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 18,
2010.
Financial and Operational Results
Results for the 16 weeks ended April 18, 2010, compared to the
16 weeks ended April 19, 2009, are as follows:
- Restaurant revenue increased
0.3% to $267.5 million.
- Company-owned comparable
restaurant sales decreased 2.3%.
- Restaurant-level operating
profit decreased 5.7% to $48.8 million.
- GAAP diluted earnings per share
were $0.32 vs. $0.25 in the fiscal first quarter a year ago. GAAP
diluted earnings per share in the fiscal first quarter 2009
included $0.22 per diluted share in one-time charges.
- The Company recorded $3.5
million, or $0.19 per diluted share, in other income as a result of
a one-time adjustment to unredeemed gift card liabilities (see
“Gift Card Breakage Income” below)
- Three new company-owned Red
Robin® restaurants opened during the fiscal first quarter 2010.
Three additional restaurants that were under construction during
the first quarter – one company-owned and two franchised -- have
opened since the end of the quarter. Two franchised restaurants and
one company-owned restaurant closed during the first quarter.
As of the end of the fiscal first quarter 2010, there were 308
company-owned and 131 franchised Red Robin® restaurants.
“While there are still many challenges in the current
macroeconomic environment and the restaurant industry as a whole,
we are encouraged by the strengthening of our comparable restaurant
sales,” said Dennis Mullen, Red Robin Gourmet Burgers, Inc.’s chief
executive officer. “Our guest counts and same store sales have
benefited from our recent television advertising support, as well
as our continued focus on quality, variety, value and our
restaurant Team Members’ commitment to outstanding guest service.
We’re looking forward to building on that momentum into the summer,
with innovative and craveable additions to our menu, new LTO’s
supported with TV advertising and other exciting marketing programs
and the new restaurant development we have underway for the balance
of the year.”
Fiscal First Quarter 2010 Results
Comparable restaurant sales decreased 2.3% for company-owned
restaurants in the fiscal first quarter of 2010 compared to an 8.1%
decrease in the fiscal first quarter of 2009, driven by a 0.1%
increase in guest counts and a 2.4% decrease in the average guest
check, which included the impact of LTO price promotions in the
quarter. Fiscal first quarter 2010 comparable restaurant sales
reflected a sequential improvement from the Company’s comparable
restaurant sales decrease of 10.5% reported in the fiscal fourth
quarter of 2009 and the decrease of 14.9% reported in the fiscal
third quarter of 2009. The Company estimates that severe winter
storms in several markets in the Northeast, California and
Mid-Atlantic states in the fiscal first quarter of 2010 negatively
impacted comparable restaurant sales by approximately 1.4% and
diluted earnings per share by $0.10.
Average weekly comparable sales from the 286 company-owned
comparable restaurants were $55,896 in the fiscal first quarter of
2010, compared to $58,079 for the 244 company-owned comparable
restaurants in the fiscal first quarter of 2009. Average weekly
sales for the 22 non-comparable company-owned restaurants were
$56,560 in the fiscal first quarter of 2010, compared to $55,245
for the 41 non-comparable restaurants in the fiscal first quarter a
year ago. For all company-owned restaurants, average weekly sales
were $55,909 from the 4,906 operating weeks in the fiscal first
quarter of 2010 compared to $57,352 from the 4,768 operating weeks
in the fiscal first quarter of 2009.
Total company revenues, which include company-owned restaurant
sales, franchise royalties and fees and other revenue, increased
1.7% to $275.5 million in the fiscal first quarter of 2010, versus
$270.8 million last year. Included in other revenue in the fiscal
first quarter of 2010 was $3.8 million attributed to recognition of
gift card breakage revenue, as described below. Franchise royalties
and fees of $4.2 million in the fiscal first quarter of 2010 were
flat compared to the same period a year ago.
For the fiscal first quarter of 2010, the Company’s U.S.
franchise restaurant sales of $93.6 million were lower compared to
$95.0 million in the prior year period. Comparable sales in the
fiscal first quarter of 2010 for franchise restaurants in the U.S.
decreased 2.1% and for franchise restaurants in Canada increased
4.8% from the fiscal first quarter of 2009. Average weekly
comparable sales for the U.S. franchised restaurants were $51,857
from the 106 comparable restaurants in the fiscal first quarter of
2010, compared to $52,961 for the 98 comparable restaurants in the
fiscal first quarter of 2009. Average weekly sales in the fiscal
first quarter of 2010 for the Company’s 18 comparable franchise
restaurants in Canada were C$54,293 versus C$51,058 in the same
period last year. Canadian results are in Canadian dollars.
Selling, general and administrative expenses were $30.8 million
in the fiscal first quarter of 2010 and $24.8 million in the fiscal
first quarter of 2009, which were 11.2% and 9.1% of total revenue,
respectively. Included in the fiscal first quarter of 2010 was $6.6
million of investment in the Company’s television media campaign,
which included a $1.2 million investment made by the Company to
fund its franchisees’ portion of this initial system-wide
television campaign. Beginning in the fiscal second quarter of
2010, franchisees will contribute an additional 1.25% of their
revenue to the national cable television advertising efforts for
the remainder of 2010. System-wide funding for the remaining
national cable television campaigns and some local television
advertising support in fiscal 2010 will total $11.4 million, of
which $8.9 million will be funded by the Company from selling,
general and administrative expenses.
Net interest expense was $1.9 million in the fiscal first
quarter of 2010 and $2.1 million in the fiscal first quarter of
2009.
Net income for the fiscal first quarter of 2010 was $4.9 million
or $0.32 per diluted share, compared to net income of $3.8 million,
or $0.25 per diluted share, in the fiscal first quarter of
2009.
For the fiscal first quarter of 2010, the Company’s effective
tax rate was 17.1% compared to an effective tax rate of 25.3% in
the fiscal first quarter of 2009. The decrease is primarily due to
more favorable general business and tax credits, primarily the FICA
Tip Tax Credit, which as a percent of current year income before
tax did not change at the same rate as the change in taxable
income. The Company anticipates that the effective tax rate for the
full fiscal year 2010 will be approximately 17%.
Schedule I of this earnings release defines restaurant-level
operating profit and reconciles this metric to income from
operations and net income for all periods presented. The Company’s
restaurant-level operating profit metric is designed to afford
management and investors with a basis for considering and comparing
restaurant performance. It is not calculated in conformity with
generally accepted accounting principles (“GAAP”). It is intended
to supplement, rather than replace GAAP results. Restaurant-level
operating profit is useful to management and to the Company’s
investors because it is widely regarded in the restaurant industry
as a useful metric by which to evaluate restaurant-level operating
efficiency and performance.
Gift Card Breakage Income
Through its restaurants and third-parties, the Company sells
gift cards, which do not have an expiration date, and the Company
does not deduct non-usage fees from outstanding gift card balances.
The Company recognizes revenue from gift cards when the gift
card is redeemed by the customer, or if the likelihood of gift
card redemption is remote (referred to as “gift card breakage”) and
the Company determines that there is not a legal obligation to
remit the unredeemed gift cards to the relevant jurisdiction.
During the fiscal first quarter of 2010, the Company completed an
analysis of liabilities from unredeemed gift cards that were sold
through its restaurants and, as a result of this analysis, recorded
$3.5 million, or $0.19 per diluted share, in other revenue as a
one-time cumulative adjustment, and $266,000 of other revenue for
the first quarter 2010 related to the on-going amortization of the
unredeemed gift card balances. The on-going quarterly revenue to be
recognized as a result of breakage from unredeemed gift cards that
were sold through the Company’s restaurants is expected to be
between $200,000 and $250,000.
Balance Sheet and Liquidity
On April 18, 2010, the Company held $13.9 million in cash and
cash equivalents and had a total outstanding debt balance of $170.2
million, including $113.3 million in borrowings under its $150
million term loan, $50.5 million of borrowings under its $150
million revolving credit facility and $6.3 million outstanding for
capital leases. The Company has also issued $5.4 million of
outstanding letters of credit under its revolving credit facility.
In the first fiscal quarter of 2010, the Company paid down $21.2
million in debt, and since the end of the first quarter 2010, the
Company has made additional debt repayments of $3.5 million on its
revolving credit facility.
The Company is subject to a number of customary covenants under
its credit agreement, including limitations on additional
borrowings, acquisitions, dividend payments, and requirements to
maintain certain financial ratios. As of April 18, 2010, the
Company was in compliance with all of its debt covenants, and the
Company expects to remain in full compliance.
Outlook
The Company’s fiscal second quarter of 2010 is a 12-week
quarter. One new company-owned restaurant opened early in the
fiscal second quarter and four new company-owned restaurants are
currently under construction. Two new franchised restaurants opened
in the fiscal second quarter, and no new franchised restaurants are
currently under construction. During fiscal year 2010, the Company
expects to open 12 to 13 new company-owned restaurants and
franchisees are expected to open three to four new restaurants.
For the fiscal year 2010, which is a 52-week year, the Company
expects revenues of $872 million to $880 million and net income of
$1.10 to $1.30 per diluted share. These projected results are based
upon certain assumptions, including an expected comparable
restaurant sales of 0% to up 1.0% compared to the fiscal year 2009.
Through May 16, 2010, the first four weeks of the Company’s 12-week
fiscal second quarter of 2010, comparable restaurant sales
decreased 1.2% from the prior year comparable period for
company-owned restaurants, compared to a year-over-year decrease of
11.1% in the first four weeks of the fiscal second quarter of 2009.
The Company did not engage in TV advertising during the first four
weeks of the second fiscal quarter of 2010 or 2009.
The annual financial guidance includes approximately $15.6
million that the Company expects to spend for television
advertising to support limited time offer (LTO) promotions during
2010, compared to $2.3 million that the Company spent on television
advertising during fiscal year 2009. The Company’s total marketing
expense in 2010 is expected to be about $28.8 million compared to
$15.2 million spent in fiscal 2009 and is included in selling,
general and administrative expense.
For the remaining three quarters of fiscal 2010, the Company’s
run rate SG&A expense is expected to be between $16.5 and $17.0
million per quarter. Adding to that will be what the Company’s
portion of TV marketing expense is expected to be by quarter as
follows: For the fiscal second quarter of 2010, the Company expects
to spend $3.3 million; for the fiscal third quarter of 2010, the
Company expects to spend $3.4 million; and for the fiscal fourth
quarter of 2010, the Company expects to spend $2.3 million.
Based on the Company’s development plans and other
infrastructure and maintenance costs, the Company expects fiscal
year 2010 capital expenditures to be approximately $35 million to
$40 million, which the Company expects to fund entirely out of
operating cash flow. The Company also intends to make scheduled
payments of $18.7 million required by the term loan portion of its
existing credit facility from free cash flow after capital
expenditures in fiscal year 2010 and expects to use its remaining
free cash flow to make payments on the Company’s revolving credit
facility.
Investor Conference Call and
Webcast
Red Robin will host an investor conference call to discuss its
fiscal first quarter 2010 results today at 5:00 p.m. ET. The
conference call number is (877) 407-0784. To access the webcast,
please visit www.redrobin.com and select the “Investors” link from
the menu. The 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 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 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 440 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 “anticipates,” “assumptions,” “believe,”
“continue,” “expects,” “guidance,” “ongoing,” “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, high levels of
unemployment and decreasing consumer confidence, resulting in
changes in consumer preferences or consumer discretionary spending;
the effectiveness of our advertising strategy; 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; the effect of
increased competition in the casual dining market and discounting
by competitors; 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; concentration of less mature restaurants in the
comparable restaurant base which impacts profitability; the ability
of our franchisees to open and manage new restaurants; 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.
RED ROBIN GOURMET BURGERS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
amounts)
(Unaudited)
April 18, 2010 December 27,
2009 Assets: Current Assets: Cash and cash equivalents $
13,886 $ 20,268 Accounts receivable, net 5,292 4,703 Inventories
14,594 14,526 Prepaid expenses and other current assets 6,462 6,203
Income tax receivable 2,498 4,713 Deferred tax asset 3,392 4,127
Restricted current assets—marketing funds 858
665 Total current assets $ 46,982 $ 55,205
Property and equipment, net 424,581 431,536 Goodwill 61,769
61,769 Intangible assets, net 46,151 47,426 Other assets, net
4,044 4,159 Total assets $ 583,527
$ 600,095
Liabilities and Stockholders’
Equity: Current Liabilities: Trade accounts payable $ 15,694 $
10,891 Construction related payables 2,873 3,181 Accrued payroll
and payroll related liabilities 27,403 26,912 Unearned revenue
6,513 15,437 Accrued liabilities 21,580 18,818 Accrued
liabilities—marketing funds 858 665 Current portion of term loan
notes payable 18,739 18,739 Current portion of long-term debt and
capital lease obligations 765 779 Total
current liabilities $ 94,425 $ 95,422 Deferred
rent 31,959 30,996 Long-term portion of term loan notes payable
94,584 103,954 Other long-term debt and capital lease obligations
56,079 67,862 Other non-current liabilities 11,281
13,239 Total liabilities $ 288,328 $ 311,473
Stockholders’ Equity:
Common stock; $0.001 par value:
30,000,000 sharesauthorized; 17,093,724 and 17,079,267 shares
issued;15,601,414 and 15,586,948 shares outstanding
17 17
Preferred stock, $0.001 par value:
3,000,000 sharesauthorized; no shares issued and outstanding
- - Treasury stock, 1,492,280 shares, at cost (50,125 ) (50,125 )
Paid-in capital 168,766 167,637 Accumulated other comprehensive
loss, net of tax (715 ) (1,212 ) Retained earnings 177,256
172,305 Total stockholders’ equity
295,199 288,622 Total liabilities and
stockholders’ equity $ 583,527 $ 600,095
RED ROBIN GOURMET BURGERS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except per share
data)
(Unaudited)
Sixteen Weeks Ended
April 18, 2010
April 19, 2009
Revenues: Restaurant revenue $ 267,505 $ 266,595 Franchise
royalties and fees 4,169 4,152 Other revenue 3,836
66 Total revenues 275,510 270,813
Costs and expenses:
Restaurant operating costs
(exclusive of depreciationand amortization shown separately
below):
Cost of sales 65,013 65,283 Labor (includes $209 and $986 of
stock-based compensation, respectively) 95,361 91,385 Operating
38,639 38,415 Occupancy 19,708 18,908 Tender offer stock based
compensation - restaurants - 886 Depreciation and amortization
17,251 17,637
Selling, general, and
administrative (includes $893 and$3,727 of stock-based
compensation, respectively)
30,750 24,773 Pre-opening costs 877 2,550 Tender offer stock based
compensation - corporate - 3,116 Restaurant closure costs 85
586 Total costs and expenses 267,684
263,539 Income from operations 7,826 7,274
Other expense (income): Interest expense, net 1,885 2,114 Other
(30 ) 10 Total other expenses 1,855
2,124 Income before income taxes 5,971 5,150
Provision for income taxes 1,020 1,305 Net
income $ 4,951 $ 3,845 Earnings per share: Basic $ 0.32
$ 0.25 Diluted $ 0.32 $ 0.25 Weighted average shares
outstanding: Basic 15,477 15,356 Diluted
15,607 15,432
Schedule I
Reconciliation of Non-GAAP
Restaurant-Level Operating Profit to Income
from Operations and Net
Income
(In thousands, except
percentage data)
The Company believes that restaurant-level operating profit
is an important measure for management and investors 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 defines restaurant-level operating profit
to be restaurant revenues minus restaurant-level operating costs,
excluding restaurant closures and impairment costs. The measure
includes restaurant level occupancy costs, which include fixed
rents, percentage rents, common area maintenance charges, real
estate and personal property taxes, general liability insurance and
other property costs, but excludes depreciation related to
restaurant buildings and leasehold improvements. The measure
excludes depreciation and amortization expense, substantially all
of which is related to restaurant level assets, because such
expenses represent historical sunk costs which do not reflect a
current cash outlay for the restaurants. The measure also excludes
selling, general and administrative costs, and therefore excludes
occupancy costs associated with selling, general and administrative
functions, pre-opening costs, reacquired franchise costs, legal
settlements and costs associated with the tender offer of stock
options attributed to non-restaurant employees. 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 18, 2010 and April 19, 2009, 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 18, 2010
April 19, 2009 Restaurant revenues $ 267,505
97.1% $ 266,595 98.4%
Restaurant operating costs
(exclusive of depreciationand amortization shown separately
below):
Cost of sales 65,013 24.3 65,283 24.5 Labor 95,361 35.6 91,385 34.3
Operating 38,639 14.4 38,415 14.4 Occupancy 19,708 7.4 18,908 7.1
Tender offer stock-based compensation expense - - 886
0.3 Restaurant-level operating profit 48,784 18.2
51,718 19.4 Add – other revenues 8,005 2.9 4,218 1.6 Deduct
– other operating: Depreciation and amortization 17,251 6.3 17,637
5.8 Selling, general, and administrative 30,750 11.2 24,773 9.1
Pre-opening costs 877 0.3 2,550 0.9 Tender offer stock-based
compensation expense - - 3,116 1.2 Restaurant closure costs
85 - 586 0.2 Total other operating 48,963 17.7
48,662 17.2 Income from operations 7,826 2.8 7,274 2.7
Total other expenses, net 1,855 0.7 2,124 0.8 Provision for
income taxes 1,020 0.4 1,305 0.5 Total other 2,875
1.1 3,429 1.3 Net income $ 4,951 1.8% $ 3,845 1.4%
Certain percentage amounts in the
table above do not sum due to rounding as well as the fact that
restaurantoperating costs are expressed as a percentage of
restaurant revenues, as opposed to total revenues.
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