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 July 12, 2020.
Second Quarter 2020 Financial Summary Compared to Second
Quarter 2019
- Total revenues were $161.1 million, a decrease of 47.7%,
primarily resulting from our operational shift in response to
COVID-19, including limited occupant capacity as we reopen dining
rooms, operating an off-premise only model at our restaurants with
closed dining rooms, and closed restaurants;
- Comparable restaurant revenue decreased 41.4%;
- Comparable average Guest check decreased 2.9%, resulting from a
5.7% decrease from menu mix, partially offset by a 2.2% increase in
pricing and a 0.6% increase from lower discounting;
- Comparable restaurant Guest counts decreased 38.5%;
- Off-premise sales increased 208.7% and comprised 63.8% of total
food and beverage sales;
- GAAP loss per diluted share was $4.09 compared to GAAP earnings
per diluted share of $0.08;
- Adjusted loss per diluted share was $3.31 compared to adjusted
earnings per diluted share of $1.03 (see Schedule I);
- Net loss was $56.3 million compared to net income of $1.0
million; and
- Adjusted EBITDA was a loss of $15.3 million compared to
adjusted EBITDA of $25.5 million (see Schedule III).
Paul J.B. Murphy III, Red Robin's President and Chief Executive
Officer, said, “We are accelerating the transformation of our
business through exceptional hospitality and uncompromising health
and safety standards, despite the challenges created by the recent
surge in COVID-19 cases and localized, renewed mandates to re-close
dining rooms. In addition to generating sequential improvement in
average weekly net sales per restaurant over the last five weeks,
our record-high dine-in and off-premise satisfaction scores
validate our consistent, quality execution as we build trust and
affinity within our communities.”
Murphy continued, “Having strengthened our liquidity through our
recent equity raise of almost $30 million, we are managing our
business prudently while continuing to progress the foundational
pillars in our previously articulated strategic plan to create
long-term value for our shareholders. This plan includes executing
our TGX hospitality model, implementing Donatos® Pizza in our
restaurants, and improving our digital experience to drive
increased Guest engagement and frequency.”
Second Quarter 2020 Operating Results
Total revenues, which primarily include Company-owned restaurant
revenue and franchise royalties, decreased 47.7% to $161.1 million
in the second quarter of 2020, from $308.0 million in the second
quarter of 2019. Restaurant revenue decreased $142.3 million due to
a $112.8 million decrease in comparable restaurant revenue(1) and a
$29.5 million decrease primarily from closed restaurants. The
decrease in comparable restaurant revenue was driven by restaurants
operating at no higher than 50% occupant capacity for dining rooms
that have reopened during the quarter or off-premise only for
restaurants with closed dining rooms.
System-wide restaurant revenue (which includes franchised
restaurants) for the second quarter of 2020 totaled $200.4 million,
compared to $366.4 million for the second quarter of 2019. Due to
the effects of COVID-19 on Red Robin's franchise operations, we
temporarily abated franchise royalty payments and advertising
contributions effective March 20, 2020. During the latter half of
our second fiscal quarter, however, we resumed charging and
collecting partial royalty payments and advertising contributions
from our franchisees. Abated royalty payments and advertising
contributions will not be collected by the Company.
Comparable restaurant revenue(1) decreased 41.4% in the second
quarter of 2020 compared to the same period a year ago, driven by a
38.5% decrease in Guest count and a 2.9% decrease in average Guest
check. The decrease in Guest count was primarily driven by a 36.2%
decrease from the COVID-19 pandemic. The decrease in average Guest
check resulted from a 5.7% decrease in menu mix, partially offset
by a 2.2% increase in pricing and a 0.6% increase from lower
discounting. The decrease in menu mix was primarily driven by
limited dining room capacity at re-opened restaurants and operating
off-premise only at restaurants with closed dining rooms, resulting
in lower sales of beverages and Finest burgers.
Net loss was $56.3 million for the second quarter of 2020
compared to net income of $1.0 million for the same period a year
ago. Adjusted net loss (a non-GAAP financial measure) was $45.5
million for the second quarter of 2020 compared to adjusted net
income of $13.4 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 2.0% in the second
quarter of 2020 compared to 18.2% in the same period a year ago.
Cost of sales as a percentage of restaurant revenue increased 30
basis points resulting from an increase in ground beef prices,
partially offset by discounts and lower waste. Restaurant labor
costs as a percentage of restaurant revenue increased 400 basis
points primarily due to sales deleverage and higher hourly wage and
benefit rates driven by shifting labor mix in support of our
off-premise operating model, partially offset by lower restaurant
manager incentive compensation. Other restaurant operating costs as
a percentage of restaurant revenue increased 730 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 supply, utility, and technology costs, partially offset
by a decrease in restaurant maintenance costs. Occupancy costs as a
percentage of restaurant revenue increased 460 basis points
primarily due to sales deleverage impacts on rent expense 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
Q2 2020
Q2 2019
Average weekly sales per unit:
Company-owned – Total
$
32,287
$
52,907
Company-owned – Comparable(1)
32,277
54,932
Franchised units – Comparable(1)
$
34,582
$
58,573
Total operating weeks:
Company-owned units
4,960
5,716
Franchised units
1,116
1,075
____________________
(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 $20.6 million
in the second quarter of 2020 from $21.4 million in the second
quarter of 2019.
General and administrative costs were $14.1 million, or 8.8% of
total revenues, in the second quarter of 2020, compared to $21.8
million, or 7.1% of total revenues, in the same period a year ago.
The decrease was primarily driven by a decrease in Team Member
salaries and wages from the reduction in force and temporary salary
reductions and a decrease in Team Member benefits, travel and
entertainment, and professional services costs.
Selling expenses were $5.6 million, or 3.4% of total revenues,
in the second quarter of 2020, compared to $13.4 million, or 4.4%
of total revenues, during the same period a year ago. The decrease
was primarily driven by a reduction in national and local media
spend and gift card related costs.
Other charges in the second quarter of 2020 included $7.6
million of restaurant closure and refranchising costs, $5.3 million
of restaurant asset impairment, $1.0 million of board and
stockholder matters costs, and $0.7 million of COVID-19 related
costs related to the purchase of personal protective equipment for
our Team Members and Guests and emergency sick pay provided to
restaurant Team Members during the pandemic.
The Company had an effective tax rate of 7.0% in the second
quarter of 2020, compared to an effective tax benefit of 106.5% in
the same period a year ago. The effective tax rate for the
twenty-eight weeks ended July 12, 2020 was 7.7%, compared to a
110.9% benefit for the same period in 2019. 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 projected cash tax
refunds in the range of $14 million to $17 million within the next
12 months.
Loss per diluted share for the second quarter of 2020 was $4.09
compared to earnings per diluted share of $0.08 in the second
quarter of 2019. Excluding costs per diluted share included in
Other charges of $0.41 for restaurant closure and refranchising
costs, $0.28 for restaurant asset impairment, $0.05 for board and
stockholder matters costs, and $0.04 for COVID-19 related costs,
adjusted loss per diluted share for the second quarter ended July
12, 2020 was $3.31. Excluding costs per diluted share included in
Other charges of $0.80 for restaurant asset impairment, $0.07 for
board and stockholder matters costs, $0.05 for restaurant closure
and refranchising costs, $0.02 for severance and executive
transition, and $0.01 for executive retention, adjusted earnings
per diluted share for the second quarter ended July 14, 2019 was
$1.03. 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:
Twelve Weeks Ended
Twenty-Eight Weeks
Ended
July 12, 2020
July 14, 2019
July 12, 2020
July 14, 2019
Company-owned:
Beginning of period
452
483
454
484
Opened during the period
—
—
—
—
Closed during the period(2)
(2
)
(11
)
(4
)
(12
)
End of period
450
472
450
472
Franchised:
Beginning of period
102
89
102
89
Opened during the period
—
1
—
1
Closed during the period
—
—
—
—
End of period
102
90
102
90
Total number of restaurants
552
562
552
562
____________________
(2)
In addition to the permanent
closures during the twelve and twenty-eight weeks ended July 12,
2020, 35 Company-owned restaurants remained temporarily closed due
to the COVID-19 pandemic.
Balance Sheet and Liquidity
As of July 12, 2020, the Company had total debt of $207.5
million, of which $9.7 million was classified as current. The
Company made net repayments of $83.4 million on its credit facility
during the second quarter of 2020. As of July 12, 2020, the Company
had outstanding borrowings under its credit facility of $206.6
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 July 12, 2020, the Company had approximately $107.2
million in total liquidity including cash and cash equivalents and
available borrowing capacity under our revolving line of credit.
The average cash burn rate for the second quarter of 2020 was
approximately $1 million per week.
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.
On May 29, 2020, the Company entered into the First Amendment to
the Credit Agreement and Waiver (the "Amendment") that waived
compliance of the lease adjusted leverage ratio financial covenant
and fixed charge coverage ratio financial covenant for the first
and second quarters of 2020, and it waives compliance for the
remainder of fiscal 2020 and sets forth adjusted covenant ratios
for fiscal year 2021 provided the Company issued new equity (or
convertible debt) generating net cash proceeds of at least $25
million on or before November 13, 2020. The equity issuance
requirement of the Amendment was satisfied on June 17, 2020 when
the Company issued 2.6 million shares of common stock raising
proceeds of $28.7 million, net of stock issuance costs, through its
at-the-market equity offering. 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.
As of August 9, 2020, the Company had more than $103 million in
total liquidity, including cash and cash equivalents and available
borrowing capacity under our revolving line of credit. We currently
expect an average cash burn of approximately $2 million per week
for the third fiscal quarter, including the impact of increased
occupancy payments compared to the second quarter.
COVID-19 Business Update
Since the release of our first quarter earnings, net comparable
restaurant revenue and average net sales per company-owned
restaurant through the week ended August 9, 2020 is as follows:
Week ended
Company-owned Restaurants(5)
14-Jun
21-Jun
28-Jun
5-Jul
12-Jul
19-Jul
26-Jul
2-Aug
9-Aug
Weekly Net Comparable Restaurant
Revenues
(35.5)%
(27.4)%
(30.4)%
(33.9)%
(33.9)%
(35.9)%
(34.3)%
(35.4)%
(32.8)%
Average Net Sales per Restaurant
$38,259
$40,596
$38,471
$33,938
$34,731
$35,164
$36,783
$37,239
$38,031
# of
Comparable Company-operated Restaurants(3)
413
413
413
413
413
413
412
412
412
____________________
(3)
Comparable restaurants are those
Company-owned restaurants that have operated five full quarters as
of the fiscal week presented. Restaurant count shown is as of the
end of the fiscal week presented.
Restaurants with Open Indoor Dining Rooms
As of August 9, 2020, the Company has re-opened 346 indoor
dining rooms with limited capacity, representing approximately 84%
of currently open Company-owned restaurants. Notably, these
restaurants have on average maintained off-premise sales that are
approximately 40% of sales mix after re-opening dining rooms. As
dining rooms have re-opened, the Company has continued to focus on
the mutual health and safety of our Guests and Team Members. In
addition to the health and safety measures implemented in the first
quarter of 2020, we recently began expanding outdoor seating beyond
restaurant patios where possible, piloting partitions between
tables in our dining rooms, requiring Guests to wear face coverings
in all locations, while entering, exiting, and walking around the
restaurant, and providing face masks to Guests who arrive at our
restaurants without one.
The Company has been required to re-close dining rooms since the
release of our first quarter earnings at numerous Company-owned
restaurants, including 53 indoor dining rooms in California due to
a state mandate in early July, from the effects of increased
COVID-19 cases in certain states and localities. Since these
closures in early July, our average weekly net sales per restaurant
has increased through the week ended August 9, 2020 even as these
indoor dining rooms have remained closed.
Net comparable restaurant revenue and average net sales per
Company-owned restaurant with re-opened indoor dining rooms through
the week ended August 9, 2020 is as follows:
Week ended
Re-opened Company-owned Restaurant
Indoor Dining Rooms(5)
14-Jun
21-Jun
28-Jun
5-Jul
12-Jul
19-Jul
26-Jul
2-Aug
9-Aug
Weekly Net Comparable Restaurant
Revenues
(27.0)%
(22.4)%
(26.3)%
(29.7)%
(28.4)%
(30.5)%
(29.5)%
(30.4)%
(27.9)%
Average Net Sales per Restaurant
$42,271
$44,134
$40,834
$35,592
$36,845
$37,380
$38,393
$39,058
$39,808
# of Comparable Company-operated
Restaurants(4)
336
359
385
328
336
349
350
348
346
____________________
(4)
Net
sales performance for Company-owned restaurants with re-opened
indoor dining rooms for full fiscal week presented. Restaurant
count shown is as of the end of the fiscal week
presented.
(5)
Net
comparable restaurant revenues and average net sales per restaurant
for weeks ending after July 12, 2020 are preliminary
amounts.
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
second quarter 2020 results today at 5:00 pm. ET. The conference
call can be accessed live over the phone by dialing (201) 689-8560.
A replay will be available from approximately two hours after the
end of the call and can be accessed by dialing (412) 317-6671; the
conference ID is 13707308. The replay will be available through
Tuesday, August 18, 2020.
The call will be webcast live and later archived from the
Company's website at www.redrobin.com under the investor relations
section.
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 strategic plan and transformation of our business, future
performance, Guest satisfaction scores, preliminary results
including comparable restaurant revenue and average net sales per
restaurant, average cash burn rate, expectations for enterprise
level positive cash flow and timing thereof, increased occupancy
payments, anticipated rollout of Donatos®, and statements under the
heading “COVID-19 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," "could," "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 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)
Twelve Weeks Ended
Twenty-Eight Weeks
Ended
July 12, 2020
July 14, 2019
July 12, 2020
July 14, 2019
Revenues:
Restaurant revenue
$
160,144
$
302,418
$
461,578
$
702,902
Franchise royalties, fees and other
revenue
978
5,563
5,609
14,945
Total revenues
161,122
307,981
467,187
717,847
Costs and expenses:
Restaurant operating costs (exclusive of
depreciation and amortization shown separately below):
Cost of sales
38,780
72,387
109,206
166,102
Labor
62,742
106,538
181,308
249,432
Other operating
34,663
43,000
86,954
98,565
Occupancy
20,758
25,458
54,415
60,478
Depreciation and amortization
20,560
21,369
48,880
49,807
General and administrative
14,141
21,791
40,864
51,881
Selling
5,556
13,443
20,335
31,469
Pre-opening costs and acquisition
costs
3
—
156
319
Other charges
14,501
16,847
133,880
19,245
Total costs and expenses
211,704
320,833
675,998
727,298
Loss from operations
(50,582
)
(12,852
)
(208,811
)
(9,451
)
Other expense:
Interest expense, net and other
1,979
2,153
5,349
5,391
Loss before income taxes
(52,561
)
(15,005
)
(214,160
)
(14,842
)
Income tax provision (benefit)
3,700
(15,986
)
16,399
(16,462
)
Net (loss) income
$
(56,261
)
$
981
$
(230,559
)
$
1,620
(Loss) earnings per share:
Basic
$
(4.09
)
$
0.08
$
(17.38
)
$
0.12
Diluted
$
(4.09
)
$
0.08
$
(17.38
)
$
0.12
Weighted average shares outstanding:
Basic
13,741
12,970
13,262
12,969
Diluted
13,741
13,043
13,262
13,047
RED ROBIN GOURMET BURGERS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except per
share amounts)
(Unaudited)
July 12, 2020
December 29, 2019
Assets:
Current Assets:
Cash and cash equivalents
$
26,138
$
30,045
Accounts receivable, net
8,989
22,372
Inventories
24,983
26,424
Prepaid expenses and other current
assets
46,817
26,646
Total current assets
106,927
105,487
Property and equipment, net
461,350
518,013
Right of use assets, net
415,900
426,248
Goodwill
—
96,397
Intangible assets, net
26,537
29,975
Other assets, net
19,931
61,460
Total assets
$
1,030,645
$
1,237,580
Liabilities and Stockholders’
Equity:
Current Liabilities:
Accounts payable
$
19,906
$
33,040
Accrued payroll and payroll related
liabilities
25,135
35,221
Unearned revenue
43,938
54,223
Current portion of lease obligations
62,068
42,699
Current portion of long-term debt
9,692
—
Accrued liabilities and other
44,250
29,403
Total current liabilities
204,989
194,586
Long-term debt
197,798
206,875
Long-term portion of lease obligations
455,288
465,435
Other non-current liabilities
14,479
10,164
Total liabilities
872,554
877,060
Stockholders’ Equity:
Common stock; $0.001 par value: 45,000
shares authorized; 20,449 and 17,851 shares issued; 15,547 and
12,923 shares outstanding as of July 12, 2020 and December 29,
2019
20
18
Preferred stock, $0.001 par value: 3,000
shares authorized; no shares issued and outstanding as of July 12,
2020 and December 29, 2019
—
—
Treasury stock, 4,902 and 4,928 shares, at
cost as of July 12, 2020 and December 29, 2019
(199,945
)
(202,313
)
Paid-in capital
240,812
213,922
Accumulated other comprehensive loss, net
of tax
(5,503
)
(4,373
)
Retained earnings
122,707
353,266
Total stockholders’ equity
158,091
360,520
Total liabilities and stockholders’
equity
$
1,030,645
$
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 twelve and twenty-eight weeks ended July 12, 2020, and
July 14, 2019, net income and basic and diluted earnings per share,
excluding the effects of goodwill impairment, restaurant asset
impairment, litigation contingencies, board and stockholder matters
costs, restaurant closure and refranchising costs, severance and
executive transition costs, COVID-19 related costs, 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.
Twelve Weeks Ended
Twenty-Eight Weeks
Ended
July 12, 2020
July 14, 2019
July 12, 2020
July 14, 2019
Net (loss) income as reported
$
(56,261
)
$
981
$
(230,559
)
$
1,620
Goodwill impairment
—
—
95,414
—
Restaurant asset impairment
5,281
14,064
20,779
14,064
Restaurant closure and refranchising
costs
7,602
1,001
9,008
1,305
Litigation contingencies
—
—
4,500
—
Board and stockholder matter costs
967
1,152
2,449
1,152
Severance and executive transition
—
370
881
2,364
COVID-19 related costs
651
—
849
—
Executive retention
—
260
—
360
Income tax expense
(3,770
)
(4,380
)
(34,809
)
(5,004
)
Adjusted net (loss) income
$
(45,530
)
$
13,448
$
(131,488
)
$
15,861
Basic (loss) earnings per share:
Net (loss) income as reported
$
(4.09
)
$
0.08
$
(17.38
)
$
0.12
Goodwill impairment
—
—
7.19
—
Restaurant asset impairment
0.38
1.08
1.57
1.08
Restaurant closure and refranchising
costs
0.55
0.07
0.68
0.10
Litigation contingencies
—
—
0.34
—
Board and stockholder matter costs
0.07
0.09
0.18
0.09
Severance and executive transition
—
0.03
0.07
0.18
COVID-19 related costs
0.05
—
0.06
—
Executive retention
—
0.02
—
0.03
Income tax expense
(0.27
)
(0.34
)
(2.62
)
(0.38
)
Adjusted (loss) earnings per share -
basic
$
(3.31
)
$
1.03
$
(9.91
)
$
1.22
Diluted (loss) earnings per share:
Net (loss) income as reported
$
(4.09
)
$
0.08
$
(17.38
)
$
0.12
Goodwill impairment
—
—
7.19
—
Restaurant asset impairment
0.38
1.08
1.57
1.08
Restaurant closure and refranchising
costs
0.55
0.07
0.68
0.10
Litigation contingencies
—
—
0.34
—
Board and stockholder matter costs
0.07
0.09
0.18
0.09
Severance and executive transition
—
0.03
0.07
0.18
COVID-19 related costs
0.05
—
0.06
—
Executive retention
—
0.02
—
0.03
Income tax expense
(0.27
)
(0.34
)
(2.62
)
(0.38
)
Adjusted (loss) earnings per share -
diluted
$
(3.31
)
$
1.03
$
(9.91
)
$
1.22
Weighted average shares outstanding
Basic
13,741
12,970
13,262
12,969
Diluted
13,741
13,043
13,262
13,047
Schedule II
Reconciliation of Non-GAAP Restaurant-Level
Operating Profit to Loss from Operations and Net (Loss) 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 twelve and twenty-eight weeks ended July 12, 2020 and July
14, 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.
Twelve Weeks Ended
Twenty-Eight Weeks
Ended
July 12, 2020
July 14, 2019
July 12, 2020
July 14, 2019
Restaurant revenues
$
160,144
99.4
%
$
302,418
98.2
%
$
461,578
98.8
%
$
702,902
97.9
%
Restaurant operating costs(1):
Cost of sales
38,780
24.2
%
72,387
23.9
%
109,206
23.7
%
166,102
23.6
%
Labor
62,742
39.2
%
106,538
35.2
%
181,308
39.3
%
249,432
35.5
%
Other operating
34,663
21.6
%
43,000
14.3
%
86,954
18.8
%
98,565
14.0
%
Occupancy
20,758
13.0
%
25,458
8.4
%
54,415
11.8
%
60,478
8.6
%
Restaurant-level operating profit
3,201
2.0
%
55,035
18.2
%
29,695
6.4
%
128,325
18.3
%
Add – Franchise royalties, fees and other
revenue
978
0.6
%
5,563
1.8
%
5,609
1.2
%
14,945
2.1
%
Deduct – other operating:
Depreciation and amortization
20,560
12.8
%
21,369
6.9
%
48,880
10.5
%
49,807
6.9
%
General and administrative expenses
14,141
8.8
%
21,791
7.1
%
40,864
8.7
%
51,881
7.2
%
Selling
5,556
3.4
%
13,443
4.4
%
20,335
4.4
%
31,469
4.4
%
Pre-opening & acquisition costs
3
—
%
—
—
%
156
—
%
319
—
%
Other charges
14,501
9.0
%
16,847
5.5
%
133,880
28.7
%
19,245
2.7
%
Total other operating
54,761
34.0
%
73,450
23.8
%
244,115
52.3
%
152,721
21.3
%
Loss from operations
(50,582
)
(31.4
)%
(12,852
)
(4.2
)%
(208,811
)
(44.7
)%
(9,451
)
(1.3
)%
Interest expense, net and other
1,979
1.2
%
2,153
0.7
%
5,349
1.1
%
5,391
0.8
%
Income tax provision (benefit)
3,700
2.3
%
(15,986
)
(5.2
)%
16,399
3.5
%
(16,462
)
(2.3
)%
Total other
5,679
3.5
%
(13,833
)
(4.5
)%
21,748
4.7
%
(11,071
)
(1.5
)%
Net (loss) income
$
(56,261
)
(34.9
)%
$
981
0.3
%
$
(230,559
)
(49.4
)%
$
1,620
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 (Loss) 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 goodwill impairment, restaurant asset
impairment, litigation contingencies, board and stockholder matters
costs, restaurant closure and refranchising costs, severance and
executive transition costs, COVID-19 related costs, and executive
retention costs. 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.
Twelve Weeks Ended
Twenty-Eight Weeks
Ended
July 12, 2020
July 14, 2019
July 12, 2020
July 14, 2019
Net (loss) income as reported
$
(56,261
)
$
981
$
(230,559
)
$
1,620
Interest expense, net
2,194
2,322
5,428
5,667
Income tax provision (benefit)
3,700
(15,986
)
16,399
(16,462
)
Depreciation and amortization
20,560
21,369
48,880
49,807
EBITDA
$
(29,807
)
$
8,686
$
(159,852
)
$
40,632
Goodwill impairment
$
—
$
—
$
95,414
$
—
Restaurant asset impairment
5,281
14,064
20,779
14,064
Restaurant closure and refranchising
costs
7,602
1,001
9,008
1,305
Litigation contingencies
—
—
4,500
—
Board and stockholder matter costs
967
1,152
2,449
1,152
Severance and executive transition
—
370
881
2,364
COVID-19 related costs
651
—
849
—
Executive retention
—
260
—
360
Adjusted EBITDA
$
(15,306
)
$
25,533
$
(25,972
)
$
59,877
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200811005807/en/
For media relations questions contact: Danielle
Paleafico, Coyne PR (973) 588-2000
For investor relations questions contact: Raphael Gross,
ICR (203) 682-8253
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