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 twelve and twenty-eight weeks
ended July 12, 2009.
Financial and Operational Highlights
Highlights for the 12 weeks ended July 12, 2009, compared to the
12 weeks ended July 13, 2008, are as follows:
- Total revenues decreased 2.6% to
$201.1 million.
- Restaurant revenue decreased
2.4% to $198.0 million.
- Company-owned comparable
restaurant sales decreased 11.5%.
- Restaurant-level operating
profit decreased 6.0% to $35.6 million.
- GAAP diluted earnings per share
were $0.41 vs. $0.49 in the same period a year ago, which included
a $0.03 charge for reacquired franchise costs and related
acquisition integration expenses in the fiscal second quarter of
2008.
- A total of seven new Red Robin®
restaurants, six company-owned restaurants and one franchised
location, were opened during the second quarter 2009.
As of the end of the fiscal second quarter of 2009, there were
304 company-owned and 131 franchised Red Robin® restaurants.
“Red Robin’s financial performance during the second quarter
reflected the continued weak macroeconomic climate that is
impacting the casual dining industry as a whole, combined with the
lapping of our successful brand-building national advertising last
year,” said Dennis B. Mullen, Red Robin Gourmet Burgers, Inc.,
chairman and chief executive officer. “We are encouraged by our
Team Members’ abilities to streamline operations and manage
controllable costs, while delivering a consistently great dining
experience, in addition to their focus on targeted traffic-driving
and retention initiatives to improve our top line. For the balance
of the year, we will concentrate on making further progress on
improving productivity and executing on our targeted marketing
strategies.”
Fiscal Second Quarter 2009 Results
Comparable restaurant sales decreased 11.5% for company-owned
restaurants in the fiscal second quarter of 2009 compared to the
fiscal second quarter of 2008, driven by a 12.2% decline in guest
counts, which was partially offset by a 0.7% increase in the
average guest check. Average weekly comparable sales from the 245
company-owned comparable restaurants were $56,335 in the fiscal
second quarter of 2009, compared to $64,842 for the 207
company-owned comparable restaurants in the fiscal second quarter
of 2008. Average weekly sales for the 44 non-comparable
company-owned restaurants were $56,053 in the fiscal second quarter
of 2009, compared to $56,233 for the 43 non-comparable restaurants
in the fiscal second quarter a year ago. For all company-owned
restaurants, average weekly sales were $55,973 from 3,619 operating
weeks in the fiscal second quarter of 2009 compared to $63,013 from
3,281 operating weeks, in the fiscal second 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 $49,842 in the fiscal second quarter of 2009
and $54,905 in the fiscal second quarter of 2008. These 15
locations will be included in the company-owned comparable
restaurant base in the fiscal third quarter of 2009.
Total Company revenues, which include company-owned restaurant
sales and franchise royalties and fees, decreased 2.6% to $201.1
million in the fiscal second quarter of 2009, versus $206.4 million
last year. Franchise royalties and fees decreased 10.4% to $3.1
million in the fiscal second quarter of 2009 compared to $3.4
million in the same period a year ago. Franchise royalties and fees
in the fiscal second quarter of 2008 included $276,000 of royalties
attributed to the 2008 Acquired Restaurants.
For the fiscal second quarter of 2009, the Company’s U.S.
franchise restaurant sales of $69.2 million were lower compared to
$74.9 million in the prior year period, primarily as a result of
franchise restaurants acquired by the company early in the fiscal
second quarter of 2008. Comparable sales in the fiscal second
quarter of 2009 for franchise restaurants in the U.S. decreased
10.3% and for franchise restaurants in Canada decreased 1.6% from
the fiscal second quarter of 2008. Average weekly comparable sales
for the U.S. franchised restaurants were $51,970 from the 100
comparable restaurants in the fiscal second quarter of 2009,
compared to $58,353 for the 87 comparable restaurants in the fiscal
second quarter of 2008. Average weekly sales in the fiscal second
quarter of 2009 for the Company’s 18 comparable franchise
restaurants in Canada were C$52,977 versus C$53,829 in the same
period last year. Canadian results are in Canadian dollars.
Restaurant-level operating profit margins at company-owned
restaurants were 18.0% in the fiscal second quarter of 2009
compared to 18.6% in the fiscal second quarter of 2008. Fiscal
second quarter 2009 restaurant-level operating profit margins were
negatively impacted by an approximately 0.5% increase in food and
beverage costs, a 0.2% increase in labor costs, along with a 0.8%
increase in occupancy costs, partially offset by 0.9% 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 second quarter of
2009 versus 1.5% of restaurant revenue last year.
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 $15.1 million in the
fiscal second quarter of 2009 and $14.5 million in the fiscal
second quarter of 2008, which were 7.5% and 7.0% of total revenue,
respectively. Reacquired franchise and other acquisition costs in
the fiscal second quarter last year represented one-time pre-tax
charges of $0.5 million.
Interest expense was $1.6 million in the fiscal second quarter
of 2009, compared to $1.8 million in the fiscal second quarter of
2008.
In the fiscal second quarter of 2009, the Company realized a
reduction in the effective tax rate to 23.2% compared to 27.8% for
the fiscal second quarter of 2008.
Net income for the fiscal second quarter of 2009 was $6.4
million, or $0.41 per diluted share, as compared to net income of
$7.9 million, or $0.49 per diluted share, in the fiscal second
quarter of 2008. Net income for the fiscal second quarter of 2008
included a $0.03 per diluted share charge for reacquired franchise
costs and acquisition-related integration expenses.
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 second quarter of 2009 and 2008 to adjusted
amounts excluding certain acquisition costs.
Outlook
The Company expects to open two new company-owned restaurants in
the fiscal fourth quarter of 2009. Both of these restaurants
currently are under construction. A new franchised restaurant that
opened early in the fiscal third quarter of 2009 is expected to be
the last new franchised opening of the fiscal year. For the full
52-week period, the Company expects to open a total of 15 new
company-owned restaurants, while franchisees have opened a total of
four new restaurants.
The Company continues to expect that guest counts 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
second quarter 2009 results today at 5:00 p.m. ET. The conference
call number is (888) 211-7360. To access the webcast, please visit
www.redrobin.com and select the “Investors” link from the menu. The
quarterly financial information that the Company intends 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 prior to 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 430 Red Robin® restaurants
located across the United States and Canada, including
company-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 “expects,” “anticipates,” “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; 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; 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.
Twelve Weeks Ended
Twenty-eight Weeks Ended July 12, 2009
July 13, 2008 July 12, 2009 July 13,
2008
Company-owned:
Beginning of period 298 258 294 249 Opened during period 6 8 13 17
Acquired during period - 15 1 15 Closed during period - - (4
) - End of period 304 281 304 281
Franchised:
Beginning of period 130 135 129 135 Opened during period 1 3 3 4
Sold or closed during period - (15 ) (1 ) (16 ) End of period 131
123 131 123
Total number of Red Robin®
restaurants
435 404 435 404
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)
July 12,2009
December 28,2008
Assets: Current Assets: Cash and cash equivalents $ 9,937 $
11,158 Accounts receivable, net 8,029 5,611 Inventories 14,002
13,123 Prepaid expenses and other current assets 5,928 9,032 Income
tax receivable 2,159 6,208 Deferred tax asset 4,143 3,366
Restricted current assets—marketing funds 1,358
1,590 Total current assets $ 45,556 $ 50,088
Property and equipment, net 440,663 442,012 Goodwill 61,769
60,982 Intangible assets, net 50,505 51,990 Other assets, net
3,544 4,665 Total assets $ 602,037
$ 609,737
Liabilities and Stockholders’
Equity: Current Liabilities: Trade accounts payable $ 9,868 $
11,966 Construction related payables 4,054 9,747 Accrued payroll
and payroll related liabilities 27,078 25,489 Unredeemed gift
certificates 8,587 11,997 Accrued liabilities 23,574 20,385 Accrued
liabilities—marketing funds 1,358 1,590 Current portion of term
loan notes payable 18,739 10,313 Current portion of long-term debt
and capital lease obligations 636 696
Total current liabilities $ 93,894 $ 92,183 Deferred
rent 29,556 26,790 Long-term portion of term loan notes payable
108,639 122,687 Other long-term debt and capital lease obligations
80,410 88,876 Other non-current liabilities 8,017
10,293 Total liabilities $ 320,516 $ 340,829
Stockholders’ Equity: Common stock 17 17 Treasury
stock, 1,492,280 shares, at cost (50,125 ) (50,125 ) Paid-in
capital 168,453 165,932 Accumulated other comprehensive loss, net
of tax (1,796 ) (1,622 ) Retained earnings 164,972
154,706 Total stockholders’ equity 281,521
268,908 Total liabilities and stockholders’
equity $ 602,037 $ 609,737
RED ROBIN GOURMET BURGERS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Income
(In thousands, except share
amounts)
(Unaudited)
Twelve Weeks Ended Twenty-eight Weeks Ended
July 12,2009
July 13,2008
July 12,2009
July 13,2008
Revenues: Restaurant revenue $ 197,963 $ 202,898 $
464,558 $ 453,800 Franchise royalties and fees 3,078 3,434 7,230
8,068 Rent revenue 47 56 113 113
Total revenues 201,088 206,388
471,901 461,981 Costs and expenses: Restaurant
operating costs: Cost of sales 48,228 48,505 113,511 107,853 Labor
(includes $137, $308, $1,123 and $663 of stock-based compensation,
respectively) 67,679 68,956 159,950 154,095 Operating 32,008 34,397
75,026 76,903 Occupancy 14,494 13,216 33,402 29,218 Depreciation
and amortization 13,066 11,680 30,703 26,529 General and
administrative (includes $615, $1,041, $4,342, and $2,514 of
stock-based compensation, respectively) 15,099 14,454 38,971 36,929
Pre-opening costs 588 2,041 3,138 4,604 Reacquired franchise and
other acquisition costs - 451 -
451 Total costs and expenses 191,162 193,700
454,701 436,582 Income from
operations 9,926 12,688 17,200 25,399 Other expense (income):
Interest expense, net 1,559 1,763 3,673 4,059 Other 9
(38 ) 19 (25 ) Total other expenses 1,568
1,725 3,692 4,034 Income
before income taxes 8,358 10,963 13,508 21,365 Provision for income
taxes 1,937 3,047 3,242 6,196
Net income $ 6,421 $ 7,916 $ 10,266 $ 15,169
Earnings per share: Basic $ 0.42 $ 0.49 $ 0.67 $ 0.92
Diluted $ 0.41 $ 0.49 $ 0.66 $ 0.91 Weighted average
shares outstanding: Basic 15,380 16,093
15,366 16,460 Diluted 15,486 16,221
15,467 16,586
RED ROBIN GOURMET BURGERS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Twenty-eight Weeks Ended
July 12,2009
July 13,2008
Cash Flows From Operating Activities: Net income $ 10,266 $
15,169 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 30,703 26,529
Stock-based compensation expense 5,465 3,177 Restaurant closure
costs 598 - Other, net (1,224 ) 152 Changes in operating assets and
liabilities 3,479 7,349 Cash provided
by operating activities 49,287 52,376
Cash Flows From Investing Activities: Changes in marketing
fund restricted cash - 45 Acquisition of franchise restaurants, net
of cash acquired of $0 and $55, respectively (1,248 ) (30,257 )
Purchases of property and equipment (32,905 ) (41,765
) Cash used in investing activities (34,153 ) (71,977
) Cash Flows From Financing Activities: Borrowings of
long-term debt 97,500 125,900 Payments of long-term debt (110,730 )
(58,025 ) Purchase of treasury stock - (50,042 ) Payment for tender
offer for stock options (3,498 ) - Proceeds from exercise of stock
options and employee stock purchase plan 607 1,295 Excess tax
benefit related to exercise of stock options 76 232 Payments of
other debt and capital lease obligations (310 ) (264
) Cash provided (used) by financing activities (16,355 )
19,096 Net change in cash and cash equivalents
(1,221 ) (505 ) Cash and cash equivalents, beginning of period
11,158 12,914 Cash and cash
equivalents, end of period $ 9,937 $ 12,409
Supplemental Disclosure of Cash Flow Information: Income taxes paid
$ 936 $ 1,364 Interest paid, net of amounts capitalized 3,469 3,925
Supplemental Disclosure of Non-Cash Items: Capital lease
obligations incurred for equipment purchases - 156 Unrealized gain
(loss) on cash flow hedge, net of tax (174 ) 1,203
Schedule I
Reconciliation of Non-GAAP
Restaurant-Level Operating Profit to Incomefrom 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 twelve and twenty-eight weeks ended July 12,
2009 and July 13, 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.
Twelve Weeks Ended Twenty-eight Weeks
Ended July 12, 2009 July 13, 2008
July 12, 2009 July 13, 2008 Restaurant
revenues $ 197,963 98.5 % $ 202,898 98.3 % $ 464,558
98.5 % $ 453,800 98.2 % Restaurant operating costs:
Cost of sales 48,228 24.4 48,505 23.9 113,511 24.4 107,853 23.8
Labor 67,679 34.2 68,956 34.0 159,064 34.2 154,095 34.0 Operating
32,008 16.1 34,397 17.0 75,026 16.1 76,903 16.9 Occupancy 14,494
7.3 13,216 6.5 33,402 7.2 29,218 6.4 Tender offer stock-based
compensation expense - - - - 886
0.2 - - Restaurant-level operating profit
35,554 18.0 37,824 18.6 82,669
17.8 85,731 18.9 Add – other revenues
3,125 1.5 3,490 1.7 7,343 1.5 8,181 1.8 Deduct – other operating:
Depreciation and amortization 13,066 6.5 11,680 5.7 30,703 6.5
26,529 5.7 General and administrative 15,087 7.5 14,454 7.0 35,257
7.5 36,929 8.0 Pre-opening costs 588 0.3 2,041 1.0 3,138 0.7 4,604
1.0 Tender offer stock-based compensation expense - - - - 3,116 0.7
- - Restaurant closure costs 12 - - - 598 0.1 - - Reacquired
franchise and other acquisition costs - - 451
0.2 - - 451 0.1 Total other
operating 28,753 14.3 28,626 13.9
72,812 15.5 68,513 14.8 Income
from operations 9,926 4.9 12,688 6.1 17,200 3.6 25,399 5.5
Total other expenses, net 1,568 0.8 1,725 0.8 3,692 0.8 4,034 0.9
Provision for income taxes 1,937 1.0 3,047 1.5
3,242 0.7 6,196 1.3 Total other
3,505 1.8 4,772 2.3 6,934 1.5 10,230 2.2 Net income
6,421 3.1 % 7,916 3.8 % 10,266 2.1 % 15,169
3.3 %
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 twelve and twenty-eight week periods ended July 12,
2009 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 2009, and
the reacquired franchise costs and other acquisition costs, and
acquisition related integration-related costs incurred during the
twelve and twenty-eight week periods ended July 13, 2008. 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.
Twelve Weeks Ended
Year Over Year
July 12, 2009 July 13, 2008
Percentage Change
Net Diluted Net Diluted Net Diluted
Income EPS Income EPS Income EPS Reported $ 6,421 $ 0.41 $ 7,916 $
0.49 -18.9 % -16.3 % After-tax impact of : Restaurant
closure costs 9 - - - Reacquired franchise rights and other
acquisition costs - - 326 0.02 Acquisition-related integration
costs - - 174 0.01 9 - 500 0.03
Adjusted $ 6,430 $ 0.41 $ 8,416 $ 0.52 -23.6 % -21.2 %
Twenty-Eight Weeks Ended
Year Over Year
July 12, 2009 July 13, 2008
Percentage Change
Net Diluted Net Diluted Net Diluted Income EPS Income EPS Income
EPS Reported $ 10,266 $ 0.66 $ 15,169 $ 0.91 -32.3 % -27.5 %
After-tax impact of : Cash Tender Offer 3,042 0.20 - - Restaurant
closure costs 454 0.03 - - Reacquired franchise rights and other
acquisition costs - - 320 0.02 Acquisition-related integration
costs - - 180 0.01 3,496 0.23 500 0.03
Adjusted $ 13,762 $ 0.89 $ 15,669 $ 0.94 -12.2 % -5.3 %
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