Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB) ("Red Robin" or
the "Company"), a full-service restaurant chain serving an
innovative selection of high-quality gourmet burgers in a
family-friendly atmosphere, today reported financial results for
the quarter ended April 19, 2020.
First Quarter 2020 Financial Summary Compared to First
Quarter 2019
- Total revenues were $306.1 million, a decrease of 25.3%,
primarily resulting from the closure of the Company's dining rooms,
and its operational shift to off-premise only in response to the
COVID-19 pandemic;
- Comparable restaurant revenue decreased 20.8% for the quarter
after growing comparable restaurant revenue by 3.7% through the
second fiscal period;
- Comparable average Guest check increased 0.1%, resulting from a
1.6% increase in pricing and a 0.3% increase from lower
discounting, partially offset by a 1.8% decrease from menu
mix;
- Comparable restaurant Guest counts decreased 20.9% for the
quarter after growing comparable restaurant Guest counts by 0.9%
through the second fiscal period;
- Off-premise sales increased 86.1% and comprised 26.3% of total
food and beverage sales;
- GAAP loss per diluted share was $13.51 compared to GAAP
earnings per diluted share of $0.05;
- Adjusted loss per diluted share was $6.66 compared to adjusted
earnings per diluted share of $0.19 (see Schedule I);
- Net loss was $174.3 million compared to net income of $0.6
million; and
- Adjusted EBITDA was a loss of $10.7 million compared to
adjusted EBITDA of $34.3 million (see Schedule III).
Paul J.B. Murphy III, Red Robin’s President and Chief Executive
Officer, said, "We entered 2020 with accelerating business
momentum, generating positive comparable restaurant revenue of 3.7%
and positive Guest counts of 0.9% through the end of our second
fiscal period. However, the COVID-19 pandemic resulted in an
immediate shift of our priorities, inclusive of pivoting to a 100%
off-premise model, the preservation of liquidity and the reduction
of costs amid the ongoing uncertainty."
"Since the onset of the health crisis, we have significantly
improved our off-premise execution, resulting in a material
improvement in Guest satisfaction scores. Comparable restaurant
revenue trends have also shown continual improvement week by week,
including (39.7)% for the week ending June 7th. Importantly, we
have recently begun opening dining rooms with limited capacities of
up to 50% in our largest and highest volume market on the West
Coast. In total, we have re-opened approximately 270 dining rooms
with disciplined health and safety protocols and our new
hospitality model we call TGX. Sales are exceeding our
expectations, accompanied by record high dine-in Guest satisfaction
scores and continued, strong retention of our elevated off-premise
sales. For the week ending June 7th, restaurants with open dining
rooms generated total comparable restaurant revenue of (26.7)%,
including off-premise sales of 40% of total food and beverage
sales. The substantive actions the organization implemented has
positioned us well to not only manage through these near-term
challenging times, but to succeed in the long-term, post-COVID
environment."
First Quarter 2020 Operating Results
Total revenues, which primarily include Company-owned restaurant
revenue and franchise royalties, decreased 25.3% to $306.1 million
in the first quarter of 2020, from $409.9 million in the first
quarter of 2019. Restaurant revenue decreased $99.1 million due to
a $74.6 million decrease in comparable restaurant revenue(1) and a
$24.5 million decrease from closed restaurants. The decrease in
comparable restaurant revenue was driven by the closure of the
Company's dining rooms in response to the COVID-19 pandemic in
mid-March and subsequent operational shift to an off-premise
model.
System-wide restaurant revenue (which includes franchised
restaurants) for the first quarter of 2020 totaled $370.9 million,
compared to $483.7 million for the first quarter of 2019. In
response to COVID-19's effect on Red Robin franchisee's operations,
we temporarily abated franchise royalty payments and advertising
contributions effective March 20, 2020.
Comparable restaurant revenue(1) decreased 20.8% in the first
quarter of 2020 compared to the same period a year ago, driven by a
20.9% decrease in Guest count partially offset by a 0.1% increase
in average Guest check. The decrease in Guest count was primarily
driven by a 22.0% decrease from the COVID-19 pandemic. The increase
in average Guest check resulted from a 1.6% increase in pricing and
a 0.3% increase from lower discounting, partially offset by a 1.8%
decrease in menu mix. The decrease in menu mix was primarily driven
by the Company’s operational shift to off-premise only, resulting
in lower sales of beverages and Finest burgers.
Net loss was $174.3 million for the first quarter of 2020
compared to net income of $0.6 million for the same period a year
ago. Adjusted net loss (a non-GAAP financial measure) was $86.0
million for the first quarter of 2020 compared to adjusted net
income of $2.4 million for the same period a year ago (see Schedule
I).
Restaurant-level operating profit as a percentage of restaurant
revenue (a non-GAAP financial measure) was 8.8% in the first
quarter of 2020 compared to 18.3% in the same period a year ago.
Cost of sales as a percentage of restaurant revenue remained flat
resulting from a decrease in beverage costs offset by an increase
in ground beef prices. Restaurant labor costs as a percentage of
restaurant revenue increased 360 basis points primarily due to
sales deleverage, higher wage rates, and higher group insurance
costs partially offset by lower restaurant manager incentive
compensation. Other restaurant operating costs as a percentage of
restaurant revenue increased 340 basis points primarily due to an
increase in third-party delivery fees driven by higher off-premise
sales volumes and sales deleverage impacts on restaurant
maintenance, technology, supply, and utility costs. Occupancy costs
as a percentage of restaurant revenue increased 250 basis points
primarily due to sales deleverage impacts on rent expense and
general liability and other real estate 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, the most
directly comparable GAAP metrics.
(1) Comparable restaurants are those Company-owned restaurants
that have operated five full quarters during the period presented,
and such restaurants are only included in the comparable metrics if
they have operated for the entirety of both periods presented.
Restaurant Revenue Performance
Q1 2020
Q1 2019
Average weekly sales per unit:
Company-owned – Total
$
41,785
$
51,802
Company-owned – Comparable(1)
$
42,888
$
54,120
Franchised units – Comparable(1)
$
43,910
$
59,225
Total operating weeks:
Company-owned units
7,214
7,731
Franchised units
1,632
1,408
(1) Comparable restaurants are those Company-owned restaurants
that have operated five full quarters during the period presented,
and such restaurants are only included in the comparable metrics if
they have operated for the entirety of both periods presented.
Other Results
Depreciation and amortization costs decreased to $28.3 million
in the first quarter of 2020 from $28.4 million in the first
quarter of 2019.
General and administrative costs were $26.7 million, or 8.7% of
total revenues, in the first quarter of 2020, compared to $30.1
million, or 7.3% of total revenues, in the same period a year ago.
The decrease was primarily driven by decreased Team Member
benefits, travel and entertainment costs, and professional services
costs, partially offset by increased Team Member salary and wages
stemming from merit salary increases.
Selling expenses were $14.8 million, or 4.8% of total revenues,
in the first quarter of 2020, compared to $18.0 million, or 4.4% of
total revenues, during the same period a year ago. The decrease was
primarily driven by a reduction in national media spend, gift card
related costs, and project-related G&A costs.
Other charges in the first quarter of 2020 included $95.4
million of goodwill impairment, $15.5 million of restaurant asset
impairment, $4.5 million of litigation contingencies, $1.5 million
of board and stockholder matters costs, $1.4 million of restaurant
closure and refranchising costs, $0.9 million of severance and
executive transition costs, and $0.2 million of COVID-19 related
charges.
The Company had an effective tax rate of a 7.9% expense in the
first quarter of 2020, compared to an effective tax rate of a
291.4% benefit in the same period a year ago. The increase in tax
expense is primarily due to a decrease in current year tax credits
and the recognition of a valuation allowance on the Company's tax
credit deferred tax asset, partially offset by a decrease in income
and a favorable rate impact of net operating loss carrybacks
allowed as part of the Coronavirus Aid, Relief, and Economic
Security ("CARES") Act, which could generate up to $12 million of
projected cash tax refunds within the next 12 months.
Loss per diluted share for the first quarter of 2020 was $13.51
compared to earnings per diluted share of $0.05 in the first
quarter of 2019. Excluding costs per diluted share included in
Other charges of $5.48 for goodwill impairment, $0.89 for
restaurant asset impairment, $0.26 for litigation contingencies,
$0.08 for board and stockholder matters costs, $0.08 for restaurant
closure and refranchising costs, $0.05 for severance and executive
transition costs, and $0.01 for COVID-19 related charges, adjusted
loss per diluted share for the first quarter ended April 19, 2020,
was $6.66. Excluding charges per diluted share of $0.11 for
severance and executive transition costs, $0.02 for restaurant
closure costs, and $0.01 for executive retention costs, adjusted
earnings per diluted share for the first quarter ended April 21,
2019, was $0.19. See Schedule I for a reconciliation of adjusted
net income and adjusted earnings per share (each, a non-GAAP
financial measure) to net income and earnings per share.
Restaurant Portfolio
The following table details restaurant unit data for
Company-owned and franchised locations for the periods
indicated:
Sixteen Weeks Ended
April 19, 2020
April 21, 2019
Company-owned:
Beginning of period
454
484
Opened during the period
—
—
Closed during the period(2)
(2)
(1)
End of period
452
483
Franchised:
Beginning of period
102
89
Opened during the period
—
—
End of period
102
89
Total number of restaurants
554
572
(2) In addition to two permanent closures during the sixteen
weeks ended April 19, 2020, 35 Company-owned restaurants were
temporarily closed due to an inability to effectively operate these
restaurants with an off-premise only operating model during the
COVID-19 pandemic.
Balance Sheet and Liquidity
As of April 19, 2020, the Company had cash and cash equivalents
of $88.9 million and total debt of $290.9 million, of which $9.7
million was classified as short-term. The Company made net draws of
$84.0 million on its credit facility during the first quarter of
2020 using the proceeds to provide operating liquidity during the
COVID-19 pandemic. As of April 19, 2020, the Company had
outstanding borrowings under its credit facility of $290.0 million,
in addition to amounts issued under letters of credit of $7.5
million. Amounts issued under letters of credit reduce the amount
available under the credit facility but are not recorded as debt.
As of April 19, 2020, the company had no remaining borrowing
capacity under the credit facility to help mitigate the impact of
COVID-19 on its business and provide operational liquidity.
On January 10, 2020, the Company replaced its credit facility
with a new five-year Amended and Restated Credit Agreement (the
"Credit Agreement") which provides for a $161.5 million revolving
line of credit and a $138.5 million term loan for a total borrowing
capacity of $300 million. The Credit Agreement is included as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with
the SEC on January 13, 2020.
As of April 19, 2020, the Company was not in compliance with
certain financial covenants due to the negative impact of COVID-19
on its business. As a result, the Company entered into the First
Amendment to the Credit Agreement and Waiver (the "Amendment") on
May 29, 2020 that waives compliance of the lease adjusted leverage
ratio financial covenant and fixed charge coverage ratio financial
covenant for the remainder of fiscal 2020 provided the Company
issues new equity (or convertible debt) generating net cash
proceeds of at least $25 million on or before November 13,
2020.
Per the maximum cash balance limitation required in the
Amendment, the Company made a $59 million repayment on the
revolving line of credit on May 29, 2020 to ensure cash on hand did
not exceed $30 million. As of June 7, 2020, the Company had $30
million of cash on hand, $54 million of available borrowing
capacity under its revolving line of credit and expects an average
cash burn of $1 million to $2 million per week for the second
fiscal quarter.
The Amendment was filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K filed with the SEC on May 29, 2020.
Actions in Response to COVID-19
The Company has taken the following actions to preserve
liquidity, and enhance financial flexibility:
- Temporarily closed dine-in services at substantially all Red
Robin-operated restaurants while continuing to provide to-go,
delivery, and catering choices and ensuring the continuity of the
Company's supply chain;
- Temporarily closed 35 Company-owned restaurants. In connection
with these closures, restaurant managers were furloughed or
transferred to nearby operational restaurants when possible;
- Implemented enhanced health and safety protocols across the
business, emergency sick pay for hourly Team Members, and
telecommuting policies for nearly all corporate level
employees;
- Significantly reduced restaurant level costs and general and
administrative expenses, including reducing by 20 percent executive
base salaries, Board member cash retainer fees, and restaurant
support center and non-furloughed restaurant supervisory Team
Member wages and salaries;
- Eliminated approximately 50 restaurant support center general
and administrative positions;
- Reduced selling expense by pivoting from national media to
digital in support of the Company's off-premise business;
- Postponed or eliminated all non-essential spending, including
capital expenditures for previously planned growth and other
projects, including the Company's continued rollout of Donatos®,
restaurant refreshes, and IT projects; prior to the pandemic, the
Company purchased Donato's equipment for the Seattle market,
including approximately 40 restaurants. We currently plan to resume
our roll out of Donato's in this legacy market by the end of the
year;
- Drew down the remaining capacity under the Company's $300
million credit facility;
- Suspended share repurchases and terminated the Company's
prearranged stock trading plan under Rule 10b5-1 of the Securities
Exchange Act of 1934, as amended; and
- Began to engage in constructive discussions with landlords
regarding potential restructuring of lease payments.
Second Quarter Business Update
Overall during the beginning of the second quarter of 2020, the
Company's weekly comparable restaurant revenue has sequentially
improved. Preliminary net comparable restaurant revenue and average
net sales per restaurant through the week ended June 7, 2020 is as
follows:
Week ended
Company-owned Restaurants
26-Apr
3-May
10-May
17-May
24-May
31-May
7-Jun
Weekly Net Comparable Restaurant
Revenues
(56.0)%
(54.7)%
(52.2)%
(47.9)%
(47.0)%
(43.8)%
(39.7)%
Average Net Sales per Restaurant
$24,435
$24,514
$27,202
$28,895
$29,598
$32,239
$34,222
# of Comparable Company-operated
Restaurants
414
414
414
414
414
414
414
Restaurant Re-Openings
As of June 7, 2020, the Company has re-opened approximately 270
dining rooms with limited capacity, representing approximately 65%
of currently open Company-owned restaurants. These re-openings
include restaurants located in the Company's largest and highest
volume markets on the West Coast. Notably, these restaurants have
on average maintained off-premise sales that are approximately one
and a half to two times pre-COVID-19 levels and 40% of sales mix
since re-opening.
Preliminary net comparable restaurant revenue and average net
sales per restaurant for re-opened Company-owned restaurants
through the week ended June 7, 2020 is as follows:
Week ended
Re-opened Company-owned
Restaurants(3)
26-Apr
3-May
10-May
17-May
24-May
31-May
7-Jun
Weekly Net Comparable Restaurant
Revenues
N/A
N/A
(37.6)%
(35.8)%
(31.6)%
(26.9)%
(26.7)%
Average Net Sales per Restaurant
N/A
N/A
$27,171
$27,536
$33,835
$37,731
$37,682
# of Comparable Company-operated
Restaurants
—
2
65
108
156
218
270
(3) Net sales performance for restaurants re-opened for full
fiscal week presented. Restaurant count shown is as of the end of
fiscal week presented.
Outlook for 2020 and Guidance Policy
In light of the ongoing uncertainty regarding the duration and
impact of the COVID-19 pandemic, the Company withdrew its 2020 and
long-term financial outlook on April 1, 2020.
Investor Conference Call and Webcast
Red Robin will host an investor conference call to discuss its
first quarter 2020 results today at 8:00 a.m. Eastern Time. The
conference call number is (201) 689-8560. The financial information
that the Company intends to discuss during the conference call is
included in this press release and will be available in the
"Company" section of the Company’s website at www.redrobin.com by
selecting the "Investor Relations" link, then the "News &
Events" link, then the "Calendar of Events" link. 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 "Company" section,
then the "Investor Relations" link, then the "Presentations" link.
A replay of the live conference call will be available from two
hours after the call through Wednesday, June 17, 2020. The replay
can be accessed by dialing (412) 317-6671. The conference ID is
13703138.
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., and under the trade name
Red Robin Gourmet Burgers and Brews, 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. At Red Robin, burgers
are more than just something Guests eat; they’re a bonding
experience that brings together friends and families, kids and
adults. In addition to its many burger offerings, Red Robin serves
a wide variety of salads, soups, appetizers, entrees, desserts, and
signature beverages. Red Robin offers a variety of options behind
the bar, including its extensive selection of local and regional
beers and cocktails. It’s now easy to take Red Robin anywhere with
online ordering for to-go and Gourmet Burger Bar catering. There
are more than 550 Red Robin restaurants across the United States
and Canada, including those operating under franchise agreements.
Red Robin… YUMMM®! Connect with Red Robin on Facebook, Instagram,
and Twitter.
Forward-Looking Statements
Forward-looking statements in this press release regarding the
Company’s future performance, sales, guest satisfaction scores,
preliminary results including comparable restaurant revenue,
average net sales per restaurant, cash burn, anticipated rollout of
Donatos® in our Seattle market, and statements under the heading
“Second Quarter Business Update”, 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," "believe," "anticipate," "intend," "plan,"
"project," "will" or "estimate," or the negative or other
variations thereof or comparable terminology are intended to
identify forward-looking statements. Except as required by law, the
Company undertakes no obligation to update such statements to
reflect events or circumstances arising after such date and
cautions 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 extent
of the impact of the COVID-19 global pandemic or any other
epidemic, disease outbreak, or public health emergency, including
the duration, spread, severity, and any recurrence of the COVID-19
pandemic, the duration and scope of related government orders and
restrictions, the impact on our Team Members, economic, public
health, and political conditions that impact consumer confidence
and spending, including the impact of COVID-19 and other health
epidemics or pandemics on the global economy; the amount of cash
tax refund received as a result of the CARES act; the rapidly
evolving nature of the COVID-19 pandemic and related containment
measures, including the potential for a complete shutdown of
Company restaurants; changes in unemployment rate; the ability to
achieve significant cost savings; the Company’s ability to defer
lease or contract payments or otherwise obtain concessions from
landlords, vendors, and other parties in light of the impact of the
COVID-19 pandemic; the economic health of the Company’s landlords
and other tenants in retail centers in which its restaurants are
located; the economic health of suppliers, licensees, vendors, and
other third parties providing goods or services to the Company; the
Company’s ability to continue to increase sales; the impact of
political protests and curfews imposed by state and local
governments; the effectiveness of the Company’s marketing
strategies and promotions and menu changes; the cost and
availability of key food products, distribution, labor, and energy;
the effectiveness of the Company’s strategic initiatives including
service model and technology solutions; the cost and availability
of capital or credit facility borrowings; the ability to obtain
equity financing; the adequacy of cash flows or available debt
resources to fund operations; 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)
Sixteen Weeks Ended
April 19, 2020
April 21, 2019
Revenues:
Restaurant revenue
$
301,434
$
400,484
Franchise royalties, fees and other
revenue
4,631
9,382
Total revenues
306,065
409,866
Costs and expenses:
Restaurant operating costs (exclusive of
depreciation and amortization shown separately below):
Cost of sales
70,426
93,715
Labor
118,566
142,894
Other operating
52,291
55,565
Occupancy
33,657
35,020
Depreciation and amortization
28,320
28,438
General and administrative
26,723
30,090
Selling
14,779
18,026
Pre-opening costs and acquisition
costs
153
319
Other charges
119,379
2,398
Total costs and expenses
464,294
406,465
(Loss) income from operations
(158,229)
3,401
Other expense:
Interest expense, net and other
3,370
3,238
(Loss) income before income taxes
(161,599)
163
Provision (benefit) for income taxes
12,699
(476)
Net (loss) income
$
(174,298)
$
639
(Loss) earnings per share:
Basic
$
(13.51)
$
0.05
Diluted
$
(13.51)
$
0.05
Weighted average shares outstanding:
Basic
12,903
12,967
Diluted
12,903
13,041
RED ROBIN GOURMET BURGERS,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In
thousands, except per share amounts)
(Unaudited)
April 19, 2020
December 29, 2019
Assets:
Current Assets:
Cash and cash equivalents
$
88,920
$
30,045
Accounts receivable, net
10,263
22,372
Inventories
24,863
26,424
Prepaid expenses and other current
assets
30,790
26,646
Total current assets
154,836
105,487
Property and equipment, net
486,273
518,013
Right of use assets, net
413,287
426,248
Goodwill
—
96,397
Intangible assets, net
27,369
29,975
Other assets, net
40,286
61,460
Total assets
$
1,122,051
$
1,237,580
Liabilities and Stockholders’
Equity:
Current Liabilities:
Accounts payable
$
26,304
$
33,040
Accrued payroll and payroll related
liabilities
24,694
35,221
Unearned revenue
43,349
54,223
Short-term portion of lease
obligations
49,654
42,699
Short-term debt
9,692
—
Accrued liabilities and other
39,110
29,403
Total current liabilities
192,803
194,586
Long-term debt
281,221
206,875
Long-term portion of lease obligations
453,775
465,435
Other non-current liabilities
9,883
10,164
Total liabilities
937,682
877,060
Stockholders’ Equity:
Common stock; $0.001 par value: 45,000
shares authorized; 17,851 and 17,851 shares issued; 12,890 and
12,923 shares outstanding
18
18
Preferred stock, $0.001 par value: 3,000
shares authorized; no shares issued and outstanding
—
—
Treasury stock, 4,961 and 4,928 shares, at
cost
(202,343)
(202,313)
Paid-in capital
213,246
213,922
Accumulated other comprehensive loss, net
of tax
(5,520)
(4,373)
Retained earnings
178,968
353,266
Total stockholders’ equity
184,369
360,520
Total liabilities and stockholders’
equity
$
1,122,051
$
1,237,580
Schedule I
Reconciliation of Non-GAAP Results to GAAP
Results (In thousands, except per share data,
unaudited)
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 sixteen weeks ended April 19, 2020, and April 21, 2019,
net income and basic and diluted earnings per share, excluding the
effects of asset impairment, litigation contingency costs, board
and stockholder matters costs, restaurant closure costs, severance
and executive transition costs, COVID-19 related charges, executive
retention costs, and related income tax effects. The Company
believes the presentation of net income and earnings per share
exclusive of the identified item 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 effect of reconciling items was
calculated based on the change in the total tax provision
calculation after adjusting for the identified item. The non-GAAP
measurements are intended to supplement the presentation of the
Company’s financial results in accordance with GAAP.
Sixteen Weeks Ended
April 19, 2020
April 21, 2019
Net (loss) income as reported
$
(174,298)
$
639
Goodwill impairment
95,414
—
Restaurant asset impairment
15,498
—
Litigation contingencies
4,500
—
Board and stockholder matter costs
1,482
—
Restaurant closure and refranchising
costs
1,406
304
Severance and executive transition
881
1,994
COVID-19 related charges
198
—
Executive retention
—
100
Income tax expense
(31,039)
(623)
Adjusted net (loss) income
$
(85,958)
$
2,414
Basic (loss) earnings per share:
Net (loss) income as reported
$
(13.51)
$
0.05
Goodwill impairment
7.40
—
Restaurant asset impairment
1.20
—
Litigation contingencies
0.35
—
Board and stockholder matter costs
0.11
—
Restaurant closure and refranchising
costs
0.11
0.03
Severance and executive transition
0.07
0.15
COVID-19 related charges
0.02
Executive retention
—
0.01
Income tax expense
(2.41)
(0.05)
Adjusted (loss) earnings per share -
basic
$
(6.66)
$
0.19
Diluted (loss) earnings per share:
Net (loss) income as reported
$
(13.51)
$
0.05
Goodwill impairment
7.40
—
Restaurant asset impairment
1.20
—
Litigation contingencies
0.35
—
Board and stockholder matter costs
0.11
—
Restaurant closure and refranchising
costs
0.11
0.03
Severance and executive transition
0.07
0.15
COVID-19 related charges
0.02
—
Executive retention
—
0.01
Income tax expense
(2.41)
(0.05)
Adjusted (loss) earnings per share -
diluted
$
(6.66)
$
0.19
Weighted average shares outstanding
Basic
12,903
12,967
Diluted
12,903
13,041
Schedule II
Reconciliation of Non-GAAP Restaurant-Level
Operating Profit to Income from Operations and Net
Income (In thousands, unaudited)
The Company believes 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 impairment and closure costs. The measure includes
restaurant-level occupancy costs that 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
equipment, 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
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 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 in the Company's
industry. The table below sets forth certain unaudited information
for the sixteen week periods ended April 19, 2020 and April 21,
2019, expressed as a percentage of total revenues, except for the
components of restaurant-level operating profit that are expressed
as a percentage of restaurant revenue.
Sixteen Weeks Ended
April 19, 2020
April 21, 2019
Restaurant revenues
$
301,434
98.5
%
$
400,484
97.7
%
Restaurant operating costs(1):
Cost of sales
70,426
23.4
%
93,715
23.4
%
Labor
118,566
39.3
%
142,894
35.7
%
Other operating
52,291
17.3
%
55,565
13.9
%
Occupancy
33,657
11.2
%
35,020
8.7
%
Restaurant-level operating profit
26,494
8.8
%
73,290
18.3
%
Add – Franchise royalties, fees and other
revenue
4,631
1.5
%
9,382
2.3
%
Deduct – other operating:
Depreciation and amortization
28,320
9.3
%
28,438
6.9
%
General and administrative expenses
26,723
8.7
%
30,090
7.3
%
Selling
14,779
4.8
%
18,026
4.4
%
Pre-opening & acquisition costs
153
—
%
319
0.1
%
Other charges
119,379
39.0
%
2,398
0.6
%
Total other operating
189,354
61.9
%
79,271
19.3
%
(Loss) income from operations
(158,229)
(51.7)
%
3,401
0.8
%
Interest expense, net and other
3,370
1.1
%
3,238
0.8
%
Provision (benefit) for income taxes
12,699
4.1
%
(476)
(0.1)
%
Total other
16,069
5.3
%
2,762
0.7
%
Net (loss) income
$
(174,298)
(56.9)
%
$
639
0.2
%
(1)
Excluding depreciation and amortization, which is shown
separately.
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.
Schedule III
Reconciliation of Net Income to EBITDA and
Adjusted EBITDA (In thousands, unaudited)
The Company defines EBITDA as net (loss) income before interest
expense, benefit for income taxes, and depreciation and
amortization. EBITDA and adjusted EBITDA are presented because the
Company believes investors’ understanding of its performance is
enhanced by including these non-GAAP financial measures as a
reasonable basis for evaluating its ongoing results of operations
excluding the effects of asset impairment, litigation contingency
costs, board and stockholder matters costs, restaurant closure
costs, severance and executive transition costs, COVID-19 related
charges, executive retention costs, and related income tax effects.
EBITDA and adjusted EBITDA are supplemental measures of operating
performance that do not represent and should not be considered as
alternatives to net (loss) income or cash flow from operations, as
determined by GAAP, and the Company's calculation thereof may not
be comparable to that reported by other companies in its industry
or otherwise. Adjusted EBITDA further adjusts EBITDA to reflect the
additions and eliminations shown in the table below. The use of
adjusted EBITDA as a performance measure permits a comparative
assessment of our operating performance relative to the Company's
performance based on its GAAP results, while isolating the effects
of some items that vary from period to period without any
correlation to core operating performance. Adjusted EBITDA as
presented may not be comparable to other similarly-titled measures
of other companies, and the Company's presentation of adjusted
EBITDA should not be construed as an inference that its future
results will be unaffected by excluded or unusual items. The
Company has not provided a reconciliation of its adjusted EBITDA
outlook to the most comparable GAAP measure of net income.
Providing net income guidance is potentially misleading and not
practical given the difficulty of projecting event-driven
transactional and other non-core operating items that are included
in net income, including asset impairments and income tax valuation
adjustments. The reconciliations of adjusted EBITDA to net (loss)
income for the historical periods presented below are indicative of
the reconciliations that will be prepared upon completion of the
periods covered by the non-GAAP guidance.
Sixteen Weeks Ended
April 19, 2020
April 21, 2019
Net (loss) income as reported
$
(174,298)
$
639
Interest expense, net
3,234
3,345
Provision (benefit) for income taxes
12,699
(476)
Depreciation and amortization
28,320
28,438
EBITDA
$
(130,045)
$
31,946
Goodwill impairment
$
95,414
$
—
Restaurant asset impairment
15,498
—
Litigation contingencies
4,500
—
Board and stockholder matter costs
1,482
—
Restaurant closure and refranchising
costs
1,406
304
Severance and executive transition
881
1,994
COVID-19 related charges
198
—
Executive retention
—
100
Adjusted EBITDA
$
(10,666)
$
34,344
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200610005218/en/
For media relations questions: Danielle Paleafico, Coyne
PR (973) 588-2000 For investor relations questions: Raphael
Gross, ICR (203) 682-8253
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