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 12 and 52 weeks ended December
25, 2011.
Financial and Operational Results
During the Company’s fiscal fourth quarter 2011:
- Adjusted earnings per diluted share
were $0.28 compared to $0.13 a year ago; GAAP earnings per diluted
share were $0.20 compared to $0.14 in the fiscal fourth quarter
2010 (See Schedule I)
- Company-owned comparable restaurant
gross sales increased 4.8%
- Restaurant-level operating profit
margin increased to 19.9% from 17.0% (See Schedule II)
- The Company opened four new
company-owned Red Robin® restaurants, including its first Red
Robin’s Burger Works™ and one new franchised Red Robin®
restaurant
Adjusted net income for the 12 weeks ended December 25, 2011,
was $4.1 million compared to $2.0 million earned for the comparable
period in fiscal 2010. Adjusted net income excludes $1.2 million of
expense and $0.4 million of income in the fiscal fourth quarter
2011 and 2010, respectively, related to asset impairments,
restaurant closing and executive transition costs net of taxes as
detailed in Schedule I below. GAAP net income during the fiscal
fourth quarter 2011 was $2.9 million compared to $2.2 million
during the comparable period in fiscal 2010.
For the 52 weeks ended December 25, 2011, the Company reported
adjusted earnings per diluted share of $1.58 compared to $0.71 in
fiscal 2010. Adjusted net income in fiscal 2011 was $24.3 million
compared to $11.1 million in 2010 as detailed in Schedule I. GAAP
earnings per diluted share for fiscal 2011 amounted to $1.34
compared to $0.46 in 2010. GAAP net income in fiscal 2011 and 2010
was $20.6 million and $7.3 million, respectively.
“Our strong fourth quarter 2011 performance reflects the sales
growth we realized from a sequential improvement in guest count
trends, accentuating value with the continued success of our
limited time offerings and execution of happy hour and other
revenue-driving initiatives,” said Steve Carley, Red Robin Gourmet
Burgers, Inc. Chief Executive Officer. “In addition, despite
continued pressure from commodity inflation, our team members were
able to capture substantial net cost savings, which resulted in
significantly higher profits in the fourth quarter. The targeted
reduction in restaurant costs we announced in early 2011 with
Project Red are being realized more quickly than we
anticipated.”
Continued Growth in Operating Results
Total Company revenues, which include company-owned restaurant
sales and franchise royalties, increased 7.0% to $206.0 million in
the fiscal fourth quarter of 2011 versus $192.6 million in the same
period last year. For fiscal 2011, total revenues increased 5.9% to
$914.9 million.
Comparable restaurant gross sales increased 4.8% for
company-owned restaurants in the fiscal fourth quarter of 2011
compared to the fiscal fourth quarter of 2010, driven by a 5.6%
increase in average guest check, partially offset by a 0.8%
decrease in guest counts. Net of loyalty incentive and other
discounts, comparable sales increased 3.1% in the fiscal fourth
quarter of 2011 compared to the prior year. Comparable sales for
the 52 weeks ended December 25, 2011 grew 2.9% on a gross basis and
2.3% net of incentives and discounts.
Average weekly net sales in company-owned restaurants increased
to $51,844 per unit in the fiscal fourth quarter of 2011 (3,904
operating weeks) compared to $50,198 a year ago (3,771 operating
weeks). In the Company’s franchised restaurants, average weekly net
sales per unit were $50,004 in the fiscal fourth quarter of 2011,
an increase of 4.8% compared to $47,723 last year. System-wide net
sales in the fiscal fourth quarter of totaled $284.7 million,
compared to $266.1 million in the prior year, and were $1,267.4
million for fiscal year 2011.
Restaurant-level operating profit margins at company-owned
restaurants were 19.9% in the fiscal fourth quarter of 2011
compared to 17.0% in the fiscal fourth quarter of 2010, an
improvement of 290 basis points as a result of lower operating
costs that more than offset higher food and beverage costs.
Schedule II of this earnings release defines restaurant-level
operating profit, discusses why it is a useful metric for investors
and reconciles this metric to income from operations and net
income.1
Selling, general and administrative (“SG&A”) expenses were
$23.6 million in the 12 weeks ended December 25, 2011, compared to
$19.5 million in the same period of fiscal 2010. SG&A in the
fiscal fourth quarter of 2011 increased due to higher
performance-based compensation costs and included $1.3 million
related to development of the Company’s new information systems
which will be implemented in fiscal 2012.
In the fiscal fourth quarter of 2011, the Company recorded a
pre-tax non-cash asset impairment charge of $2.4 million related to
two locations where the net book value exceeded the estimated fair
value of the related assets.
The Company had an effective tax rate of 2.8% in the fiscal
fourth quarter of 2011, compared to an effective tax benefit in the
fiscal fourth quarter of 2010. For the full fiscal year 2011, the
Company’s effective tax rate was 6.8%.
1Schedule II 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 meaningful metric by which to evaluate restaurant-level
operating efficiency and performance.
Balance Sheet and Liquidity
On December 25, 2011, the Company had cash and cash equivalents
of $35.0 million and total debt of $156.9 million, including $10.7
million of capital lease liabilities. For the 52 weeks ended
December 25, 2011, cash from operations totaled $95.7 million
compared to $70.6 million for the same period in 2010. During
fiscal 2011, Red Robin’s capital investments amounted to $44.1
million compared to $35.0 million in fiscal 2010.
During the fiscal fourth quarter of 2011, the Company
repurchased approximately 92,000 shares for $2.3 million. For the
full fiscal year 2011, the Company repurchased a total of 1.2
million shares, or 7.6% of shares outstanding, for $33.0
million.
Restaurant Openings
As of the end of the fiscal fourth quarter of 2011, there were
327 company-owned restaurants and 137 franchised Red Robin®
locations. In the fiscal fourth quarter of 2011, the Company opened
three full-size prototype Red Robin® restaurants and its first
smaller prototype Red Robin’s Burger Works™, while franchisees
opened one new restaurant. During fiscal 2011, the Company opened
13 new company-owned restaurants and three franchised Red Robin®
restaurants.
Outlook for 2012
Red Robin’s fiscal 2012 will consist of 53 weeks ending on
December 30, 2012.
In fiscal 2012, the Company expects low-single-digit growth of
comparable restaurant net sales compared to the prior year.
Cost of sales is expected to increase to near 26.0% of sales, or
60 to 80 basis points higher than fiscal 2011. Improvements in
operating expenses and the impact of select item price increases
implemented in fiscal 2011 are expected to offset the higher
commodity costs. Average restaurant-level operating profit margins
are expected to increase modestly in fiscal 2012 from fiscal
2011.
The income tax rate in fiscal 2012 is expected to increase to a
range of 22% to 24% from 6.8% in fiscal 2011 as a result of higher
income before income taxes and expiration of the HIRE Act tax
credit.
During fiscal 2012, the Company expects to open between 13 and
15 new company-owned restaurants, including four Red Robin’s Burger
Works™. The increase in new store openings from the prior year and
additional restaurant remodeling investments are expected to
increase fiscal 2012 capital expenditures to a range of $50 million
to $60 million.
The sensitivity of the Company’s earnings per diluted share to a
1% change in guest counts for fiscal 2012 is estimated to be $0.25.
Additionally, a 10 basis point change in restaurant-level operating
margin is expected to impact earnings per diluted share by
approximately $0.05, and a change of $191,000 in pre-tax income or
expense is equivalent to approximately $0.01 per diluted share.
Investor Conference Call and Webcast
Red Robin will host an investor conference call to discuss its
fiscal fourth quarter 2011 results today at 11:00 a.m. ET. The
conference call number is (888) 359-3624, or for international
callers (719) 325-2434. 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. Prior to the conference
call, the Company will post supplemental financial information that
will be discussed during the call and live webcast. To access the
supplemental financial information and webcast, please visit
www.redrobin.com and select the “Investors” link from the menu. A
replay of the live conference call will be available from one hour
after the call and available until midnight on Thursday, February
23, 2012. The replay can be accessed by dialing (877) 870-5176 or
(858) 384-5517 for international callers. The conference ID is
9419045. The webcast replay will also be available on the Company’s
website until midnight on Sunday, April 15, 2012.
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., is the
gourmet burger expert, famous for serving more than two dozen
craveable, high-quality burgers with Bottomless Steak Fries® in a
fun environment welcoming to guests of all ages. In addition to its
many burger offerings, Red Robin serves a wide variety of salads,
soups, appetizers, entrees, desserts and signature Mad Mixology®
Beverages. There currently are 465 Red Robin® restaurants located
across the United States and Canada, including 328 company-owned
restaurants and 137 restaurants operating under franchise
agreements.
Forward-Looking Statements:
Forward-looking statements in this press release regarding our
expected earnings per share and restaurant sales, new restaurant
growth, certain statements under the heading “Outlook” and all
other statements that are not historical facts, including without
limitation statements concerning our future economic performance,
plans or objectives, are made under the Safe Harbor provisions of
the Private Securities Litigation Reform Act of 1995. Any
forward-looking statements speak only as of the date on which such
statements are made, and we undertake no obligation to update such
statements to reflect events or circumstances arising after such
date. Without limiting the generality of the foregoing, words such
as “will,” “expect,” “believe,” “anticipate,” “intend,” “estimate,”
or “continue” or the negative or other variations thereof or
comparable terminology are intended to identify forward-looking
statements. These statements are based on assumptions believed by
the Company to be reasonable. We caution investors not to place
undue reliance on any such forward-looking statements.
Forward-looking statements, by their nature, involve risks and
uncertainties that could cause actual results to differ materially
from those described in the statements. These risks, described in
the Company’s Form 10-K, Form 10-Q and Form 8-K reports (including
all amendments to those reports) include but are not limited to the
following: the ability to continue the strategies and achieve
anticipated revenue and cost savings from Project RED and other
initiatives; the uncertain general economic conditions; high levels
of unemployment and uncertain consumer confidence; the
effectiveness of Company marketing strategies, loyalty program and
guest count initiatives; competition in the casual dining market
and discounting by competitors; changes in commodity prices;
the cost and availability of key food products, labor and energy;
shortages or interruptions in the delivery of food and other
products; availability of capital or credit facility borrowings;
the adequacy of cash flows or available debt resources to fund
operations and growth opportunities and repurchases of the
Company’s common stock; the ability to fulfill planned expansion,
including in both new and existing markets; the concentration of
the Company’s restaurants in the Western United States and the
associated disproportionate impact of macroeconomic factors; risks
related to doing business with franchisees; health concerns about
the Company’s food products and preparation; the Company’s ability
to protect its intellectual property and proprietary information;
federal, state and local regulation of our business including
healthcare reform, labor and insurance costs; and other risk
factors described from time to time in the Company’s filings with
the U.S. Securities and Exchange Commission.
RED ROBIN GOURMET BURGERS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(In
thousands, except per share data)(Unaudited)
Twelve Weeks Ended Fifty-Two Weeks Ended
December 25,2011
December 26,2010
December 25,2011
December 26,2010
Revenues: Restaurant revenue $ 202,504 $ 189,295 $ 898,842 $
846,389 Franchise royalties and fees 3,087 3,117 14,151 13,409
Other revenue 390 162 1,857
4,471 Total revenues 205,981
192,574 914,850 864,269
Costs and expenses: Restaurant operating costs: Cost of sales
51,464 46,206 227,063 206,639 Labor 67,915 67,798 303,503 300,878
Operating 27,270 28,442 124,238 125,137 Occupancy 15,570 14,694
65,785 63,055 Depreciation and amortization 12,521 12,959 55,272
56,738 Selling, general and administrative expenses 23,616 19,505
103,124 92,958 Pre-opening costs 728 1,024 3,527 3,015 Asset
impairment charge 2,418 - 4,337
6,116 Total costs and expenses 201,502
190,628 886,849 854,536
Income from operations 4,479 1,946 28,001 9,733 Other
(income) expense: Interest expense 1,487 828 5,885 5,112 Interest
income (14 ) (20 ) (62 ) (63 ) Other 16 (33 )
90 (46 ) Total other expenses 1,489 775 5,913
5,003 Income before income taxes 2,990 1,171 22,088 4,730 Provision
(benefit) for income taxes 85 (1,057 )
1,511 (2,569 ) Net income $ 2,905 $ 2,228
$ 20,577 $ 7,299 Earnings per share: Basic $
0.20 $ 0.14 $ 1.36 $ 0.47 Diluted $
0.20 $ 0.14 $ 1.34 $ 0.46 Weighted
average shares outstanding: Basic 14,620
15,563 15,122 15,536 Diluted
14,823 15,703 15,357
15,709
RED ROBIN GOURMET BURGERS,
INC.CONSOLIDATED BALANCE SHEETS(In thousands, except
share amounts)(Unaudited)
December 25,2011
December 26,2010
Assets: Current Assets: Cash and cash equivalents $ 35,036 $
17,889 Accounts receivable, net 14,785 6,983 Inventories 18,040
16,037 Prepaid expenses and other current assets 9,970 7,600 Income
tax receivable 1,387 3,822 Deferred tax asset 1,429
1,294 Total current assets 80,647
53,625 Property and equipment, net 402,360 414,048
Goodwill 61,769 61,769 Intangible assets, net 38,969 43,056 Other
assets, net 9,231 6,759 Total assets $
592,976 $ 579,257
Liabilities and
Stockholders’ Equity: Current Liabilities: Trade accounts
payable $ 14,798 $ 12,776 Construction related payables 3,328 2,943
Accrued payroll and payroll related liabilities 35,044 29,137
Unearned revenue, net 24,139 14,391 Accrued liabilities 19,045
18,592 Current portion of term loan notes payable 9,375 18,739
Current portion of long-term debt and capital lease obligations
757 838 Total current liabilities
106,486 97,416 Deferred rent 40,025
34,214 Long-term portion of term loan notes payable 136,875 85,214
Other long-term debt and capital lease obligations 9,924 53,731
Other non-current liabilities 4,968 8,021
Total liabilities 298,278 278,596
Stockholders’ Equity:
Common stock; $0.001 par value: 30,000,000
shares authorized; 17,276,404 and 17,101,897 shares issued;
14,579,257 and 15,600,867 shares outstanding
17 17
Preferred stock, $0.001 par value:
3,000,000 shares authorized; no shares issued and outstanding
- -
Treasury stock 2,697,147 and 1,501,030
shares, at cost
(83,285 ) (50,321 ) Paid-in capital 178,111 171,558 Accumulated
other comprehensive loss, net of tax (326 ) (197 ) Retained
earnings 200,181 179,604 Total
stockholders’ equity 294,698 300,661
Total liabilities and stockholders’ equity $ 592,976 $
579,257
Schedule IReconciliation of
Non-GAAP Results to GAAP Results(In Thousands, Except for
Per Share Data)
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 fifty-two weeks ended
December 25, 2011, and December 26, 2010, net income (loss) and
basic and diluted earnings (loss) per share, excluding the effects
of the asset impairment charges, restaurant closure costs,
severance expense, executive transition costs, and initial gift
card breakage revenue recorded in first quarter 2011. The Company
believes that the presentation of net income and earnings per share
exclusive of the identified items gives the reader additional
insight into the ongoing operational results of the Company. This
supplemental information will assist with comparisons of past and
future financial results against the present financial results
presented herein. The non-GAAP results were calculated using an
assumed 13.8% normalized tax rate in 2011 and a tax benefit of 3.2%
in 2010 on income and expense items before taxes excluding the
identified items. The non-GAAP measurements are intended to
supplement the presentation of the Company’s financial results in
accordance with GAAP.
Twelve Weeks Ended Fifity-two Weeks Ended
December 25, 2011
December 26, 2010
December 25, 2011
December 26, 2010
Net income (loss) as reported $ 2,905 $ 2,228 $ 20,577 $
7,299 Executive transition and severance expense - 47 2,228 2,559
Asset impairment and restaurant closure costs 2,418 767 4,337 6,972
Initial cumulative gift card breakage income - - (438 ) (3,507 )
Income tax benefit (expense) (1,208 ) (994 )
(2,391 ) (2,230 ) Adjusted net income $ 4,115 $ 2,048
$ 24,313 $ 11,093 Basic net income (loss) per share:
Net income (loss) as reported $ 0.20 $ 0.14 $ 1.36 0.47 Executive
transition and severance expense - - 0.15 0.16 Asset impairment and
restaurant closure costs 0.17 0.05 0.29 0.45 Initial cumulative
gift card breakage income - - (0.03 ) (0.23 ) Income tax benefit
(expense) (0.09 ) (0.06 ) (0.16 ) (0.14
) Adjusted earnings per basic share $ 0.28 $ 0.13 $ 1.61 $
0.71 Diluted net income (loss) per share: Net
income (loss) as reported $ 0.20 $ 0.14 $ 1.34 $ 0.46 Executive
transition and severance expense - - 0.15 0.16 Asset impairment and
restaurant closure costs 0.16 0.05 0.28 0.45 Initial cumulative
gift card breakage income - - (0.03 ) (0.22 ) Income tax benefit
(expense) (0.08 ) (0.06 ) (0.16 ) (0.14
) Adjusted earnings per diluted share $ 0.28 $ 0.13 $ 1.58 $
0.71 Weighted average shares outstanding: Basic 14,620
15,563 15,122 15,536 Diluted 14,823 15,703 15,357 15,709
Schedule IIReconciliation of
Non-GAAP Restaurant-Level Operating Profit to Incomefrom
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 asset 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, and pre-opening costs. 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 12 and 52 weeks ended
December 25, 2011, and December 26, 2010, 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 Fifty-two Weeks Ended
December 25, 2011
December 26, 2010
December 25, 2011
December 26, 2010
As Reported As Reported As Reported As
Reported Restaurant revenues $ 202,504 98.3 % $ 189,295
98.3 % $
898,842
98.3 % $ 846,389 97.9 % Restaurant operating costs: Cost of
sales 51,464 25.4 46,206 24.4 227,063 25.3 206,639 24.4 Labor
67,915 33.5 67,798 35.8 303,503 33.8 300,878 35.5 Operating 27,270
13.5 28,442 15.0 124,238 13.8 125,137 14.8 Occupancy 15,570
7.7 14,694 7.8 65,785
7.3 63,055 7.4 Restaurant-level
operating profit 40,285 19.9 32,155
17.0 178,253 19.8 150,680
17.8 Add – other revenues 3,477 1.7 3,279 1.7
16,008 1.7 17,880 2.1 Deduct – other operating: Depreciation and
amortization 12,521 6.1 12,959 6.7 55,272 6.0 56,738 6.6 Selling,
general and administrative 23,630 11.5 18,738 9.7 103,078 11.3
92,102 10.7 Pre-opening costs 728 0.4 1,024 0.5 3,527 0.4 3,015 0.3
Asset impairment charge 2,418 1.2 - - 4,337 0.5 6,116 0.7
Restaurant closure costs (14 ) (0.0 ) 767 0.4
46 0.0 856 0.1
Total other operating 39,283 19.1
33,488 17.4 166,260 0.5
158,827 18.4 Income from operations 4,479 2.2
1,946 1.0 28,001 3.1 9,733 1.1 Total other expenses, net
1,489 0.7 775 0.4 5,913 0.6 5,003 0.6 Provision (benefit) for
income taxes 85 0.0 (1,057 ) (0.5 )
1,511 0.2 (2,569 ) (0.3 ) Total other
1,574 0.8 (282 ) (0.1 ) 7,424 0.8 2,434 0.3 Net income $
2,905 1.4 % $ 2,228 1.2 % $ 20,577 2.2 % $
7,299 0.8 %
Certain percentage amounts in the table
above do not total 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.
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