Red Robin Gourmet Burgers, Inc., (NASDAQ: RRGB), a casual dining
restaurant chain focused on serving an innovative selection of
high-quality gourmet burgers in a family-friendly atmosphere, today
reported financial results for the 16 weeks ended April 19,
2009.
Financial and Operational Highlights
Highlights for the 16 weeks ended April 19, 2009, compared to
the 16 weeks ended April 20, 2008, are as follows:
- Total revenues increased 6.0% to
$270.8 million.
- Restaurant revenue increased
6.3% to $266.6 million.
- Company-owned comparable
restaurant sales decreased 8.1%.
- Restaurant-level operating
profit decreased 1.7% to $47.1 million.
- GAAP diluted earnings per share
were $0.25, which included $0.19 per diluted share in compensation
expense related to the Company�s tender offer for certain stock
options, and $0.03 per diluted share in costs related to the
closing of four company-owned restaurants, vs. $0.43 in the fiscal
first quarter a year ago.
- A total of nine new Red Robin�
restaurants, seven company-owned and two franchised locations, were
opened during the fiscal first quarter 2009.
As of the end of the fiscal first quarter of 2009, there were
298 company-owned and 130 franchised Red Robin� restaurants.
�While the macroeconomic environment remains challenging, our
restaurant teams are focused on driving traffic and strengthening
our business by offering our Guests the service, quality and value
they expect from Red Robin, while we invest in our people,
streamline our operations and manage our controllable costs,� said
Dennis Mullen, chairman and chief executive officer. �We are
confident that our strategy will not only enable us to weather the
current downturn but will also position us well as the economy
improves. We will continue to strengthen our balance sheet with
reduced new restaurant development in 2009, and thus we expect to
generate significant free cash flow, the majority of which will be
used to further reduce our debt levels.�
Fiscal First Quarter 2009 Results
Comparable restaurant sales comparisons were difficult in the
fiscal first quarter of 2009, as the Company overlapped its most
successful quarter of 2008, in which it began its 2008 national
cable advertising on February 4th of last year, while there was no
national cable advertising in the fiscal first quarter of 2009.
Comparable restaurant sales decreased 8.1% for company-owned
restaurants in the fiscal first quarter of 2009 compared to the
fiscal first quarter of 2008, driven by a 10.2% decline in guest
counts partially offset by a 2.1% increase in the average guest
check. Average weekly comparable sales for company-owned
restaurants were $58,079 from the 244 comparable restaurants in the
fiscal first quarter of 2009, compared to $64,543 for the 200
comparable restaurants in the fiscal first quarter of 2008. Average
weekly sales for the 41 non-comparable company-owned restaurants
were $55,245 in the fiscal first quarter of 2009, compared to
$55,165 for the 42 non-comparable restaurants in the fiscal first
quarter a year ago. For all Company-owned restaurants, average
weekly sales were $57,352 from 4,768 operating weeks in the first
quarter of 2009 compared to $62,945 from 4,075 operating weeks, in
the fiscal first quarter of 2008.
Early in the second quarter of 2008, the Company acquired 15
existing Red Robin franchised restaurants from three franchisees
(the �2008 Acquired Restaurants�). Average weekly sales for these
15 restaurants were $52,555 in the fiscal first quarter of
2009.
Total Company revenues, which include company-owned restaurant
sales and franchise royalties and fees, increased 6.0% to $270.8
million in the fiscal first quarter of 2009, versus $255.6 million
last year. Franchise royalties and fees decreased 10.4% to $4.2
million in the fiscal first quarter of 2009 compared to $4.6
million in the same period a year ago. Franchise royalties and fees
in the fiscal first quarter of 2008 included $517,000 of royalties
attributed to the 2008 Acquired Restaurants.
For the fiscal first quarter of 2009, the Company�s franchise
system reported a decrease in total U.S. franchise restaurant sales
of 10.2% to $95.0 million, compared to $105.9 million in the prior
year period, due primarily to $13.3 million of fiscal first quarter
2008 revenue from the 2008 Acquired Restaurants. Comparable sales
in the fiscal first quarter of 2009 for franchise restaurants in
the U.S. decreased 7.2% and for franchise restaurants in Canada
increased 0.8% compared to the fiscal first quarter of 2008.
Average weekly comparable sales for the U.S. franchised restaurants
were $52,919 from the 98 comparable restaurants in the fiscal first
quarter of 2009, compared to $56,809 for the 94 comparable
restaurants in the fiscal first quarter of 2008. Average weekly
sales in the fiscal first quarter of 2009 for the Company�s 18
comparable franchise restaurants in Canada were C$51,058 versus
C$50,662 in the same period last year. Canadian results are in
Canadian dollars.
Restaurant-level operating profit margins at company-owned
restaurants were 17.7% in the fiscal first quarter of 2009 compared
to 19.1% in the fiscal first quarter of 2008. Fiscal first quarter
2009 restaurant-level operating profit margins were negatively
impacted by approximately 0.8% of higher food and beverage costs, a
0.7% increase in labor costs, including 0.3% related to the tender
offer for stock options, and a 0.7% increase in occupancy costs,
partially offset by 0.8% lower operating costs, largely driven by
lower year-over-year contributions to the Company�s national
advertising fund, which were 0.25% of restaurant revenue in the
fiscal first quarter of 2009 versus 1.5% of revenue in 2008.
The Company's restaurant-level operating profit metric does not
represent income from operations or net income calculated in
accordance with generally accepted accounting principles ("GAAP").
Schedule I of this earnings release reconciles restaurant-level
operating profit to income from operations and net income for all
periods presented.
General and administrative expense was $20.2 million, or 7.4% of
revenue in the fiscal first quarter of 2009, compared to $22.5
million, or 8.8% of revenue, in the fiscal first quarter of
2008.
During the fiscal first quarter of 2009, the Company completed
the previously announced cash tender offer for certain stock
options. As a result of the tender offer, the Company incurred a
one-time non-cash pretax charge of approximately $4.0 million, or
$0.19 per diluted share. Approximately $3.1 million of this charge
in the fiscal first quarter of 2009 was attributed to the Company�s
non-restaurant employees� tendered options and approximately
$886,000 was attributed to restaurant employees� tendered options.
The gross cash proceeds paid for the tendered options were $3.5
million.
As previously announced, the Company closed four restaurants
during the first quarter of 2009. This decision was the result of
an initiative to identify those restaurants that were in declining
trade areas, performing below acceptable profitability levels
and/or required significant capital expenditures. The locations
selected for closure represented older restaurants whose leases
were not extended, or were in need of significant capital
improvements that were not projected to provide acceptable returns
in the foreseeable future. The Company recognized a charge of
approximately $586,000, or $0.03 per diluted share, during the
fiscal first quarter of 2009 related to lease termination costs
based on estimated remaining lease obligations, net of estimated
sublease income, and other closing related costs.
Interest expense was $2.1 million in the fiscal first quarter of
2009, compared to $2.3 million in the fiscal first quarter of
2008.
Net income for the fiscal first quarter of 2009 was $3.8 million
or $0.25 per diluted share. The fiscal first quarter 2009 net
income includes $0.19 per diluted share related to the one time
charge associated with the acceleration of vesting for options
tendered, and $0.03 related to the previously announced closure of
four restaurants in the quarter. Excluding these one time charges,
diluted earnings per share were $0.47, an increase of 9.3% compared
to $0.43 per diluted share in the fiscal first quarter of 2008.
Schedule II of this earnings release reconciles the impact on
the net income and diluted earnings per share as reported on a GAAP
basis in the fiscal first quarters of 2009 and 2008 to adjusted
amounts excluding the impact from the tender offer and restaurant
closures.
Balance Sheet and Liquidity
On April 19, 2009, the Company held $8.6 million in cash and
equivalents and had total outstanding debt of $218.9 million,
including $130.2 million in borrowings under the $150 million term
loan and $82.0 million of borrowing, as well as $4.4 million of
letters of credit outstanding under the $150 million revolving
credit facility. As of May 17, 2009, the Company�s total
outstanding debt balance was $212.8.
The Company is subject to a number of customary covenants under
the various credit agreements, including limitations on additional
borrowings, acquisitions, dividend payments, and requirements to
maintain certain financial ratios. As of April 19, 2009, the
Company was in compliance with all debt covenants and expects to
remain in compliance throughout fiscal year 2009.
Based on the Company�s development plans and other
infrastructure and maintenance capital expenditures, the Company
expects fiscal year 2009 capital expenditures to be approximately
$45 million, which the Company will fund out of operating cash
flow. The Company will make scheduled payments of $15 million
required by the term loan portion of its existing credit facility
from free cash flow after capital expenditures in fiscal year 2009
and expects to use the remaining free cash flow to make payments on
the Company�s revolving credit facility and may make opportunistic
purchases of its common stock.
Outlook
For the fiscal second quarter of 2009, which is a twelve week
quarter, the Company expects to open six new company-owned
restaurants with the franchisees opening one new franchised
restaurants. Three company-owned restaurants and one new franchised
restaurant have already opened during the fiscal second quarter of
2009 and three company-owned restaurants and one franchised
restaurant are currently under construction. In fiscal 2009, the
Company plans to open 14 to 15 new company-owned restaurants, while
franchisees are expected to open five to six new restaurants.
The Company continues to expect that traffic will remain
negative in fiscal year 2009. In addition to the general
macroeconomic pressures, the extent of the traffic declines may
also be influenced by prior-year marketing activities, which create
more difficult comparisons during certain periods. The Company also
expects certain costs, such as minimum wage increases and select
commodity cost increases, to continue to put pressure on
restaurant-level profitability. Based on these factors, the Company
anticipates that without any menu price increases, restaurant-level
operating margins could decline by 50 to 80 basis points during
fiscal year 2009, even after considering the benefit from reduced
national advertising contributions and other cost reduction
activities. For every 10 basis point change in restaurant level
operating profit during fiscal year 2009, diluted earnings per
share are estimated to be impacted by approximately $0.04.
Investor Conference Call and
Webcast
Red Robin will host an investor conference call to discuss its
fiscal first quarter 2009 results today at 5:00 p.m. ET. The
conference call number is (888) 656-7437. To access the webcast,
please visit www.redrobin.com and select the "Investors" link from
the menu. The quarterly financial information that we intend to
discuss during the conference call is included in this press
release and will be available on the "Investors" link of the
Company's website at www.redrobin.com following the conference
call.
About Red Robin Gourmet Burgers,
Inc. (NASDAQ: RRGB)
Red Robin Gourmet Burgers, Inc. (www.redrobin.com), a casual
dining restaurant chain founded in 1969 that operates through its
wholly-owned subsidiary, Red Robin International, Inc., serves up
wholesome, fun, feel-good experiences in a kid- and family-friendly
environment. Red Robin� restaurants are famous for serving more
than two dozen insanely delicious, high-quality gourmet burgers in
a variety of recipes with Bottomless Steak Fries�, as well as
salads, soups, appetizers, entrees, desserts, and signature Mad
Mixology� Beverages. There are more than 425 Red Robin� restaurants
located across the United States and Canada, including
corporate-owned locations and those operating under franchise
agreements.
Forward-Looking
Statements:
Certain information and statements contained in this press
release, including those under the heading �Outlook,� are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking
statements include statements regarding our expectations, beliefs,
intentions, plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements which
are other than statements of historical facts. These statements may
be identified, without limitation, by the use of forward-looking
terminology such as �assumptions,� �believes,� �continue,�
�expects,� �anticipates,� �guidance,� �plan,� �potential,�
�projected,� �will� or comparable terms or the negative thereof.
All forward-looking statements included in this press release are
based on information available to the Company on the date hereof.
Such statements speak only as of the date hereof and we undertake
no obligation to update any such statement to reflect events or
circumstances arising after the date hereof. These statements are
based on assumptions believed by us to be reasonable, and involve
known and unknown risks and uncertainties that could cause actual
results to differ materially from those described in the
statements. These risks and uncertainties include, but are not
limited to, the following:�the downturn in general economic
conditions including severe volatility in financial markets and
decreasing consumer confidence, resulting in changes in consumer
preferences, or consumer discretionary spending; potential
fluctuation in our quarterly operating results due to economic
conditions, seasonality and other factors; potential negative
impact of the fluctuation of our stock price on our results and
financial position; changes in availability of capital or credit
facility borrowings to us and to our franchisees; the adequacy of
cash flows generated by our business to fund operations and growth
opportunities; our ability to achieve and manage our planned
expansion, including both in new markets and existing markets;
changes in the cost and availability of building materials and
restaurant supplies; the concentration of our restaurants in the
Western United States and the associated disproportionate impact of
macroeconomic factors; changes in the availability and costs
of food; changes in labor and energy costs and changes in the
ability of our vendors to meet our supply requirements; labor
shortages, particularly in new markets; the effectiveness of our
initiative to normalize new restaurant operations; lack of
awareness of our brand in new markets; the effectiveness of our
advertising strategy; higher percentage of operating weeks from
non-comparable restaurants; concentration of less mature
restaurants in the comparable restaurant base which impacts
profitability; our ability to successfully integrate the acquired
franchise restaurants;�the ability of our franchisees to open and
manage new restaurants; the effect of increased competition in the
casual dining market and discounting by competitors; health
concerns about our food products and food preparation; our ability
to protect our intellectual property and proprietary information;
the impact of federal, state or local government regulations
relating to our team members or the sale of food or alcoholic
beverages; our franchisees� adherence to our practices, policies
and procedures; and other risk factors described from time to time
in the Company�s 10-Q and 10-K filings with the SEC.
RESTAURANT UNIT DATA
The following table details restaurant unit data for
company-owned and franchise locations for the periods
indicated.
�
Sixteen Weeks Ended April 19,2009 April
20,2008 Company-owned: Beginning of period 294 249
Opened during period 7 9 Acquired during period 1 � Closed during
period (4 ) � End of period 298 258 � Franchised: Beginning of
period 129 135 Opened during period 2 1 Closed or sold during
period (1 ) (1 ) End of period 130 135 � Total number of Red Robin�
restaurants 428 393
On December�31, 2008, the Company acquired a restaurant that was
managed by the Company under a management agreement with a
franchisee since May 2008.
RED ROBIN GOURMET BURGERS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (In thousands,
except share amounts) (Unaudited) �
April
19,2009 December 28,2008 Assets:
Current Assets: Cash and cash equivalents $ 8,607 $ 11,158 Accounts
receivable, net 6,988 5,611 Inventories 13,647 13,123 Prepaid
expenses and other current assets 5,825 9,032 Income tax receivable
4,009 6,208 Deferred tax asset 3,771 3,366 Restricted current
assets�marketing funds 1,153 1,590 Total current assets 44,000
50,088 Property and equipment, net 443,545 442,012 Goodwill 61,769
60,982 Intangible assets, net 51,250 51,990 Other assets, net 4,368
4,665 Total assets $ 604,932 $ 609,737 �
Liabilities and
Stockholders� Equity: Current Liabilities: Trade accounts
payable $ 9,461 $ 11,966 Construction related payables 7,030 9,747
Accrued payroll and payroll related liabilities 26,829 25,489
Unredeemed gift certificates 8,619 11,997 Accrued liabilities
19,963 20,385 Accrued liabilities�marketing funds 1,153 1,590
Current portion of term loan notes payable 16,865 10,313 Current
portion of long-term debt and capital lease obligations 608 696
Total current liabilities 90,528 92,183 Deferred rent 28,555 26,790
Long-term portion of term loan notes payable 113,324 122,687 Other
long-term debt and capital lease obligations 88,056 88,876 Other
non-current liabilities 10,220 10,293 Total liabilities 330,683
340,829 Commitments and contingencies � Stockholders� Equity:
Common stock; $0.001 par value:
30,000,000 shares authorized; 17,018,503 and16,954,205 shares
issued; 15,526,223 and 15,461,925 shares outstanding
17 17
Preferred stock, $0.001 par value:
3,000,000 shares authorized; no shares issued andoutstanding
� � Treasury stock, 1,492,280 shares, at cost (50,125 ) (50,125 )
Paid-in capital 167,386 165,932 Accumulated other comprehensive
loss, net of tax (1,580 ) (1,622 ) Retained earnings 158,551
154,706 Total stockholders� equity 274,249 268,908 Total
liabilities and stockholders� equity $ 604,932 $ 609,737
RED
ROBIN GOURMET BURGERS, INC. AND SUBSIDIARIES Condensed
Consolidated Statements of Income (In thousands, except
share amounts) (Unaudited) �
Sixteen Weeks Ended
April 19,2009 �
April 20,2008 �
Revenues: Restaurant revenue $ 266,595 $ 250,902 Franchise and
royalty fees 4,152 4,634 Rent revenue 66 57 Total revenues 270,813
255,593 � Costs and expenses: Restaurant operating costs: Cost of
sales 65,283 59,348 Labor 91,385 85,139 Operating 43,018 42,506
Occupancy 18,908 16,002 Tender offer stock-based compensation -
restaurants 886 � Depreciation and amortization 17,637 14,849
General and administrative 20,170 22,475 Pre-opening costs 2,550
2,563 Tender offer stock-based compensation - corporate 3,116 �
Restaurant closure costs 586 � Total costs and expenses 263,539
242,882 � Income from operations 7,274 12,711 Other expense:
Interest expense, net 2,114 2,296 Other 10 13 Total other expenses
2,124 2,309 � Income before income taxes 5,150 10,402 Provision for
income taxes 1,305 3,149 Net income $ 3,845 $ 7,253 Earnings per
share: Basic $ 0.25 $ 0.43 Diluted $ 0.25 $ 0.43 Weighted average
shares outstanding: Basic 15,356 16,736 Diluted 15,432 16,946
RED ROBIN GOURMET BURGERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (In
thousands) (Unaudited) �
Sixteen Weeks Ended
April 19,2009 April 20,2008 Cash Flows
From Operating Activities: Net income $ 3,845 $ 7,253 Adjustments
to reconcile net income to net cash provided by operating
activities: Depreciation and amortization 17,637 14,849 Stock-based
compensation expense 4,713 1,828 Restaurant closure costs 586 �
Other, net (292 ) 82 Changes in operating assets and liabilities
(701 ) 3,884 Cash provided by operating activities 25,788 27,896 �
Cash Flows From Investing Activities: Changes in marketing fund
restricted cash � 26 Acquisition of franchise restaurants, net of
cash acquired of $0 and $21, respectively (1,247 ) (1,097 )
Purchases of property and equipment (20,906 ) (23,627 ) Cash used
in investing activities (22,153 ) (24,698 ) � Cash Flows From
Financing Activities: Borrowings of long-term debt 54,000 15,000
Payments of long-term debt (56,919 ) (14,812 ) Payment for tender
offer for stock options (3,498 ) � Proceeds from exercise of stock
options and employee stock purchase plan 338 773 Excess tax benefit
related to exercise of stock options 54 128 Payments of other debt
and capital lease obligations (161 ) (173 ) Cash provided (used) by
financing activities (6,186 ) 916 � Net change in cash and cash
equivalents (2,551 ) 4,114 Cash and cash equivalents, beginning of
period 11,158 12,914 Cash and cash equivalents, end of period $
8,607 $ 17,028 � Supplemental Disclosure of Cash Flow Information:
Income taxes paid $ 198 $ 90 Interest paid, net of amounts
capitalized 1,832 2,273 � Supplemental Disclosure of Non-Cash
Items: Capital lease obligations incurred for equipment purchases �
156 Unrealized gain (loss) on cash flow hedge, net of tax (1,580 )
684
Schedule I
Reconciliation of Non-GAAP
Restaurant-Level Operating Profit to Income from Operations and Net
Income
The Company defines restaurant-level operating profit to be
restaurant revenues minus restaurant-level operating costs,
excluding restaurant closures and impairment costs in the event
closure or impairment charges are incurred. It does not include
general and administrative costs, depreciation and amortization,
pre-opening costs and costs associated with the tender offer of
stock options attributed to non-restaurant employees. The Company
believes that restaurant-level operating profit is an important
measure of financial performance because it is widely regarded in
the restaurant industry as a useful metric by which to evaluate
restaurant-level operating efficiency and performance. The Company
excludes restaurant closure costs as they do not represent a
component of the efficiency of continuing operations. Restaurant
impairment costs are excluded, because, similar to depreciation and
amortization, they represent a non-cash charge for the Company�s
investment in its restaurants and not a component of the efficiency
of restaurant operations. Restaurant-level operating profit is not
a measurement determined in accordance with generally accepted
accounting principles (�GAAP�) and should not be considered in
isolation, or as an alternative, to income from operations or net
income as indicators of financial performance. Restaurant-level
operating profit as presented may not be comparable to other
similarly titled measures of other companies. The table below sets
forth certain unaudited information for the sixteen weeks ended
April 19, 2009 and April 20, 2008, expressed as a percentage of
total revenues, except for the components of restaurant operating
costs, which are expressed as a percentage of restaurant
revenues.
�
Sixteen Weeks Ended April 19, 2009 �
April 20,
2008 � � Restaurant revenues $ 266,595 98.4 % $ 250,902 98.2 %
Restaurant operating costs: Cost of sales 65,283 24.5 59,348 23.7
Labor
91,385 34.3 85,139 33.9 Operating 43,018 16.1 42,506 16.9 Occupancy
18,908 7.1 16,002 6.4
Tender offer
stock-basedcompensation expense
� 886 � 0.3 � � � � � � � Restaurant-level operating profit �
47,115 � 17.7 � � � 47,907 � 19.1 � � Add � other revenues 4,218
1.6 4,691 1.8 Deduct � other operating: Depreciation and
amortization 17,637 6.5 14,849 5.8 General and administrative
20,170 7.4 22,475 8.8 Pre-opening costs 2,550 0.9 2,563 1.0
Tender offer stock-based
compensation
3,116 1.2 � � Restaurant closure costs � 586 � 0.2 � � � � � � �
Total other operating � 44,059 � 16.2 � � � 39,887 � 15.6 � �
Income from operations 7,274 2.7 12,711 5.0 � Total other expenses,
net 2,124 0.8 2,309 0.9 Provision for income taxes � 1,305 � 0.5 �
� � 3,149 � 1.2 � Total other 3,429 1.3 5,458 2.1 � Net income $
3,845 � 1.4 % � $ 7,253 � 2.9 % � � � � Certain percentage amounts
in the table above do not sum due to rounding as well as the fact
that restaurant operating costs are expressed as a percentage of
restaurant revenues, as opposed to total revenues.
Schedule II
Reconciliation of Non-GAAP Results
to GAAP Results
In addition to the results provided in accordance with Generally
Accepted Accounting Principles (�GAAP�) throughout this press
release, the Company has provided non-GAAP measurements which
present the sixteen week periods ended April 19, 2009 and April 20,
2008, year-over-year change in net income and diluted net income
per share, for the tender offer for certain stock options and costs
associated with the closure of four restaurants during sixteen
weeks ended April 19, 2009. The non-GAAP measurements are intended
to supplement the presentation of the Company�s financial results
in accordance with GAAP. The Company believes that the presentation
of these items provides additional information to facilitate the
comparison of past and present financial results.
�
Sixteen Weeks Ended �
Year Over Year April 19,
2009 �
April 20, 2008 Percentage Change
Net Income
�
Diluted EPS
NetIncome
�
Diluted EPS
NetIncome
�
DilutedEPS
Reported $ 3,845 $ 0.25 $ 7,253 $ 0.43 (47.0)% (41.9)% After-tax
impact of: Tender offer 2,989 0.19 � � Restaurant closure costs �
438 � 0.03 � � � � Adjusted $ 7,272 $ 0.47 $ 7,253 $ 0.43 0.3% 9.3%
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