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 October 5, 2014 compared
to the 12 weeks ended October 6, 2013.
Third Quarter Financial Highlights
- Revenues were $267.4 million, an
increase of 15.9% over the same period a year ago
- Comparable restaurant revenue increased
0.9% over the same period a year ago
- Excluding acquired restaurants,
restaurant-level operating profit, as a percent of restaurant
revenue, was 20.1% compared to 20.4% in the third quarter of 2013.
Total reported restaurant-level operating profit was 19.5% (See
Schedule II)
- Earnings per diluted share were $0.50,
an increase of 56.3% compared to $0.32 for the same period a year
ago
Net income was $7.2 million compared to $4.7 million for the
same period a year ago. Third quarter results included $0.4 million
or $0.03 per diluted share of after-tax acquisition costs and $0.5
million or $0.04 per diluted share from a tax credit. Year to date
through the Company’s fiscal third quarter 2014, net income was
$28.6 million compared to $25.3 million for the same period a year
ago. Year to date adjusted net income of $29.0 million excludes an
after-tax adjustment for executive transition costs of $0.4 million
or $0.03 per diluted share. Year to date adjusted earnings per
diluted share was $2.00, compared to $1.75 a year ago. See Schedule
I for a reconciliation of adjusted net income and earnings per
share.
“We are pleased with our performance during the third quarter,”
said Steve Carley, Red Robin Gourmet Burgers, Inc. chief executive
officer. “We continue to focus on delivering superior value to our
guests with great menu items and transforming our restaurants with
new environments and elevated service.”
Operating Results
Total Company revenues, which include Company-owned restaurant
revenue and franchise royalties, increased $36.7 million or 15.9%
to $267.4 million in the third quarter of 2014 from $230.7 million
in the third quarter of 2013. Restaurants acquired in 2014 had
$23.1 million of restaurant revenue.
System-wide restaurant revenue (including franchised units) for
the third quarter of 2014 totaled $330.9 million, compared to
$314.5 million for the third quarter in 2013 at constant currency
rates.
Comparable restaurant revenue increased 0.9% in the third
quarter of 2014 compared to the prior year. In the third quarter,
guest counts decreased 2.3%, while average guest check increased
3.2%. 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 19.5% in the third quarter of fiscal year 2014
compared to 20.4% in the third quarter of fiscal year 2013, a
decline of 90 basis points. Excluding acquired restaurants,
restaurant-level operating profit margins decreased 30 basis points
to 20.1%, primarily due to higher food and beverage costs 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) Q3-2014
Q3-2013 Average weekly sales per unit:
Company-owned – Total
$ 54,684 $ 55,029 Company-owned – Comparable $ 55,458 $ 54,947
Franchised units (2) $ 57,011 $ 54,196 Total operating weeks:
Company-owned units(3) 4,803 4,108 Franchised
units(3) 1,176 1,618
(1) Excludes Red Robin Burger Works® fast casual restaurants
which had 84 and 60 operating weeks in the third quarter of 2014
and 2013
(2) Calculated at constant currency rates
(3) Inclusive of the acquisition of 32 franchised restaurants in
the U.S. and Canada that was completed on July 14, 2014
Other Results
Depreciation and amortization costs increased $1.8 million to
$15.2 million in the third quarter of 2014 compared to $13.4
million in the third quarter of 2013. The increased depreciation
was primarily related to new restaurants acquired and opened since
the third quarter 2013 and restaurants remodeled under our brand
transformation initiative.
General and administrative costs were $20.1 million, a decrease
of $0.5 million from the third quarter of fiscal year 2013, due
mainly to a decrease in incentive compensation.
Selling expenses were $7.7 million, or 2.9% of revenue, in the
third quarter of fiscal year 2014, compared to $6.8 million or 3.0%
of revenue a year ago. The increase in selling expenses is
primarily due to increased marketing program costs and gift card
program growth.
Pre-opening and acquisition costs in the fiscal third quarter of
2014 totaled $2.6 million compared to $2.5 million in the
comparable period a year ago. Acquisition costs totaled $0.6
million in the third quarter of 2014 related to the purchase of 32
Red Robin franchised restaurants.
The Company had an effective tax rate of 12.5% in the third
quarter of fiscal year 2014, bringing the year to date effective
tax rate to 23.9%, compared to 24.2% a year ago.
Restaurant Development and Acquisitions
As of the end of the third quarter of 2014, there were 402
Company-owned Red Robin® restaurants, seven Red Robin Burger Works®
and 98 franchised Red Robin restaurants for a total of 507
restaurants. A year ago, there were 345 Company-owned restaurants,
five Red Robin Burger Works and 135 franchised locations. In the
third quarter of fiscal 2014, the Company opened six new Red Robin
restaurants, closed one restaurant, and acquired 32
restaurants.
As previously announced, on July 14, 2014, the Company completed
the acquisition of 32 franchised restaurants in the U.S. and Canada
for $40 million. The 32 franchised restaurants generate
approximately $90 million in restaurant revenue on an annualized
basis.
Balance Sheet and Liquidity
As of October 5, 2014, the Company had cash and cash equivalents
of $19.9 million and total debt of $156.1 million, including $8.7
million of capital lease liabilities. The Company increased debt by
$19.0 million during the third quarter.
During the third quarter, the Company purchased 326,157 shares
of treasury stock for $17.6 million. As of October 5, 2014,
there were approximately $19.3 million remaining under the current
board authorization for stock repurchases.
Updated Outlook for 2014
Red Robin’s 2014 fiscal year consists of 52 weeks and will end
on December 28, 2014.
In fiscal year 2014, the Company expects comparable restaurant
revenue growth approaching 3.0%. The Company plans to open 19 new
Red Robin restaurants and three Red Robin Burger Works resulting in
operating week growth of over 6.0%. Restaurants acquired in 2014
are expected to add revenues of $24 million in the fourth quarter
of 2014 and will reduce franchise royalties by approximately $0.7
million.
Capital investments in fiscal year 2014 are expected to be
approximately $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 $93 million, while selling expenses are expected to
be approximately 3.3% of sales considering increased gift card
sales. Pre-opening and acquisition costs are expected to total near
$8.5 million in fiscal 2014, of which $2.5 million relates to
acquisition and integration costs. Depreciation and amortization is
projected to be approximately $64.5 million.
Interest expense is expected to be approximately $3.2 million
while the income tax rate in fiscal year 2014 is expected to be
approximately 24.5%.
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 $190,000 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
third quarter 2014 results today at 10:00 a.m. ET. The conference
call number is (877) 780-3381, or for international callers (719)
325-2313. 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 Tuesday, November
11, 2014. The replay can be accessed by dialing (877) 870-5176, or
(858) 384-5517 for international callers. The conference ID is
5775183.
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 from acquired franchised restaurants), franchise
royalties, new restaurant openings and operating weeks, capital
investments including our brand transformation initiative and
restaurant remodeling, future economic performance, anticipated
costs, expenses, tax rate, sensitivity of earnings per share, 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 Forty Weeks Ended
October 5, 2014 October 6, 2013 October 5,
2014 October 6, 2013 Revenues: Restaurant revenue
$ 263,883 $ 226,844 $ 850,696 $ 762,647 Franchise royalties, fees
and other revenue 3,493 3,829 13,297 12,674
Total revenues 267,376 230,673 863,993 775,321
Costs and expenses: Restaurant operating costs (exclusive of
depreciation and amortization shown separately below): Cost of
sales 68,241 57,253 216,150 190,259 Labor 88,918 76,624 282,410
255,154 Other operating 34,124 29,463 105,744 95,016 Occupancy
21,222 17,132 64,122 56,484 Depreciation and amortization 15,209
13,436 48,216 44,589 General and administrative 20,106 20,647
72,645 71,480 Selling 7,725 6,834 27,928 21,995 Pre-opening costs
and acquisition costs 2,605 2,482 7,045 4,607
Total costs and expenses 258,150 223,871 824,260
739,584 Income from operations 9,226 6,802 39,733
35,737 Other expense: Interest expense, net and other 986
624 2,134 2,387 Income before income
taxes 8,240 6,178 37,599 33,350 Provision for income taxes 1,032
1,517 8,977 8,070 Net income $ 7,208 $
4,661 $ 28,622 $ 25,280 Earnings per share: Basic $
0.51 $ 0.33 $ 2.00 $ 1.78 Diluted $ 0.50
$ 0.32 $ 1.97 $ 1.75 Weighted average shares
outstanding: Basic 14,216 14,328 14,299 14,189
Diluted 14,397 14,600 14,516 14,472
RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
October 5, 2014 December 29, 2013
Assets: Current Assets: Cash and cash equivalents $ 19,940 $
17,108 Accounts receivable, net 12,684 22,568 Inventories 24,639
21,992 Prepaid expenses and other current assets 13,817 15,766
Deferred tax asset and other 3,058 3,212 Total
current assets 74,138 80,646 Property and
equipment, net 490,804 444,727 Goodwill 86,727 62,525 Intangible
assets, net 43,429 36,800 Other assets, net 12,849 9,947
Total assets $ 707,947 $ 634,645
Liabilities and Stockholders’ Equity: Current Liabilities:
Trade accounts payable $ 18,891 $ 19,117 Construction related
payables 19,714 14,682 Accrued payroll and payroll-related
liabilities 42,069 45,919 Unearned revenue 25,872 35,740 Accrued
liabilities and other 24,992 24,454 Total current
liabilities 131,538 139,912 Deferred rent
56,510 51,985 Long-term debt 147,375 79,375 Long-term portion of
capital lease obligations 8,071 8,513 Other non-current liabilities
8,212 7,457 Total liabilities 351,706 287,242
Stockholders’ Equity: Common stock; $0.001 par value:
30,000 shares authorized; 17,845 and 17,851 shares issued; 14,033
and 14,350 shares outstanding 18 18 Preferred stock, $0.001 par
value: 3,000 shares authorized; no shares issued and outstanding —
— Treasury stock 3,812 and 3,501 shares, at cost (131,898 )
(110,486 ) Paid-in capital 199,928 197,145 Accumulated other
comprehensive loss, net of tax (1,180 ) (25 ) Retained earnings
289,373 260,751 Total stockholders’ equity 356,241
347,403 Total liabilities and stockholders’ equity $
707,947 $ 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 40 weeks ended October 5, 2014 and the 12 and 40
weeks ended October 6, 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 Forty Weeks Ended
October 5, 2014 October 6, 2013 October 5,
2014 October 6, 2013 Net income as reported $
7,208 $ 4,661 $ 28,622 $ 25,280 Executive transition costs — — 544
— Income tax expense — — (183 ) — Adjusted net income
$ 7,208 $ 4,661 $ 28,983 $ 25,280 Basic
net income per share: Net income as reported $ 0.51 $ 0.33 $ 2.00 $
1.78 Executive transition costs — — 0.04 — Income tax expense —
— (0.01 ) — Adjusted earnings per share - basic $
0.51 $ 0.33 $ 2.03 $ 1.78 Diluted net
income per share: Net income as reported $ 0.50 $ 0.32 $ 1.97 $
1.75 Executive transition costs — — 0.04 — Income tax expense —
— (0.01 ) — Adjusted earnings per share - diluted $
0.50 $ 0.32 $ 2.00 $ 1.75 Weighted
average shares outstanding Basic 14,216 14,328 14,299
14,189 Diluted 14,397 14,600 14,516
14,472
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 40 weeks ended October 5, 2014
and the 12 and 40 weeks ended October 6, 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 Forty Weeks Ended
October 5, 2014 October 6, 2013 October 5,
2014 October 6, 2013 Restaurant revenue $ 263,883
98.7 % $ 226,844 98.3 % $ 850,696
98.5 % $ 762,647 98.4 % Restaurant
operating costs (exclusive of depreciation and amortization shown
separately below): Cost of sales 68,241 25.9 % 57,253 25.2 %
216,150 25.4 % 190,259 24.9 % Labor 88,918 33.7 % 76,624 33.8 %
282,410 33.2 % 255,154 33.5 % Other operating 34,124 12.9 % 29,463
13.0 % 105,744 12.4 % 95,016 12.5 % Occupancy 21,222
8.0 % 17,132 7.6 % 64,122 7.5 % 56,484
7.4 % Restaurant-level operating profit 51,378
19.5 % 46,372 20.4 % 182,270
21.4 % 165,734 21.7 % Add – Franchise
royalties, fees and other revenues 3,493 1.3 % 3,829 1.7 % 13,297
1.5 % 12,674 1.6 % Deduct – other operating: Depreciation and
amortization 15,209 5.7 % 13,436 5.8 % 48,216 5.6 % 44,589 5.8 %
General and administrative 20,106 7.5 % 20,647 9.0 % 72,645 8.4 %
71,480 9.2 % Selling 7,725 2.9 % 6,834 3.0 % 27,928 3.2 % 21,995
2.8 % Pre-opening and acquisition costs 2,605 1.0 %
2,482 1.1 % 7,045 0.8 % 4,607
0.6 % Total other operating 45,645 17.1 %
43,399 18.8 % 155,834 18.0 % 142,671
18.4 % Income from operations 9,226 3.5 %
6,802 2.9 % 39,733 4.6 % 35,737 4.6 % Interest expense, net
and other 986 0.4 % 624 0.3 % 2,134 0.2 % 2,387 0.3 % Income tax
expense 1,032 0.4 % 1,517 0.7 % 8,977
1.0 % 8,070 1.0 % Total other 2,018
0.8 % 2,141 0.9 % 11,111
1.3 % 10,457 1.3 % Net income $ 7,208
2.7 % $ 4,661 2.0 % $ 28,622 3.3
% $ 25,280 3.3 %
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:Coyne PRJennifer DeNick,
(973) 588-2000orFor investor relations questions:Red Robin
Gourmet Burgers, Inc.Stuart Brown, Chief Financial Officer, (303)
846-6000
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