-09, Compensation – Stock Compensation (Topic 718), which affects all entities that issue share-based compensation to their employees. The amendments in this ASU cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. Therefore, for the thirty-nine weeks of fiscal year 2017, the recognition of excess tax benefits and deficiencies were recognized as income tax benefits or expense on the consolidated statement of income and as an operating activity on the statement of cash flows. Prior toOn May 15, 2018, the Company’s ~~adoption of ASU 2016-09, these tax benefits and deficiencies were recognized as additional paid-in capital on the balance sheet and as~~stockholders approved a ~~financing activity on the statement of cash flows.~~

~~Under~~new 2018 Omnibus Incentive Plan (“2018 Plan”) which replaces the Amended and Restated 2005 Equity Incentive Plan ~~at September 24, 2017,~~(“2005 Plan”), which expired on May 30, 2018. The 2018 Plan authorizes 2.5 million shares reserved for future grants. Awards that were previously awarded under the 2005 Plan that are forfeited or cancelled in the future will be made available for grant or issuance under the 2018 Plan. The 1,649,094 shares that were authorized but unissued under the 2005 Plan as of May 15, 2018 were cancelled. As of July 1, 2018, there were ~~19,250~~11,790 shares of common stock issuable upon exercise of currently outstanding options, ~~1,184,629~~and 997,906 currently outstanding unvested restricted stock awards ~~and 1,806,516~~under the 2005 Plan. As of July 1, 2018, the 2018 Plan has 2,574,151 shares available for future grants. During the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017,~~2018, the Company issued ~~251,512~~226,843 restricted stock awards to directors, officers and other employees of the Company. Of the ~~251,512~~226,843 restricted stock awards issued during the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017, 38,220 shares will vest in fiscal year~~ 2018, ~~135,073~~35,386 shares will vest in fiscal year 2019, ~~48,219~~98,368 shares will vest in fiscal year 2020, ~~10,000~~54,091 shares will vest in fiscal year 2021, ~~10,000 will vest in 2022~~ and ~~10,000~~38,998 will vest in 2023.

Total stock compensation expense recognized during the first ~~thirty-nine~~twenty-six weeks of fiscal years 2018 and 2017 ~~and 2016~~ was ~~$5.1~~$3.8 million and ~~$4.3~~$3.4 million, respectively.

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:

	39 Weeks Ended						26 Weeks Ended
	September 24,			September 25,			July 1,			June 25,
	2017			2016			2018			2017
Income tax expense at statutory rates		35.0	%		35.0	%		21.0	%		35.0	%
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal benefit		3.0	%		4.2	%		3.4	%		3.0	%
Federal employment tax credits		(7.0	%)		(7.1	%)		(9.5	%)		(6.8	%)
Other		0.8	%		0.7	%		0.3	%		0.1	%
Effective tax rate		31.8	%		32.8	%		15.2	%		31.3	%

The Tax Cuts and Jobs Act (the “2017 Tax Act”), signed into law on December 22, 2017, significantly revised several aspects of U.S. tax law. Effective January 1, 2018, the 2017 Tax Act reduced the statutory corporate tax rate from 35% to 21%. The reduction in the statutory corporate tax rate is the principal driver for the decrease to the Company’s continuing operations quarterly effective tax rate illustrated above. Income tax expense for the first twenty-six weeks of fiscal year 2018 and 2017 was reduced by discreet income tax items of $631 thousand and $247 thousand, respectively, primarily related to excess tax benefits from the vesting of restricted stock.

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 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 files consolidated and separate income tax returns in the United States federal jurisdiction and many state jurisdictions, respectively. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations for years before ~~2012.~~2013.

The following table sets forth the computation of earnings per share (amounts in thousands, except share and per share amounts):

	13 Weeks Ended					39 Weeks Ended						13 Weeks Ended				26 Weeks Ended
	September 24,			September 25,		September 24,			September 25,			July 1,		June 25,		July 1,		June 25,
	2017			2016		2017			2016			2018		2017		2018		2017
Income from continuing operations	$	1,767		$	3,508	$	20,657		$	21,347		$	9,561	$	7,804	$	23,197	$	18,889
Income (loss) from discontinued operations, net of income taxes		(71	)		75		(101	)		(94	)		12		7		22		(30	)
Net income	$	1,696		$	3,583	$	20,556		$	21,253		$	9,573	$	7,811	$	23,219	$	18,859
Shares:
Weighted average number of common shares outstanding - basic		30,348,180			31,305,952		30,490,554			32,023,814			29,713,825		30,548,258		29,701,847		30,561,741
Weighted average number of common shares outstanding - diluted		30,877,192			31,737,036		31,040,640			32,437,142			30,375,306		31,264,266		30,377,194		31,255,441

Basic earnings (loss) per common share:
Continuing operations	$	0.06		$	0.11	$	0.68		$	0.67		$	0.32	$	0.26	$	0.78	$	0.62
Discontinued operations		—			—		(0.01	)		—			—		—		—		—
Basic earnings per common share	$	0.06		$	0.11	$	0.67		$	0.67		$	0.32	$	0.26	$	0.78	$	0.62

Diluted earnings (loss) per common share:
Continuing operations	$	0.06		$	0.11	$	0.67		$	0.66		$	0.32	$	0.25	$	0.76	$	0.60
Discontinued operations		(0.01	)		—		(0.01	)		—			—		—		—		—
Diluted earnings per common share	$	0.05		$	0.11	$	0.66		$	0.66		$	0.32	$	0.25	$	0.76	$	0.60

There were no anti-dilutive shares for the second quarter of fiscal year 2018. Diluted earnings per share for the ~~third quarters~~second quarter of fiscal year 2017 excludes 17 restricted shares which were outstanding during the period but were anti-dilutive and ~~2016~~had a weighted average exercise price of $0 per share. Diluted earnings per share for the first twenty-six weeks of fiscal year 2018 and 2017 excludes ~~stock options and~~ restricted shares of 0679 and ~~31,845,~~1,295, respectively, which were outstanding during the period but were ~~anti-dilutive. The~~anti-dilutive and had a weighted average exercise ~~prices~~price of ~~the anti-dilutive stock options for the third quarters of fiscal years 2017~~$0 and ~~2016 were $0 per share and $19.14 per share. Dilutive~~

earnings per share for the first thirty-nine weeks of fiscal years 2017 and 2016 excludes stock options and restricted shares of 857 and 24,981, respectively, which were outstanding during the period but were anti-dilutive. The weighted average exercise prices of the anti-dilutive stock options for the first thirty-nine weeks of fiscal years 2017 and 2016 were $21.60, ~~per share and $19.04 per share,~~ respectively.

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.

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.

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.

~~On November 2, 2017~~The Company sold eighteen Mitchell’s Fish Markets and three Mitchell’s/Cameron’s Steakhouse restaurants (Mitchell’s Restaurants) on January 21, 2015 to Landry’s Inc. and Mitchell’s Entertainment, Inc., an affiliate of Landry’s Inc. (together with Landry’s Inc., Landry’s). The Company guaranteed Landry’s lease obligations aggregating $28.4 million under seven of the Mitchell’s Restaurant’s 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 entered into an asset purchase agreement with Desert Island Restaurants, L.L.C., Honolulu Steak House, LLC, Maui Steak House LLC, Wailea Steak House LLC, Beachwalk Steak House LLC, Lava Coast Steak House, LLC and Kauai Steak House, LLC (collectively,in the ~~“Sellers”) to acquire the six franchised Ruth’s Chris Steak House restaurants in Hawaii for~~event of a cash purchase price of $35 million, subject to certain adjustments. The transaction has been approved by our Board of Directors and is subject to the satisfaction of customary closing conditions and may be terminated by the Company or the Sellers if closing has not occurred on or before 120 days following the datedefault under any of the ~~asset purchase agreement.~~leases.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains “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 “believe,” “anticipate,” “expect,” “estimate,” “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, including with respect to new restaurant openings, ~~strategy, financial outlook,~~ capital expenditures, ~~liquidity~~ and ~~capital resources,~~ the impact of healthcare inflation, recent accounting pronouncements and ~~minimum wage~~tax reform legislation, ~~the expected timing of the closing of the Hawaii franchisee acquisition and the expected benefits of the Hawaii franchisee acquisition~~ 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 income taxes, unclaimed property, 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; a material failure, interruption or security breach of the Company’s information technology network; ~~repeal or reduction of the federal FICA tip credit;~~ the Company’s indemnification obligations in connection with its sale of the Mitchell’s Restaurants; the inability to successfully integrate the Hawaiian Restaurants into the Company’s business operations; the Company’s ability to protect

its name and logo and other proprietary information; an impairment in the financial statement carrying value of our goodwill, other intangible assets or property; the impact of litigation; the restrictions imposed by the Company’s ~~credit agreement;~~Credit Agreement; and changes in, or the discontinuation of, the Company’s quarterly cash dividend payments or share repurchase program; the failure or the inability of the parties to satisfy the closing conditions for the Hawaii franchisee acquisition; unanticipated transaction costs for the Hawaii franchisee acquisition; unexpected delays in closing the Hawaii franchisee acquisition; and the Company’s inability to successfully integrate the Hawaii franchisee restaurants into its operations.program. 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, see “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December ~~25, 2016,~~31, 2017, which is 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 Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof. You should not assume that material events subsequent to the date of this Quarterly Report on Form 10-Q have not occurred.

Unless the context otherwise indicates, all references in this report to the “Company,” “Ruth’s,” “we,” “us,” “our” or similar words are to Ruth’s Hospitality Group, Inc. and its subsidiaries. ~~Ruth’s Hospitality Group, Inc. is a Delaware corporation formerly known as Ruth’s Chris Steak House, Inc., and was founded in 1965.~~

The Ruth’s Chris menu features a broad selection of USDA Prime- and other high quality 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 over 50 years committed 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.

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 2120 international franchisee-owned restaurants in Aruba, Canada, China, Hong Kong, Indonesia, Japan, Mexico, Panama, Singapore ~~Taiwan~~ and the United Arab Emirates. New Company-owned Ruth’s Chris Steak House restaurants opened in Waltham, MA in January 2017 and Cleveland, OH in March 2017 and a new frachisee-owned Ruth’s Chris Steak House restaurant opened in Chengdu, China in September 2017. A new Ruth’s Chris Steak House restaurant operating under a contractual agreement also opened in Tulsa, OK in January 2017. A franchisee-owned Ruth’s Chris Steak House restaurant was closed in San Juan, Puerto Rico in September 2017.Taiwan.

Our business is subject to seasonal fluctuations. Historically, our first and fourth quarters have tended to be the strongest revenue quarters due largely to the year-end holiday season and the popularity of dining out during the fall and winter months. Consequently,

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.

Our Annual Report on Form 10-K for the fiscal year ended December ~~25, 2016~~31, 2017 provides additional information about our business, operations and financial condition.

The table below sets forth certain operating data expressed as a percentage of total revenues for the periods indicated, except as otherwise noted. Our historical results are not necessarily indicative of the operating results that may be expected in the future.

	13 Weeks Ended						39 Weeks Ended						13 Weeks Ended						26 Weeks Ended
	September 24,			September 25,			September 24,			September 25,			July 1,			June 25,			July 1,			June 25,
	2017			2016			2017			2016			2018			2017			2018			2017
Revenues:
Restaurant sales		93.2	%		94.0	%		93.9	%		94.1	%		94.4	%		94.1	%		94.6	%		94.2	%
Franchise income		5.0	%		4.7	%		4.4	%		4.5	%		4.1	%		4.3	%		3.9	%		4.2	%
Other operating income		1.8	%		1.3	%		1.7	%		1.4	%		1.5	%		1.6	%		1.5	%		1.6	%
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Costs and expenses:
Food and beverage costs (percentage of restaurant sales)		31.9	%		30.1	%		30.0	%		29.8	%		28.1	%		29.9	%		28.3	%		29.3	%
Restaurant operating expenses (percentage of restaurant sales)		53.6	%		51.5	%		48.7	%		48.5	%		48.3	%		47.8	%		47.5	%		46.7	%
Marketing and advertising		3.8	%		3.0	%		3.1	%		2.6	%		4.2	%		3.4	%		3.6	%		2.9	%
General and administrative costs		8.3	%		8.8	%		8.0	%		7.9	%		8.5	%		8.0	%		8.1	%		7.9	%
Depreciation and amortization expenses		4.5	%		4.1	%		3.8	%		3.6	%		4.3	%		3.7	%		4.0	%		3.5	%
Pre-opening costs		0.1	%		0.7	%		0.5	%		0.6	%		0.2	%		0.2	%		0.2	%		0.7	%
Total costs and expenses		96.5	%		93.3	%		89.4	%		88.3	%		89.3	%		88.5	%		87.6	%		86.5	%
Operating income		3.5	%		6.7	%		10.6	%		11.7	%		10.7	%		11.5	%		12.4	%		13.5	%

Other income (expense):
Interest expense, net		(0.2	%)		(0.4	%)		(0.2	%)		(0.3	%)		(0.4	%)		(0.1	%)		(0.3	%)		(0.1	%)
Other		-			(0.1	%)		-			-			0.0	%		0.0	%		0.0	%		0.0	%
Income from continuing operations before income tax expense		3.3	%		6.2	%		10.4	%		11.4	%		10.3	%		11.4	%		12.1	%		13.4	%
Income tax expense		1.2	%		2.0	%		3.3	%		3.7	%		1.6	%		3.6	%		1.8	%		4.2	%
Income from continuing operations		2.1	%		4.2	%		7.1	%		7.7	%		8.7	%		7.8	%		10.3	%		9.2	%
Loss from discontinued operations, net of income taxes		(0.1	%)		0.1	%		-			-			0.0	%		0.0	%		0.0	%		(0.0	%)
Net income		2.0	%		4.3	%		7.1	%		7.7	%		8.7	%		7.8	%		10.3	%		9.2	%

~~Third~~Second Quarter Ended ~~September 24, 2017~~July 1, 2018 (13 Weeks) Compared to ~~Third~~Second Quarter Ended ~~September~~June 25, ~~2016~~2017 (13 Weeks)

Overview. Operating income ~~decreased~~increased by ~~$2.6 million,~~$160 thousand, or ~~46.7%~~1.4%, to ~~$3.0~~$11.7 million for the ~~third~~second quarter of fiscal year ~~2017~~2018 from the ~~third~~second quarter of fiscal year ~~2016.~~2017. Operating income for the ~~third~~second quarter of fiscal year ~~2017~~2018 was favorably impacted by a ~~$682 thousand~~$9.4 million increase in restaurant sales offset by a ~~$2.0~~$5.0 million increase in restaurant operating expenses, $1.2 million increase in marketing and advertising expense, a ~~$1.6~~$1.2 million increase in general and administrative costs, a $942 thousand increase in depreciation and amortization, a $935 thousand increase in food and beverage ~~costs.~~costs, and a $99 thousand increase in pre-opening expenses. Income from continuing operations ~~decreased~~and net income increased from the ~~third quarter of fiscal year 2016 by $1.7 million to $1.8 million. Net income for the third~~second quarter of fiscal year 2017 ~~decreased from the third quarter of fiscal year 2016~~ by ~~$1.9~~$1.8 million to ~~$1.7 million.~~$9.6 million, primarily due to the impact of a lower effective income tax rate.

million to ~~$12.5~~$25.4 million from the ~~third~~second quarter of fiscal year ~~2016.~~2017. The ~~decrease~~increase was driven primarily by a ~~$1.0~~$9.3 million increase in restaurant sales offset by a ~~$2.0~~$5.0 million increase in restaurant operating expenses and a ~~$1.6 million~~$935 thousand increase in food and beverage costs. Franchise income increased ~~$290~~$200 thousand in the ~~third~~second quarter of fiscal year ~~2017~~2018 compared to the ~~third~~second quarter of fiscal year ~~2016 primarily due to franchise opening fees of $200 thousand.~~2017.

Restaurant Sales. Restaurant sales increased by ~~$682 thousand,~~$9.4 million, or ~~0.9%~~10.0%, to ~~$79.4~~$103.5 million in the ~~third~~second quarter of fiscal year ~~2017~~2018 from the ~~third~~first quarter of fiscal year ~~2016.~~2017. The increase was ~~attributable to~~driven by a ~~$1.9~~$9.9 million increase in restaurant sales atfrom new restaurants, ~~offset by~~including the acquired Hawaii Restaurants, and a ~~decrease~~1.3% increase in Company-owned comparable restaurant sales which consisted of ~~$1.2 million. Excluding discontinued operations, total~~

~~operating weeks during the third quarter of fiscal year 2017 increased to 910 from 877 in the third quarter of fiscal year 2016.~~ ~~Company-owned comparable restaurant sales decreased 1.6%, driven by~~ an average check ~~decrease~~increase of ~~0.1%~~1.4% and a traffic decrease of ~~1.5%~~0.1%. ~~During~~The calendar shift of Easter from the ~~third~~second quarter of 2017 ~~Hurricanes Harvey and Irma~~into the first quarter of 2018 negatively impacted ~~Company-owned~~second quarter 2018 comparable restaurant traffic and sales by approximately ~~150-200~~70 basis ~~points, driven by 64 lost operating days.~~points.

Franchise Income. Franchise income ~~increased $290 thousand~~ in the ~~third~~second quarter of fiscal year ~~2017~~2018 increased $200 thousand compared to the ~~third~~second quarter of fiscal year ~~2016.~~2017. The ~~increase~~acquisition of the Hawaii Restaurants decreased sales based royalty income by $413 thousand. This was ~~primarily due~~offset by the reclassification of franchisee advertising fees of $383 thousand from marketing and advertising expense to ~~an increase~~franchise income and the recognition of $178 thousand in franchise ~~opening~~development and site specific fees ~~of $200 thousand.~~in accordance with Topic 606.

Other Operating Income. Other operating income ~~increased $421 thousand~~remained consistent in the ~~third~~second quarter of fiscal year ~~2017~~2018 compared to the ~~third~~second quarter of fiscal year 2016. The increase in other operating income was primarily due to an increase of $371 thousand in income from restaurants operating under contractual agreements, including the new location in Tulsa, OK.2017.

Food and Beverage Costs. Food and beverage costs increased ~~$1.6 million~~$935 thousand in the ~~third~~second quarter of fiscal year ~~2017~~2018 compared to the ~~third~~second quarter of fiscal year ~~2016.~~2017. As a percentage of restaurant sales, food and beverage costs ~~increased~~decreased to ~~31.9%~~28.1% in the ~~third~~second quarter of fiscal year ~~2017~~2018 from ~~30.1%~~29.9% in the ~~third~~second quarter of fiscal year ~~2016.~~2017. The ~~increase~~decrease in food and beverage costs as a percentage of restaurant sales was primarily due to a ~~10.9%~~10.0% decrease in total beef costs as well as an increase in ~~beef costs.~~average check of 1.4%.

Restaurant Operating Expenses. Restaurant operating expenses increased ~~$2.0~~$5.0 million, or ~~5.0%~~11.1%, to ~~$42.6~~$50.0 million in the ~~third~~second quarter of fiscal year ~~2017~~2018 from the ~~third~~second quarter of fiscal year ~~2016.~~2017. Restaurant operating expenses, as a percentage of restaurant sales, increased to ~~53.6%~~48.3% in the ~~third~~second quarter of fiscal year ~~2017~~2018 from ~~51.5%~~47.8% in the ~~third~~second quarter of fiscal year ~~2016.~~2017. The increase in restaurant operating expenses as a percentage of restaurant sales was primarily due ~~to storm related inefficiencies and the resulting sales deleveraging. The third quarter of fiscal year 2017 had a $1.2 million~~an increase in ~~labor~~occupancy related ~~costs and a $335 thousand benefit in the third quarter of fiscal year 2016 related to the settlement of disputed rent costs.~~expenses.

Marketing and Advertising. Marketing and advertising expenses increased ~~$651 thousand~~$1.2 million to ~~$3.2~~$4.6 million in the ~~third~~second quarter of fiscal year ~~2017~~2018 from the ~~third~~second quarter of fiscal year ~~2016.~~2017. The increase in marketing and advertising expenses in the ~~third~~second quarter of fiscal year ~~2017~~2018 was primarily attributable to a planned increase in advertising ~~spending.~~spending in addition to the reclassification of $437 thousand in certain administrative support costs that have been historically charged to general and administrative costs.

General and Administrative Costs. General and administrative costs ~~decreased $250 thousand~~increased $1.2 million to ~~$7.1~~$9.3 million in the ~~third~~second quarter of fiscal year ~~2017~~2018 from the ~~third~~second quarter of fiscal year ~~2016.~~2017. The ~~decrease~~increase in general and administrative costs was primarily attributable to $823 thousand in compensation costs, $528 thousand in professional fees, $409 thousand in Hawaii Restaurants acquisition costs partially offset by a ~~decrease~~$437 thousand reduction in ~~performance-based compensation.~~certain administrative support costs that were reclassified to marketing and advertising.

Depreciation and Amortization Expenses. Depreciation and amortization expense increased ~~$417~~$942 thousand to ~~$3.9~~$4.7 million in the ~~third~~second quarter of fiscal year ~~2017~~2018 from the ~~third~~second quarter of fiscal year ~~2016~~2017 primarily due to depreciation on new restaurant and remodel assets placed in service within the last twelve ~~months.~~months including $680 thousand of depreciation and amortization related to the Hawaii Restaurants acquisition.

Pre-opening Costs. Pre-opening costs were ~~$121~~$272 thousand in the second quarter of fiscal year 2018 primarily due to the planned openings of a Ruth’s Chris Steak House Restaurants in Jersey City, NJ expected to open in the third quarter of 2018 and Paramus, NJ in the fourth quarter of 2018. Pre-opening costs were $173 thousand in the second quarter of fiscal year 2017 primarily due to the ~~planned opening~~openings of a Ruth’s Chris Steak House Restaurant in Denver, ~~CO. Pre-opening costs were $574 thousand~~CO which opened in the ~~third~~fourth quarter of fiscal year ~~2016 primarily due to the planned openings of two Ruth’s Chris Steak House Restaurants, including El Paso, TX, which opened in the third quarter of fiscal year 2016.~~2017.

Interest Expense. Interest expense ~~decreased $136~~increased $259 thousand to ~~$197~~$403 thousand in the ~~third~~second quarter of fiscal year 2018 from the second quarter of fiscal year 2017, ~~from~~primarily due to higher average debt balances during the ~~third~~second quarter of fiscal year ~~2016 primarily due to $78 thousand in lower amortization of capitalized debt costs during the third quarter of fiscal year 2017~~2018 compared to the ~~third~~second quarter of ~~2016.~~2017.

Other Income and Expense. During the ~~third~~second quarter of fiscal year 2018, we recognized other income of $22 thousand. During the second quarter of fiscal year 2017 we recognized other ~~expense~~income of $6$14 thousand.

Income Tax Expense. During the ~~third~~second quarter of fiscal year ~~2016~~2018, we recognized ~~other~~income tax expense of ~~$92 thousand.~~

~~Income Tax Expense~~.$1.8 million. During the ~~third~~second quarter of fiscal year 2017, we recognized income tax expense of ~~$1.0 million. During the third quarter of fiscal year 2016, we recognized income tax expense of $1.7~~$3.6 million. The effective tax rate, including the impact of discrete items, ~~increased~~decreased to ~~36.5%~~15.6% for the ~~third~~second quarter of fiscal year ~~2017~~2018 compared to ~~32.2%~~31.6% for the ~~third~~second quarter of fiscal year ~~2016.~~2017. The effective tax rate ~~increased~~decreased in the ~~third~~second quarter of fiscal year ~~2017~~2018 primarily due to the 2017 Tax Act which was signed into law on December 22, 2017. The 2017 Tax Act significantly revised U.S. tax law, and included many changes that impacted the Company, most notably a ~~discrete state income~~reduction of the statutory corporate tax ~~reserve recognized in the quarter.~~rate from 35% to 21%. Fiscal year ~~2017~~2018 discrete items and other unexpected changes impacting the annual tax expense may cause the effective tax rate for fiscal year ~~2017~~2018 to differ from the effective tax rate for the ~~third~~second quarter ~~2017.~~of fiscal year 2018.

Income from Continuing Operations. Income from continuing operations of ~~$1.8~~$9.6 million in the ~~third~~second quarter of fiscal year ~~2017 decreased~~2018 increased by ~~$1.7~~$1.8 million compared to the ~~third~~second quarter of fiscal year ~~2016~~2017 due to the factors noted above.

Income or Loss from Discontinued Operations, net of income taxes. ~~Loss~~Income from discontinued operations, net of income taxes, for the ~~third~~second quarter of fiscal year ~~2017~~2018 was ~~$71~~$12 thousand compared to income of ~~$75~~$7 thousand during the ~~third~~second quarter of fiscal year ~~2016.~~2017.

The loss in the third quarter of fiscal year 2017 was primarily due to Mitchell’s Restaurants. The income in the third quarter of 2016 was primarily attributable to a $466 thousand benefit from the extinguishment of a liability related to Mitchell’s Restaurant gift cards, partially offset by occupancy costs of $335 thousand from a closed Ruth’s Chris Steak House restaurant.

Net Income. Net income was ~~$1.7~~$9.6 million in the ~~third~~second quarter of fiscal year ~~2017~~2018 and ~~decreased~~increased by ~~$1.9~~$1.8 million compared to ~~$3.6~~$7.8 million in the ~~third~~second quarter of fiscal year ~~2016.~~2017. The ~~decrease~~increase was largely attributable to the factors noted above.

~~Thirty-nine~~Twenty-six Weeks Ended ~~September 24, 2017~~July 1, 2018 Compared to ~~Thirty-nine~~Twenty-six Weeks Ended ~~September~~June 25, ~~2016~~2017

Overview. Operating income ~~decreased~~increased by ~~$1.7 million,~~$303 thousand, or ~~5.3%~~1.1%, to ~~$30.8~~$28.1 million for the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 from the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. Operating income for the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 was favorably impacted by a ~~$11.1~~$20.3 million increase in restaurant sales ~~an increase~~and a $940 thousand decrease in ~~other operating income of $899 thousand and an increase in franchise income of $402 thousand~~pre-opening expenses partially offset by a ~~$6.0~~$11.3 million increase in restaurant operating expenses, a ~~$4.0~~$3.8 million increase in food and beverage costs, a ~~$1.9~~$2.3 million increase in marketing and advertising, a ~~$1.2~~$2.1 million increase in general and administrative ~~costs~~expenses, and a ~~$1.2~~$1.9 million increase in depreciation and amortization. Income from continuing operations ~~decreased~~increased from the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016~~2017 by ~~$690 thousand~~$4.3 million to ~~$20.7~~$23.2 million. Net income for the first ~~thirty-nine~~twenty-six weeks of fiscal year 2018 increased from the first twenty-six weeks of fiscal year 2017 ~~decreased from the first thirty-nine weeks of fiscal year 2016~~ by ~~$697 thousand~~$4.4 million to ~~$20.6~~$23.2 million.

Segment Profits. Segment profitability information is presented in Note 7 to the condensed 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 the United States, 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. Segment profits for the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 for the Company-owned steakhouse restaurant segment increased by ~~$1.8~~$5.3 million to ~~$60.7~~$53.5 million from the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. The increase was driven primarily by a ~~$11.8~~$20.4 million increase in restaurant sales partially offset by a ~~$6.0~~$11.3 million increase in restaurant operating expenses and a ~~$4.0~~$3.8 million increase in food and beverage costs. Franchise income increased ~~$402~~$227 thousand in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 compared to the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016 primarily due to royalties from a 4.5% increase in franchise restaurant sales.~~2017.

Restaurant Sales. Restaurant sales increased by ~~$11.1~~$20.3 million, or ~~4.2%~~10.5%, to ~~$273.0~~$213.9 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 from the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. The increase was attributable to a ~~$1.8 million increase in Company-owned comparable restaurant sales and a $9.3~~$22.2 million increase in restaurant sales at new ~~restaurants.~~restaurants offset by a decrease in Company-owned comparable restaurant sales of $1.2 million. Excluding discontinued operations, total operating weeks during the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 increased to ~~2,715~~2,002 from ~~2,605~~1,805 in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. Fiscal year 2018, which began one week later than fiscal year 2017, did not include restaurant sales from the last week of December. As a result, restaurant sales in fiscal year 2018 were negatively impacted by approximately $3.0 million, and comparable sales were negatively impacted by approximately 160 basis points. Adjusting for the timing of this calendar shift, Company-owned comparable restaurant sales increased ~~0.7%~~1.2%, driven by an average check increase of ~~1.1% and a traffic decrease of 0.4%~~1.2%.

Franchise Income. Franchise income increased ~~$402~~$227 thousand in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 compared to the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. The acquisition of the Hawaii Restaurants decreased sales based royalty income by $859 thousand. This was offset by the reclassification of franchisee advertising fees of $764 thousand from marketing and advertising expense to franchise income and the recognition of $236 thousand in franchise development and site specific fees in accordance with Topic 606. The remaining increase in franchise royalties was ~~primarily due to~~driven by an increase in ~~royalties from a 4.5% increase in~~comparable franchise restaurant sales.

Other Operating Income. Other operating income increased ~~$899~~$78 thousand in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 compared to the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. The increase in other operating income was primarily due to an increase ~~of $687 thousand~~ in income from restaurants operated under contractual ~~agreements, including the new location in Tulsa, OK and increased gift card breakage revenue of $175 thousand.~~ agreements.

Food and Beverage Costs. Food and beverage costs increased ~~$4.0~~$3.8 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 compared to the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. As a percentage of restaurant sales, food and beverage costs ~~increased~~decreased to ~~30.0%~~28.3% in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 from ~~29.8%~~29.3% in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. The ~~increase~~decrease in food and beverage costs as a percentage of restaurant sales was primarily due to an increase in ~~beef costs.~~average check.

Restaurant Operating Expenses. Restaurant operating expenses increased ~~$6.0~~$11.3 million, or ~~4.7%~~12.4%, to ~~$133.0~~$101.7 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 from the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. Restaurant operating expenses, as a percentage of restaurant sales, increased to ~~48.7%~~47.6% in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 from ~~48.5%~~46.7% in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. The increase in restaurant operating expenses as a percentage of restaurant sales was primarily ~~due~~attributable to an increase in ~~labor related expenses.~~occupancy costs.

Marketing and Advertising. Marketing and advertising expenses increased ~~$1.9~~$2.3 million to ~~$9.1~~$8.1 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 from the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. The increase in marketing and advertising expenses in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 was primarily attributable to a planned increase in advertising ~~spending.~~spending in addition to the reclassification of $851 thousand in certain administrative support costs that have been historically charged to general and administrative costs.

General and Administrative Costs. General and administrative costs increased ~~$1.2~~$2.1 million to ~~$23.3~~$18.2 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 from the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. The increase in general and administrative costs was primarily attributable to ~~an increase of $2.0~~$1.4 million in compensation ~~expense~~costs, $471 thousand in professional fees, $861 thousand in Hawaii Restaurants acquisition costs partially offset by a ~~decrease~~$851 thousand reduction in ~~professional fees of $997 thousand.~~certain administrative support costs that were reclassified to marketing and advertising.

Depreciation and Amortization Expenses. Depreciation and amortization expense increased ~~$1.2~~$1.9 million to ~~$11.1~~$9.1 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 from the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016~~2017 primarily due to depreciation on new restaurant and remodel assets placed in service within the last twelve ~~months.~~months including $1.3 million of depreciation and amortization related to the Hawaii Restaurants acquisition.

Pre-opening Costs. Pre-opening costs were ~~$1.5~~$412 thousand in the first twenty-six weeks of fiscal year 2018 primarily due to the anticipated opening of the Ruth’s Chris Steak House Restaurants in Jersey City, NJ which is expected to open in the third quarter of fiscal year 2018. Pre-opening costs were $1.4 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year 2017 primarily due to the openings of two ~~Ruth’s Chris Steak House~~new Company-owned restaurants in Waltham, MA and Cleveland, OH, which opened in the first ~~thirty-nine weeks of fiscal year 2017 and the anticipated opening of our second Denver, CO opening planned for the fourth~~ quarter of 2017. Pre-opening costs were $1.7 million in the first thirty-nine weeks of fiscal year 2016 primarily due to the anticipated openings of four new Company-owned restaurants, including Albuquerque, NM, which opened in May 2016 and El Paso, TX which opened in August 2016.

Interest Expense. Interest expense ~~decreased $278~~increased $459 thousand to ~~$521~~$783 thousand in the first ~~thirty-nine~~twenty-six weeks of fiscal year 2018 from the first twenty-six weeks of fiscal year 2017 ~~from~~primarily due to higher than average debt balances during the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016 primarily due~~2018 compared to ~~lower amortization of capitalized debt costs during~~ the first ~~thirty-nine~~twenty-six weeks of fiscal year 2017.

Other Income and Expense. ~~Other income remained relatively unchanged for~~During the first ~~thirty-nine~~twenty-six weeks of fiscal year 2018, we recognized other income of $34 thousand which is consistent with the amount of other income recognized during the first twenty-six weeks of fiscal year 2017 ~~compared to the first thirty-nine weeks~~ of ~~fiscal year 2016.~~$39 thousand.

Income Tax Expense. During the first ~~thirty-nine~~twenty-six weeks of fiscal year 2018, we recognized income tax expense of $4.1 million. During the first twenty-six weeks of fiscal year 2017, we recognized income tax expense of ~~$9.6 million. During the first thirty-nine weeks of fiscal year 2016, we recognized income tax expense of $10.4~~$8.6 million. The effective tax rate, including the impact of discrete items, decreased to ~~31.8%~~15.2% for the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 compared to ~~32.8%~~31.3% for the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. The effective tax rate decreased in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 primarily due to ~~lower state income taxes recognized in~~ the ~~first thirty-nine weeks.~~2017 Tax Act which was signed into law on December 22, 2017. The 2017 Tax Act significantly revised U.S. tax law, and included many changes that impacted the Company, most notably a reduction of the statutory corporate tax rate from 35% to 21%. Fiscal year ~~2017~~2018 discrete items and other unexpected changes impacting the annual tax expense may cause the effective tax rate for fiscal year ~~2017~~2018 to differ from the effective tax rate for the ~~first thirty-nine weeks~~second quarter of ~~2017.~~fiscal year 2018.

Income (loss) from Continuing Operations. Income from continuing operations of ~~$20.7~~$23.2 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017 decreased~~2018 increased by ~~$690 thousand~~$4.3 million compared to the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016~~2017 due to the factors noted above.

Loss from Discontinued Operations, net of income taxes. ~~Loss~~Income from discontinued operations, net of income taxes, for the ~~first thirty-nine weeks~~second of fiscal year ~~2017~~2018 was ~~$101~~$22 thousand compared to a loss of ~~$94~~$30 thousand during the ~~first thirty-nine weeks~~second of fiscal year ~~2016.~~2017. The loss in the first ~~thirty-nine~~twenty-six weeks of ~~fiscal year~~ 2017 ~~was~~is primarily ~~attributable to Mitchell’s Restaurants. The loss in the first thirty-nine weeks of 2016 was primarily attributable~~due to occupancy costs ~~of $581 thousand from~~attributable to a closed Ruth’s Chris Steak House ~~restaurant, partially~~Restaurant offset by the collection of an occupancy related receivable at a ~~benefit of $466 thousand from the extinguishment of a liability related to Mitchell’s Restaurant gift cards.~~ closed Ruth’s Chris Steak House Restaurant.

Net Income. Net income was ~~$20.6~~$23.2 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 and ~~decreased~~increased by ~~$697 thousand~~$4.4 million compared to ~~$21.3~~$18.9 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016.~~2017. The ~~decrease~~increase was largely attributable to the factors noted above.

Our principal sources of cash ~~during~~have been historically provided by our operating activities as well as periodic borrowings from our senior credit facility. During the first ~~thirty-nine~~twenty-six weeks of ~~2017 were net cash provided by operating activities and borrowings under~~2018 our ~~prior and current senior credit facilities. Our~~ principal uses of cash ~~during the first thirty-nine weeks of 2017~~flow from operations were ~~for~~ capital expenditures, ~~principal repayments under our senior credit facility, stock repurchases~~dividend payments and ~~dividend payments.~~the repurchase of common stock. 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.

~~Subsequent to the end of the third quarter of fiscal year~~In October 2017, our Board of Directors approved a new share repurchase program authorizing us to repurchase up to $60 million of outstanding common stock from time to time. The new share repurchase program replaces the previous share repurchase program announced in April 2016, which ~~has been retired. We spent $48.0 million to repurchase 2.8 million shares of its common stock, at an average price of $17.02 per share, under its previous share repurchase program.~~was terminated. During the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017, we~~2018, the Company repurchased ~~719,442~~224,605 shares at an aggregate cost of ~~$14.5~~$5.9 million or an average cost of ~~$20.21~~$26.46 per share. All repurchased shares were retired and cancelled. As of July 1, 2018, $44.7 million remained available for future repurchases under the share repurchase 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 ~~$0.09~~$0.11 per share, or ~~$2.9~~$3.4 million in the aggregate, during the ~~first and~~ second quarter of fiscal year ~~2017 and $2.8 million in the third quarter of fiscal year 2017.~~2018. On ~~November 3, 2017,~~August 10, 2018, we announced that our Board of Directors declared a quarterly cash dividend of ~~$0.09~~$0.11 per share, or ~~$2.8~~$3.4 million in the aggregate, to be paid on ~~November 22, 2017~~September 6, 2018 to common and restricted stockholders of record as of the close of business on ~~November 9, 2017.~~August 23, 2018. Future dividends will be subject to the approval of our Board of Directors.

We believe that our borrowing ability under our ~~new~~ senior credit facility coupled with our anticipated cash flow from operations should provide us with adequate liquidity for the next 12 months.

As of ~~September 24, 2017,~~July 1, 2018, we had ~~$30.0~~$50.0 million of outstanding indebtedness under our senior credit facility with approximately ~~$55.4~~$35.8 million of borrowings available, net of outstanding letters of credit of approximately ~~$4.6~~$4.2 million. As of ~~September 24, 2017,~~July 1, 2018, the weighted average interest rate on our outstanding debt was ~~2.7%~~3.6% and the weighted average interest rate on our outstanding letters of credit was 1.6%. In addition, the fee on the unused portion of our senior credit facility was 0.2%.

On February 2, 2017, we entered into a credit agreement with Wells Fargo Bank, National Association as administrative agent, and certain other lenders (the Credit Agreement) governing a new senior credit facility that replaced ~~the~~our prior credit facility. The Credit Agreement provides for a revolving credit facility of $90.0 million with a $5.0 million subfacility for letters of credit and a $5.0 million subfacility for swingline loans. Subject to the satisfaction of certain conditions and lender consent, the revolving credit facility may be increased up to a maximum of $150.0 million. The Credit Agreement has a maturity date of February 2, 2022. At our option, revolving loans may bear interest at (i) LIBOR, plus an applicable margin or (ii) the highest of (a) the rate publicly announced by Wells Fargo as its prime rate, (b) the average published federal funds rate in effect on such day plus 0.50% and (c) one month LIBOR plus 1.00%, plus an applicable margin. The applicable margin is based on our actual leverage ratio, ranging (a) from 1.50% to 2.25% above the applicable LIBOR rate or (b) at our option, from 0.50% to 1.25% above the applicable base rate.

The Credit Agreement contains customary representations and affirmative and negative covenants (including limitations on indebtedness and liens) as well as financial covenants requiring a minimum fixed coverage charge ratio and limiting our consolidated leverage ratio. As of ~~September 24, 2017,~~July 1, 2018, we were in compliance with all of the covenants in the Credit Agreement. The Credit Agreement also contains events of default customary for credit facilities of this type (with customary grace periods, as applicable), including nonpayment of principal or interest when due; material incorrectness of representations and warranties when made; breach of covenants; bankruptcy and insolvency; unsatisfied ERISA obligations; unstayed material judgment beyond specified periods; default under other material indebtedness; and certain changes of control of the Company. If any event of default occurs and is not cured within the applicable grace period, or waived, the outstanding loans may be accelerated by lenders holding a majority of the commitments under the Credit Agreement and the lenders’ commitments may be terminated. The obligations under the Credit Agreement are guaranteed by certain of our subsidiaries (the Guarantors), and are secured by a lien on substantially all of our personal property assets other than any equity interest in current and future subsidiaries of the Company.

Under the Credit Agreement, restricted junior payments, which include cash dividend payments, repurchases of our equity securities and payments and prepayments of subordinated indebtedness, made subsequent to February 2, 2017 are limited to $100.0 million if our consolidated leverage ratio is greater than or equal to 2.00:1.00, and are not limited in amount if our consolidated leverage ratio is less than 2.00:1.00. As of the date of this Quarterly Report on Form 10-Q, ~~$23.1~~$48.0 million in junior restricted payments have been made since February 2, 2017.

The following table presents a summary of our net cash provided by (used in) operating, investing and financing activities (in thousands):

	39 Weeks Ended						26 Weeks Ended
	September 24,			September 25,			July 1,			June 25,
	2017			2016			2018			2017
Net cash provided by (used in):
Operating activities	$	35,090		$	29,125		$	28,533		$	31,184
Investing activities		(14,326	)		(18,292	)		(13,060	)		(10,649	)
Financing activities		(19,690	)		(9,974	)		(16,479	)		(19,095	)
Net increase in cash and cash equivalents	$	1,074		$	859
Net (decrease) increase in cash and cash equivalents							$	(1,006	)	$	1,440

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, general and administrative costs and income taxes. Operating activities provided cash flow during the first ~~thirty-nine~~twenty-six weeks of both fiscal years ~~2017~~2018 and ~~2016~~2017 primarily because operating revenues exceeded cash-based expenses.

Investing Activities. Cash used in investing activities aggregated ~~$14.3~~$13.1 million in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 compared with ~~$18.3~~$10.6 million cash used in the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016. Investing cash outflows during the first thirty-nine weeks of both fiscal years 2017 and 2016 pertained primarily to capital expenditure projects.~~2017. Cash used in investing projects during the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017~~2018 primarily pertained to ~~$6.7~~$4.1 million for restaurant remodel and capital replacement projects, and ~~$6.8~~$5.0 million for new ~~restaurants.~~restaurants that are anticipated to open in 2018. Cash used in investing activities during the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016~~2017 primarily pertained to ~~$8.6~~$2.9 million for restaurant remodel and capital replacement projects and ~~$9.5~~$5.7 million for new restaurants.

Financing Activities. Financing activities used cash during the first ~~thirty-nine~~twenty-six weeks of both fiscal years ~~2017~~2018 and ~~2016.~~2017. During the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017,~~2018, we: paid dividends of $6.8 million; used ~~$14.5~~$5.9 million to repurchase common stock; ~~paid dividends of $8.6 million; increased the debt outstanding under our senior credit facility by $5.0 million;~~ and paid ~~$2.1~~$3.8 million in employee taxes in connection with the vesting of restricted stock and the exercise of stock options. We paid the ~~$2.1~~$3.8 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 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. During the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2016,~~2017, we: ~~used $40.0 million to repurchase common stock; increased~~decreased the debt outstanding under our senior credit facility by ~~$38.0~~$4.0 million; used $8.4 million to repurchase common stock; paid dividends of ~~$7.0~~$5.7 million; and paid ~~$1.5~~$1.4 million in employee taxes ~~related to~~in connection with the vesting of restricted stock ~~based compensation.~~and the exercise of stock options.

As of ~~September 24, 2017,~~July 1, 2018, we did not have any off-balance sheet arrangements.

The preparation of our financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the periods presented. Our Annual Report on Form 10-K for the fiscal year ended December ~~25, 2016~~31, 2017 includes a summary of the critical accounting policies and estimates that we believe are the most important to aid in the understanding our financial results. ~~There~~Other than the adoption of Topic 606 (see Note 2), there have been no material changes to these critical accounting policies and estimates that impacted our reported amounts of assets, liabilities, revenues or expenses during the first ~~thirty-nine~~twenty-six weeks of fiscal year ~~2017.~~2018.

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 ~~September 24, 2017,~~July 1, 2018, the Company had ~~$30.0~~$50.0 million in 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 immediate one percentage point change in interest rates would be expected to have an impact on pre-tax earnings and cash flows for fiscal year ~~2017~~2018 of approximately ~~$300~~$500 thousand.

The Company believes that fluctuations in foreign exchange rates do not present a material risk to its operations due to the relatively small amount of franchise income it receives from outside the U.S. During the first ~~thirty-nine~~twenty-six weeks of fiscal years ~~2017~~2018 and ~~2016,~~2017, franchise income attributable to international locations was approximately ~~$2.1~~$1.4 million in each year.

The Company is exposed to market price fluctuations in beef and other food product prices, which in the past have been volatile and have impacted 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. AsDuring the second quarter of ~~September 24, 2017,~~2018, the Company ~~has~~ entered into negotiated set pricing for approximately 25% of its beef

requirements ~~for the remainder of fiscal year 2017.~~from mid-August 2018 through mid-February 2019 at a price approximately 7.0% below prior year. 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. Holding other variables constant, a hypothetical 10% fluctuation in beef prices would have an approximate impact on pre-tax earnings ranging from ~~$0.5~~$2.0 million to ~~$1.0~~$2.5 million for the remainder of fiscal year ~~2017.~~2018.

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.

The Company is exposed to market price fluctuations related to the cost of providing healthcare to its employees. Claim trends are predicted to outpace inflation throughout the upcoming year. Pharmacy costs are also rising in excess of general and medical cost inflation. If prices increase, or the Company experiences significantly more claims, operating margin could be materially adversely affected. Holding other variables constant, a hypothetical 10% fluctuation in healthcare costs would have an approximate impact on pre-tax earnings of approximately ~~$250~~$500 thousand for the remainder of ~~2017.~~2018.

The Company believes that general inflation, excluding increases in food, employee wages 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. Recently, governmental entities acted to increase minimum wage rates in states where Company-owned restaurants are located. The increased minimum wage rates are expected to increase employee compensation and related taxes by approximately ~~$1.2~~$1.3 million in fiscal year ~~2017~~2018 compared to fiscal year ~~2016.~~2017. Also, the U.S. government may consider legislation to increase the federal minimum wage rate, which, if enacted, would further increase employee compensation and related taxes.

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 the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of ~~September 24, 2017.~~July 1, 2018. 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 ~~September 24, 2017~~July 1, 2018 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.

During the fiscal quarter ended ~~September 24, 2017,~~July 1, 2018, except for the addition of internal controls around the adoption of Topic 606, 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.

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.

There have been no material changes in the risk factors included in the Company’s Annual Report on Form 10-K for the fiscal year ended December ~~25, 2016.~~31, 2017. The impact of circumstances and events described in such risk factors could result in significant adverse effects on our financial position, results of operations and cash flows.

Stock repurchase activity during the fiscal quarter ended ~~September 24, 2017~~July 1, 2018 was as follows:

~~Subsequent to the end of the third quarter of fiscal year~~On November 3, 2017, the ~~Company’s~~Company announced that its Board of Directors approved a ~~new~~ share repurchase program under which the Company is authorized to repurchase up to $60 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~~replaced the Company’s previous share repurchase program announced in April 2016, which has been retired. The previous share repurchase program had permitted the repurchase of up to $60 million of outstanding common stock, of which approximately $12.0 million remained unused upon its retirement.was terminated. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and has no termination date. The Company intends to conduct any open market share repurchase activities in compliance with the safe harbor provisions of Rule 10b-18 of the Exchange Act. During the fiscal quarter ended September 24, 2017, 319,442 shares were repurchased via open market transactions at an aggregate cash cost of $6.1 million. During the fiscal quarter ended September 25, 2016, 553,341 shares were repurchased via open market transactions at an aggregate cash cost of $8.3 million. The Company’s ability to make future stock purchases under the program is currently limited by our Credit Agreement. Under our Credit Agreement, we are limited to $100.0 million of junior stock payments, which include cash dividends, repurchases of common stock and prepayments of subordinated indebtedness, if our consolidated leverage ratio is greater than or equal to 2.00:1.00. As of ~~September 24, 2017, $23.1~~July 1, 2018, $48.0 million of such payments had been made.

Pursuant to the requirements 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.

Delaware	72-1060618
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1030 W. Canton Avenue, Suite 100, Winter Park, FL	32789
(Address of principal executive offices)	(Zip code)

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐

		Emerging growth company	☐


		Page
Part I — Financial Information		3

Item 1	Financial Statements:	3

	Condensed Consolidated Balance Sheets as of ~~September 24, 2017~~July 1, 2018 and December ~~25, 2016~~31, 2017	3

	Condensed Consolidated Statements of Income for the Thirteen and ~~Thirty-nine~~Twenty-six Week Periods ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~	4

	Condensed Consolidated Statements of Shareholders’ Equity for the ~~Thirty-nine~~Twenty-six Week Periods ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~	5

	Condensed Consolidated Statements of Cash Flows for the ~~Thirty-nine~~Twenty-six Week Periods ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1418

Item 3	Quantitative and Qualitative Disclosures about Market Risk	2124

Item 4	Controls and Procedures	2225

Part II — Other Information		2226

Item 1	Legal Proceedings	2226

Item 1A	Risk Factors	2226

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	2326

Item 3	Defaults Upon Senior Securities	2326

Item 4	Mine Safety Disclosures	2326

Item 5	Other Information	2326

Item 6	Exhibits	2326

Signatures		2528

	Balance as of		Fiscal Year		Fiscal Year		Fiscal Years		More Than
	January 1, 2018		2018		2019		2020-2022		5 Years
Franchise development and opening fees	$	3,320	$	348	$	226	$	677	$	2,069

Declaration Date	Dividend per Share		Record Date	Total Amount		Payment Date
Fiscal Year 2017
February 17, 2017	$	0.09	February 23, 2017	$	2,862	March 9, 2017
May 5, 2017	$	0.09	May 18, 2017	$	2,862	June 1, 2017
July 28, 2017	$	0.09	August 10, 2017	$	2,844	August 24, 2017

Fiscal Year 2016
February 12, 2016	$	0.07	February 25, 2016	$	2,350	March 10, 2016
April 28, 2016	$	0.07	May 12, 2016	$	2,338	May 26, 2016
July 29, 2016	$	0.07	August 11, 2016	$	2,282	August 25, 2016

	Deferred			Unearned
	Revenue			Franchise Fees
Balance at December 31, 2017	$	42,596		$	—
Increase (decrease) due to the cumulative effect of adopting Topic 606		(22	)		3,092
Decreases in the beginning balance from gift card redemptions		(17,976	)		—
Increases due to proceeds received, excluding amounts recognized during the period		9,251			—
Decreases due to recognition of franchise development and opening fees		—			(236	)
Other		(37	)		3
Balance at July 1, 2018	$	33,812		$	2,859

		Fair Value as of December 31, 2017				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total Losses on Impairment
Long-lived assets held for sale		$	—			$	—			$	—			$	3,904

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program		Maximum Dollar Value that May Yet be Purchased under the Program – Amounts in thousands

June 26, 2017 to July 30, 2017	—		—		—		$	18,158
July 31, 2017 to August 27, 2017		6,845	$	19.52		6,845	$	18,025
August 28, 2017 to September 24, 2017		312,597	$	19.12		312,597	$	12,047
Totals for the fiscal quarter		319,442	$	19.13		319,442	$	12,047

10.1		Terms of Employment/Letter of Understanding and Salary Continuation Agreement dated June 4, 2018 between the Company and Cheryl J. Henry (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 4, 2018).

10.2		Terms of Employment/Letter of Understanding and Salary Continuation Agreement dated June 4, 2018 between the Company and Michael A. O’Donnell (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 4, 2018).

10.3		Form of Restricted Stock Unit Award Agreement (Director Award) under the Company’s 2018 Omnibus Incentive Plan (filed herewith).

10.4		Form of Restricted Stock Unit Award Agreement (Performance Award) under the Company’s 2018 Omnibus Incentive Plan (filed herewith).

10.5		Form of Restricted Stock Unit Award Agreement (Tenure Award) under the Company’s 2018 Omnibus Incentive Plan (filed herewith).

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Definition Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.


	RUTH’S HOSPITALITY GROUP, INC.

	By:	/S/ MICHAEL P. O’DONNELL
		Michael P. O’Donnell
		Chairman of the Board and Chief Executive Officer
		(Principal Executive Officer)

	By:	/S/ ARNE G. HAAK
		Arne G. Haak
		Executive Vice President and Chief Financial Officer of Ruth’s Hospitality Group, Inc. (Principal Financial Officer)