Red Robin Gourmet Burgers, Inc., (NASDAQ:RRGB), a casual dining
restaurant chain serving an innovative selection of high-quality
gourmet burgers in a family-friendly atmosphere, today reported
financial results for the 12 weeks ended July 13, 2014 compared to
the 12 weeks ended July 14, 2013.
Second Quarter Financial Highlights
- Revenues were $256.1 million, an
increase of 7.5%
- Comparable restaurant revenue increased
1.2%
- Restaurant-level operating profit, as a
percent of restaurant revenue, declined to 22.2% from 23.3% (See
Schedule II)
- GAAP earnings per diluted share were
$0.65, compared to $0.77 for the same period a year ago
- Adjusted earnings per diluted share
were $0.68, compared to $0.77 a year ago (See Schedule I)
Net income was $9.5 million compared to $11.1 million for the
same period a year ago. Adjusted net income of $9.8 million
excludes an after-tax adjustment for executive transition costs of
$0.4 million or $0.03 per diluted share. Net income has not been
adjusted for $0.4 million or $0.03 per diluted share of after-tax
acquisition costs. See Schedule I for a reconciliation of adjusted
net income and earnings per share.
“Although we are satisfied with our top line performance through
the first half of the year, we were disappointed that our marketing
efforts in the second quarter did not produce the desired results
in an intensely competitive environment,” said Steve Carley, Red
Robin Gourmet Burgers, Inc. chief executive officer. “Going
forward, we remain cautious in the near term but are confident that
initiatives we have in place will generate meaningful long-term
value. Our plan is to continue elevating the Red Robin brand
through guest engagement, operating efficiency and effective
expansion while working diligently to improve our sales
trends.”
Operating Results
Total Company revenues, which include Company-owned restaurant
revenue and franchise royalties, increased 7.5% to $256.1 million
in the second quarter of 2014 from $238.3 million in the second
quarter of 2013.
System-wide restaurant revenue (including franchised units) for
the second quarter of 2014 totaled $343.0 million, compared to
$323.5 million for the second quarter in 2013 at constant currency
rates.
Comparable restaurant revenue increased 1.2% in the second
quarter of 2014 compared to the prior year. In the second quarter,
guest counts decreased 2.5%, while average guest check increased
3.7%. Comparable restaurants are those Company-owned restaurants
that have achieved five full quarters of operations during the
period presented, and such restaurants are only included in our
comparable metrics if they are comparable for the entirety of both
periods presented.
Restaurant-level operating profit margins (a non-GAAP financial
measure) were 22.2% in the second quarter of fiscal year 2014
compared to 23.3% in the second quarter of fiscal year 2013, a
decline of 110 basis points. The lower margins resulted primarily
from higher food and beverage costs, and to a lesser extent, higher
other operating costs and occupancy as a percentage of sales.
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.
Restaurant Revenue Performance
Casual
Dining Restaurants (1) Q2-2014
Q2-2013 Average weekly sales per unit:
Company-owned – Total $ 57,549 $ 57,699
Company-owned – Comparable $ 58,341 $ 57,645
Franchised units (2) $ 58,463 $ 56,515 Total
operating weeks: Company-owned units
4,360 4,051 Franchised units
1,560 1,596 (1)
Excludes Red Robin Burger Works® fast casual restaurants which had
64 and 60 operating weeks in the second quarter of 2014 and 2013
(2) Calculated at constant currency rates
Other Results
Depreciation and amortization costs increased $0.8 million to
$14.1 million in the second quarter of 2014 compared to $13.3
million in the second quarter of 2013. The increased depreciation
was primarily related to new restaurants opened or acquired since
the second quarter 2013 and restaurants remodeled under our brand
transformation initiative.
General and administrative costs were $20.4 million, a decrease
of $1.4 million from the second quarter of fiscal year 2013, due
mainly to a decrease in incentive compensation. Included in second
quarter of 2014 general and administrative costs are executive
transition costs of $0.5 million related to the departure of the
Company's former chief operating officer.
Selling expenses were $9.9 million, or 3.9% of revenue, in the
second quarter of fiscal year 2014, compared to $6.5 million, or
2.7% of revenue, a year ago. The increase in selling expenses is
primarily due to increased media spend and gift card costs.
Pre-opening and acquisition costs in the fiscal second quarter
of 2014 totaled $2.3 million compared to $1.3 million in the
comparable period a year ago. Acquisition costs totaled $0.7
million in the second quarter of 2014 related to the purchase of 32
Red Robin franchised restaurants which closed in the fiscal third
quarter.
The Company had an effective tax rate of 27.1% in the second
quarter of fiscal year 2014, compared to a 24.3% rate in the same
period a year ago.
Restaurant Development and Acquisitions
As of the end of the second quarter of 2014, there were 365
Company-owned Red Robin® restaurants, seven Red Robin Burger Works®
and 130 franchised Red Robin restaurants for a total of 502
restaurants. In the second quarter of fiscal year 2014, the Company
opened three new Red Robin restaurants and two Red Robin Burger
Works restaurants. Additionally, one franchised Red Robin
restaurant was opened during the quarter.
As previously announced, on July 14, 2014, the Company completed
the acquisition of 32 franchised restaurants in the U.S. and Canada
for approximately $40 million. The 32 franchised restaurants
generate approximately $90 million in restaurant revenue on an
annualized basis.
Balance Sheet and Liquidity
On July 2, 2014, the Company replaced its existing credit
facility with a new Credit Agreement that provides a $250 million
revolving line of credit. The company also maintains the option to
increase the credit facility in the future, subject to lenders’
participation, by up to an additional $100 million in the
aggregate.
As of July 13, 2014, the Company had cash and cash equivalents
of $60.5 million and total debt of $137.3 million, including $8.9
million of capital lease liabilities. The Company increased debt
and cash by $40 million at the end of the second quarter to fund
the acquisition of the franchised restaurants.
Updated Outlook for 2014
Red Robin’s 2014 fiscal year consists of 52 weeks and will end
on December 28, 2014.
The Company's outlook for 2014 has been updated to include
expected performance as well as the impact of the acquisition of 32
restaurants.
In fiscal year 2014, the Company expects comparable restaurant
revenue growth in the low single digits. The Company plans to open
20 new Red Robin restaurants and four to five Red Robin Burger
Works resulting in operating week growth of approximately 6.5% for
fiscal year 2014. The newly acquired restaurants are expected to
add revenues of $44 million in the second half of 2014 and will
reduce franchise royalties by approximately $1.5 million.
Capital investments in fiscal year 2014 are expected to exceed
$100 million, excluding approximately $51 million related to
acquisitions. In addition to the new restaurant openings, the
Company also plans to remodel at least 65 Red Robin restaurants as
part of its brand transformation initiative as well as expand patio
seating in a few locations.
Restaurant-level operating profit margins in fiscal year 2014
are expected to be approximately 21.3%.
General and administrative costs are expected to be
approximately $94 million, while selling expenses are expected to
be approximately 3.2% of sales considering increased gift card
sales. Pre-opening and acquisition costs are expected to total near
$9.0 million in fiscal 2014 of which $2.5 million relates to
acquisition and integration costs. Depreciation and amortization is
projected to be approximately $64 million, an increase from
previous expectations due to the acquisition.
Interest expense is expected to be approximately $3 million
while the income tax rate in fiscal year 2014 is expected to be
approximately 26%.
The sensitivity of the Company’s earnings per diluted share to a
1% change in guest counts for fiscal year 2014 is estimated to be
$0.30 on an annualized basis. Additionally, a 10 basis point change
in restaurant-level operating margin is expected to impact earnings
per diluted share by approximately $0.07, and a change of
approximately $200,000 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
second quarter 2014 results today at 10:00 a.m. ET. The conference
call number is (888) 280-4443, or for international callers (719)
457-2637. 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 two hours after the call until midnight on Thursday, August
21, 2014. The replay can be accessed by dialing (877) 870-5176, or
(858) 384-5517 for international callers. The conference ID is
7896315.
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
Authority™, 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. Red Robin offers a variety of options behind the bar,
including its extensive selection of local and regional beers, and
innovative adult beer shakes and cocktails, recently earning the
restaurant the 2014 VIBE Vista Award for Best Beer Program in a
Multi-Unit Chain Restaurant. There are more than 500 Red Robin
restaurants across the United States and Canada, including those
operating under franchise agreements. Red Robin… YUMMM®! Connect
with Red Robin on Facebook and
Twitter.
Forward-Looking Statements
Forward-looking statements in this press release regarding our
expectations related to strategic initiatives, restaurant revenue
(including acquired franchised restaurants), new restaurant
openings and operating weeks, capital investments including our
brand transformation initiative and restaurant remodeling, future
economic performance, anticipated costs, expenses, tax rate, and
other financial measures, statements under the heading “Updated
Outlook for 2014” and all other statements that are not historical
facts, are made under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements are
based on assumptions believed by the Company to be reasonable and
speak only as of the date on which such statements are made.
Without limiting the generality of the foregoing, words such as
“expect,” “anticipate,” “intend,” “plan,” “project,” “will” or
“estimate,” or the negative or other variations thereof or
comparable terminology are intended to identify forward-looking
statements. We undertake no obligation to update such statements to
reflect events or circumstances arising after such date, and we
caution investors not to place undue reliance on any such
forward-looking statements. Forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those described in the statements based on a number
of factors, including but not limited to the following: the
effectiveness of the Company’s marketing strategies, loyalty
program, and guest count initiatives to achieve restaurant sales
growth; the ability to fulfill planned expansion and restaurant
remodeling; the ability to successfully integrate and achieve
anticipated revenues from recently acquired restaurants; the cost
and availability of key food products, labor and energy; the
ability to achieve anticipated revenue and cost savings from our
anticipated new technology systems and other initiatives; the macro
economic and competitive environment; availability of capital or
credit facility borrowings; the adequacy of cash flows or available
debt resources to fund operations and growth opportunities;
federal, state and local regulation of our business; and other risk
factors described from time to time in the Company’s Form 10-K,
Form 10-Q, and Form 8-K reports (including all amendments to those
reports) filed with the U.S. Securities and Exchange
Commission.
RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share
data)
(Unaudited)
Twelve Weeks Ended
Twenty-eight Weeks Ended July 13, 2014 July
14, 2013 July 13, 2014 July 14, 2013
Revenues: Restaurant revenue $ 251,818 $ 234,490 $ 586,813 $
535,803 Franchise royalties, fees and other revenue 4,315
3,809 9,804 8,845 Total revenues
256,133 238,299 596,617 544,648 Costs
and expenses: Restaurant operating costs (exclusive of depreciation
and amortization shown separately below): Cost of sales 63,689
58,024 147,909 133,006 Labor 82,572 76,648 193,493 178,530 Other
operating 31,022 28,463 71,619 65,553 Occupancy 18,618 16,779
42,900 39,352 Depreciation and amortization 14,120 13,319 33,006
31,153 General and administrative 20,442 21,868 52,540 50,835
Selling 9,878 6,518 20,203 15,159 Pre-opening costs and acquisition
costs 2,326 1,291 4,439 2,125 Total
costs and expenses 242,667 222,910 566,109
515,713 Income from operations 13,466 15,389 30,508
28,935 Other expense: Interest expense, net and other
475 674 1,149 1,763 Income before
income taxes 12,991 14,715 29,359 27,172 Provision for income taxes
3,521 3,576 7,945 6,553 Net income $
9,470 $ 11,139 $ 21,414 $ 20,619 Earnings per share: Basic $ 0.66 $
0.78 $ 1.49 $ 1.46 Diluted $ 0.65 $ 0.77 $ 1.47 $ 1.43 Weighted
average shares outstanding: Basic 14,312 14,209
14,335 14,134 Diluted 14,528 14,475
14,565 14,415
RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
July 13, 2014 December 29,
2013 Assets: Current Assets: Cash and cash equivalents $
60,543 $ 17,108 Accounts receivable, net 14,409 22,568 Inventories
22,781 21,992 Prepaid expenses and other current assets 12,484
15,766 Deferred tax asset and other 6,120
3,212 Total current assets 116,337
80,646 Property and equipment, net 467,426 444,727
Goodwill 64,647 62,525 Intangible assets, net 37,974 36,800 Other
assets, net 11,996 9,947 Total assets $
698,380 $ 634,645
Liabilities and
Stockholders’ Equity: Current Liabilities: Trade accounts
payable $ 18,983 $ 19,117 Construction related payables 16,276
14,682 Accrued payroll and payroll-related liabilities 40,120
45,919 Unearned revenue 26,748 35,740 Accrued liabilities and other
28,690 24,454 Total current liabilities
130,817 139,912 Deferred rent
55,479 51,985 Long-term debt 128,375 79,375 Long-term portion of
capital lease obligations 8,195 8,513 Other non-current liabilities
9,319 7,457 Total liabilities
332,185 287,242 Stockholders’ Equity:
Common stock; $0.001 par value: 30,000 shares authorized; 17,845
and 17,851 shares issued; 14,344 and 14,350 shares outstanding 18
18 Preferred stock, $0.001 par value: 3,000 shares authorized; no
shares issued and outstanding — — Treasury stock 3,501 and 3,501
shares, at cost (114,759 ) (110,486 ) Paid-in capital 198,812
197,145 Accumulated other comprehensive loss, net of tax (41 ) (25
) Retained earnings 282,165 260,751
Total stockholders’ equity 366,195 347,403
Total liabilities and stockholders’ equity $ 698,380
$ 634,645
Schedule I
Reconciliation of Non-GAAP Results to
GAAP Results
(In thousands, except 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 12 and 28 weeks ended July 13, 2014 and the 12 and 28
weeks ended July 14, 2013, net income and basic and diluted
earnings per share, excluding the effects of executive transition
charges in the second quarter of fiscal year 2014. 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. Income tax expense related to the asset
impairment charges and the loss on debt refinancing was calculated
based on the change in the total tax provision calculation after
adjusting for 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 Twenty-eight Weeks Ended
July 13, 2014 July 14, 2013 July 13,
2014 July 14, 2013 Net income as reported $ 9,470
$ 11,139 $ 21,414 $ 20,619 Executive transition costs 544 — 544 —
Income tax expense (183 ) — (183 ) —
Adjusted net income $ 9,831 $ 11,139 $ 21,775 $
20,619 Basic net income per share: Net income as reported $
0.66 $ 0.78 $ 1.49 $ 1.46 Executive transition costs 0.04 — 0.04 —
Income tax expense (0.01 ) — (0.01 ) —
Adjusted earnings per share - basic $ 0.69 $ 0.78 $ 1.52
$ 1.46 Diluted net income per share: Net income as
reported $ 0.65 $ 0.77 $ 1.47 $ 1.43 Executive transition costs
0.04 — 0.04 — Income tax expense (0.01 ) —
(0.01 ) — Adjusted earnings per share - diluted $ 0.68
$ 0.77 $ 1.50 $ 1.43 Weighted average shares
outstanding Basic 14,312 14,209 14,335
14,134 Diluted 14,528 14,475
14,565 14,415
Schedule II
Reconciliation of Non-GAAP
Restaurant-Level Operating Profit to Income
from Operations and Net Income
(In thousands)
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 revenue 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
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 28 weeks ended July 13, 2014
and the 12 and 28 weeks ended July 14, 2013, expressed as a
percentage of total revenues, except for the components of
restaurant-level operating profit, which are expressed as a
percentage of restaurant revenue.
Twelve
Weeks Ended Twenty-eight Weeks Ended July 13,
2014 July 14, 2013 July 13, 2014
July 14, 2013 Restaurant revenue $ 251,818
98.3 % $ 234,490 98.4 % $ 586,813 98.4
% $ 535,803 98.4 % Restaurant operating costs
(exclusive of depreciation and amortization shown separately
below): Cost of sales 63,689 25.3 % 58,024 24.7 % 147,909 25.2 %
133,006 24.8 % Labor 82,572 32.8 % 76,648 32.7 % 193,493 33.0 %
178,530 33.3 % Other operating 31,022 12.3 % 28,463 12.1 % 71,619
12.2 % 65,553 12.3 % Occupancy 18,618 7.4 % 16,779
7.2 % 42,900 7.3 % 39,352
7.3 % Restaurant-level operating profit 55,917 22.2 %
54,576 23.3 % 130,892 22.3 % 119,362
22.3 % Add – Franchise royalties, fees and
other revenues 4,315 1.7 % 3,809 1.6 % 9,804 1.6 % 8,845 1.6 %
Deduct – other operating: Depreciation and amortization 14,120 5.5
% 13,319 5.6 % 33,006 5.5 % 31,153 5.7 % General and administrative
20,442 8.0 % 21,868 9.2 % 52,540 8.8 % 50,835 9.3 % Selling 9,878
3.9 % 6,518 2.7 % 20,203 3.4 % 15,159 2.8 % Pre-opening and
acquisition costs 2,326 0.9 % 1,291 0.5
% 4,439 0.7 % 2,125 0.4 % Total other
operating 46,766 18.3 % 42,996 18.0 %
110,188 18.4 % 99,272 18.2 %
Income from operations 13,466 5.3 % 15,389 6.5 % 30,508 5.1 %
28,935 5.3 % Interest expense, net and other 475 0.2 % 674
0.3 % 1,149 0.2 % 1,763 0.3 % Income tax expense 3,521
1.4 % 3,576 1.5 % 7,945 1.3 %
6,553 1.2 % Total other 3,996 1.6 %
4,250 1.8 % 9,094 1.5 % 8,316
1.5 % Net income $ 9,470 3.7 % $ 11,139
4.7 % $ 21,414 3.6 % $ 20,619
3.8 %
Certain percentage amounts in the table above do not total due
to rounding as well as the fact that components of restaurant-level
operating profit are expressed as a percentage of restaurant
revenue and not total revenues.
For media relations questions contact:Jennifer DeNick,
Coyne PR(973) 588-2000orFor investor relations questions
contact:Stuart Brown, Chief Financial Officer(303) 846-6000
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