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 October 4, 2020.
Third Quarter 2020 Financial Summary Compared to Third
Quarter 2019
- Total revenues were $200.5 million, a decrease of 31.9%,
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 25.1% with sequential
improvement through the quarter; comparable restaurant revenues for
the fiscal periods ended August 9, September 6, and October 4, 2020
decreased 34.2%, 24.9% and 14.9%, respectively;
- Off-premise sales increased 127.2% and comprised 40.7% of total
food and beverage sales;
- Net loss was $6.2 million compared to net loss of $1.8
million;
- GAAP loss per diluted share was $0.40 compared to GAAP loss per
diluted share of $0.14;
- Adjusted loss per diluted share was $0.19 compared to adjusted
loss per diluted share of $0.24 (see Schedule I);
- Adjusted EBITDA was a loss of $0.7 million compared to adjusted
EBITDA of $14.7 million (see Schedule III); and
- The Company received $49.4 million in cash tax refunds,
including interest, subsequent to our third quarter balance sheet
date and expects to generate between $12 million to $15 million of
additional cash tax refunds within the next 12 months.
Paul J. B. Murphy III, Red Robin’s President and Chief Executive
Officer, said, "The third quarter was an inflection point for the
brand with robust sequential sales improvement throughout the
quarter, closing the traffic gap to our casual dining peers. This,
in conjunction with prudent restaurant and overhead cost structure
enhancements in place, drove better-than-expected cash flow
performance. These enhancements were achieved through actions such
as a new restaurant management structure, significant menu
rationalization, portfolio optimization, and streamlining of
corporate overhead, and we believe will deliver at least a full
percentage point of enterprise margin improvement versus 2019, once
sales normalize, with an ongoing focus to drive even more margin
improvement in the future."
Murphy continued, "Additionally, the recent receipt of a $49
million IRS tax refund, positive cash flow projections as we enter
2021, and our improved business model, solidifies our liquidity as
we resume the implementation of Donatos®, a proven growth catalyst.
Restaurants with Donatos® are currently delivering comparable
restaurant revenue growth that is 600 to 700 basis points higher
than the balance of the system. Having recently added Donatos® to
31 restaurants in the Seattle market, we are now in the process of
preparing to deploy Donatos® to approximately 120 restaurants in
2021."
Murphy concluded, "With Red Robin’s liquidity concerns put to
rest, the core business strengthening, the implementation of
Donatos® across the balance of our system that will drive
performance over the next two to three years, and a stronger
economic model, the future of Red Robin is both secure and
bright."
Third Quarter 2020 Operating Results
Total revenues, which primarily include Company-owned restaurant
revenue and franchise royalties, decreased $93.7 million to $200.5
million in the third quarter of 2020, from $294.2 million in the
third quarter of 2019. Restaurant revenue decreased $92.9 million
due to a $65.7 million decrease in comparable restaurant revenue(1)
and a $27.2 million decrease primarily from closed restaurants. The
decrease in comparable restaurant revenue was driven by restaurants
operating at limited 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 third quarter of 2020 totaled $254.5 million,
compared to $351.9 million for the third quarter of 2019. During
the third quarter of 2020, the Company continued charging and
collecting partial royalty payments and advertising contributions
from our franchisees. As of the end of the third quarter of 2020,
the Company had resumed charging full royalty and advertising
contributions to our franchisees.
Comparable restaurant revenue(1) decreased 25.1% in the third
quarter of 2020 compared to the same period a year ago, driven by a
24.6% decrease in Guest count and a 0.5% decrease in average Guest
check. The decrease in average Guest check resulted from a 3.6%
decrease in menu mix, partially offset by a 2.2% increase in
pricing and a 0.9% increase from lower discounting. The decrease in
menu mix was primarily driven by lower sales of beverages and
Finest burgers as a result of limited dining room capacity at
reopened restaurants and operating off-premise only at restaurants
with closed dining rooms.
Net loss was $6.2 million for the third quarter of 2020 compared
to a net loss of $1.8 million for the same period a year ago.
Adjusted net loss (a non-GAAP financial measure) was $2.9 million
for the third quarter of 2020 compared to adjusted net loss of $3.1
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 8.6% in the third
quarter of 2020 compared to 16.1% in the same period a year ago.
Cost of sales as a percentage of restaurant revenue decreased 40
basis points resulting from lower promotional discounts and net
favorable commodity prices. Restaurant labor costs as a percentage
of restaurant revenue increased 150 basis points primarily due to
sales deleverage and higher hourly wage 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 380 basis points primarily due to an increase in
third-party delivery fees and supply costs driven by higher
off-premise sales volumes and sales deleverage impacts on
restaurant utility costs, partially offset by a decrease in
restaurant janitorial and maintenance costs. Occupancy costs as a
percentage of restaurant revenue increased 260 basis points
primarily due to sales deleverage. 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
loss from operations and net loss, the most directly comparable
GAAP metrics.
Restaurant Revenue Performance
Twelve Weeks Ended
October 4, 2020
October 6, 2019
Average weekly sales per unit:
Company-owned – Total
$
39,418
$
51,221
Company-owned – Comparable(1)
39,616
52,904
Franchised units – Comparable(1)
$
46,964
$
52,023
Total operating weeks:
Company-owned units
4,998
5,659
Franchised units
1,237
1,080
(1)
Comparable restaurants are those
Company-owned and franchised 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 $19.2 million
in the third quarter of 2020 from $21.3 million in the third
quarter of 2019.
General and administrative costs were $15.2 million, or 7.6% of
total revenues, in the third quarter of 2020, compared to $19.2
million, or 6.5% 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 and travel and
entertainment costs.
Selling expenses were $6.1 million, or 3.0% of total revenues,
in the third quarter of 2020, compared to $17.6 million, or 6.0% 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 (gains) in the third quarter of 2020 included $4.0
million of restaurant closure costs and $0.4 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 effective tax rate for the twelve weeks ended October 4,
2020 was a 77.0% benefit, compared to a 74.1% benefit for the
twelve weeks ended October 6, 2019. The effective tax rate for the
forty weeks ended October 4, 2020 was a 1.8% benefit, compared to a
99.1% benefit for the same period in 2019. The increase in tax
benefit for the twelve weeks ended October 4, 2020 is primarily due
to a decrease in income and the release of $12.7 million in a
previously recognized valuation allowance. The decrease in tax
benefit for the forty weeks ended October 4, 2020 is primarily due
to a $67.1 million net valuation allowance and decrease in current
year tax credits, partially offset by a decrease in income and the
favorable rate impact of net operating loss ("NOL") carrybacks
allowed as part of the CARES Act. The Company received $49.4
million in cash tax refunds, including interest, subsequent to our
third quarter balance sheet date and expects to generate between
$12 million to $15 million of additional cash tax refunds within
the next 12 months.
Loss per diluted share for the third quarter of 2020 was $0.40
compared to loss per diluted share of $0.14 in the third quarter of
2019. Excluding costs per diluted share included in Other charges
(gains) of $0.19 for restaurant closure costs and $0.02 for
COVID-19 related costs, adjusted loss per diluted share for the
third quarter ended October 4, 2020 was $0.19. Excluding a gain per
diluted share included in Other charges (gains) of $0.23 for lease
terminations for previously closed restaurants offset by costs per
diluted share included in Other charges (gains) of $0.07 for board
and stockholder matters costs, $0.04 for severance and executive
transition, and $0.02 for executive retention, adjusted loss per
diluted share for the third quarter ended October 6, 2019 was
$0.24. See Schedule I for a reconciliation of adjusted net (loss)
income and adjusted (loss) earnings per share (each, a non-GAAP
financial measure) to net loss and loss per share.
Restaurant Portfolio
The following table details restaurant unit data for
Company-owned and franchised locations for the periods
indicated:
Twelve Weeks Ended
Forty Weeks Ended
October 4, 2020
October 6, 2019
October 4, 2020
October 6, 2019
Company-owned:
Beginning of period
450
472
454
484
Opened during the period
—
1
—
—
Closed during the period(1)
(6)
(2)
(10)
(13)
End of period
444
471
444
471
Franchised:
Beginning of period
102
90
102
89
Opened during the period
1
—
1
1
End of period
103
90
103
90
Total number of restaurants
547
561
547
561
(1)
In addition to the permanent closures
during the twelve and forty weeks ended October 4, 2020, 24
Company-owned restaurants remained temporarily closed due to the
COVID-19 pandemic as of October 4, 2020. Of the 35 temporarily
closed Company-owned restaurants at the beginning of the third
fiscal quarter, six restaurants have been reopened and five
restaurants have been permanently closed during the twelve weeks
ended October 4, 2020. Additionally, six more temporarily closed
Company-owned restaurants were reopened during the beginning of our
fourth fiscal quarter.
Balance Sheet and Liquidity
As of October 4, 2020, the Company had total debt of $216.1
million, of which $9.7 million was classified as current. The
Company made net draws of $8.6 million on its credit facility
during the third quarter of 2020. As of October 4, 2020, the
Company had outstanding borrowings under its credit facility of
$215.2 million, in addition to amounts issued under letters of
credit of $7.9 million. Amounts issued under letters of credit
reduce the amount available under the credit facility but are not
recorded as debt. As of October 4, 2020, the Company had
approximately $97 million in liquidity, including cash on hand and
available borrowing capacity under its credit facility, which does
not include $49.4 million in cash tax refunds, including interest,
received subsequent to our third quarter balance sheet date. A
portion of this tax refund was used to make a $42 million repayment
on the Company's credit facility on October 30, 2020.
COVID-19 Business Update
Net comparable restaurant revenue and average weekly net sales
per Company-owned restaurant for the Company's 28 day accounting
periods through the first period of our fourth fiscal quarter ended
November 1, 2020 are as follows:
Period Ended(2)
Company-owned Restaurants
9-Aug
6-Sept
4-Oct
1-Nov(3)
Net comparable restaurant revenues
(34.2)%
(24.9)%
(14.9)%
(15.4)%
Average weekly net sales per
restaurant
$36,830
$39,728
$41,731
$42,509
# of comparable Company-owned
restaurants(1)
412
412
412
412
(1)
Comparable restaurants are those
Company-owned restaurants that have operated five full quarters as
of the period presented. Restaurant count shown is as of the end of
the period presented.
(2)
The period ended August 9, September 6,
and October 4, 2020 comprise the Company's third fiscal quarter.
The period ended November 1, 2020 falls within our fourth fiscal
quarter, and amounts presented for the period are preliminary.
(3)
Sales performance at restaurants with
reopened dining rooms during the period ended November 1, 2020 was
negatively impacted by rising COVID-19 cases resulting in new
restrictions lowering dining room capacity in certain states and
localities. The negative impact was partially offset by sales
benefits from expanded outdoor seating and increased use of booth
partitions, improved off-premise sales performance in California,
and average check growth during the period. Additionally, Halloween
shifted from a Thursday to a Saturday in 2020, negatively impacting
comparable restaurant revenues by approximately 1.0% to 2.0% for
the period ended November 1, 2020.
Restaurants with Open Indoor Dining Rooms
As of November 1, 2020, the Company has reopened 370 total
(comparable and non-comparable) indoor dining rooms with limited
capacity, representing approximately 89% of currently open
Company-owned restaurants. Notably, these restaurants have on
average maintained off-premise sales that are approximately 35% of
sales mix after reopening dining rooms.
Net comparable restaurant revenue and average weekly net sales
per Company-owned restaurant with reopened indoor dining rooms for
the Company's 28 day accounting periods through the period ended
November 1, 2020 is as follows:
Period Ended(2)
Reopened Company-owned Restaurant
Indoor Dining Rooms
9-Aug
6-Sept
4-Oct
1-Nov(3)
Net comparable restaurant revenues
(29.1)%
(20.1)%
(9.5)%
(13.7)%
Average weekly net sales per
restaurant
$38,779
$41,272
$43,034
$42,778
# of comparable Company-owned
restaurants(1)
340
347
381
362
(1)
Net sales performance for Company-owned
restaurants with reopened indoor dining rooms for the full period
presented. Restaurant count is as of the end of the period
presented.
(2)
The period ended August 9, September 6,
and October 4, 2020 comprise the Company's third fiscal quarter.
The period ended November 1, 2020 falls within our fourth fiscal
quarter, and amounts presented for the period are preliminary.
(3)
Sales performance at restaurants with
reopened dining rooms during the period ended November 1, 2020 was
negatively impacted by rising COVID-19 cases resulting in new
restrictions lowering dining room capacity in certain states and
localities. The negative impact was partially offset by sales
benefits from expanded outdoor seating and increased use of booth
partitions, improved off-premise sales performance in California,
and average check growth during the period. Additionally, Halloween
shifted from a Thursday to a Saturday in 2020, negatively impacting
comparable restaurant revenues by approximately 1.0% to 2.0% for
the period ended November 1, 2020.
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
third quarter 2020 results today at 5:00 p.m. ET. The conference
call can be accessed live over the phone by dialing (212) 231-2904.
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 21971321. The replay will be available through
Thursday, November 12, 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 540 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 improved sales trajectory, Guest satisfaction scores,
seating expansion and increased indoor and outdoor dining capacity
and its effect on sales, strategic plan and transformation of our
business, future performance, preliminary results including net
comparable restaurant revenue and average weekly net sales per
restaurant, restaurant level operating profit margin improvements,
expectations for cash balance, tax refunds, cost structure
enhancements, enterprise margin improvement, free cash flow
generation and timing thereof, anticipated rollout of Donatos® to
additional locations and timing thereof, sales driving initiatives
and marketing, average check growth, 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 rapidly
evolving nature of the COVID-19 pandemic and related containment
measures, including the potential for a complete shutdown of
Company restaurants; the extent of the impact of the COVID-19
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
COVID-19 related government orders and restrictions, including in
California where a substantial number of our restaurants are
located; economic, public health, and political conditions that
impact consumer confidence and spending, including the impact of
COVID-19; the effect of the COVID-19 pandemic on labor, staffing,
and 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,
suppliers, licensees, vendors, and other third parties providing
goods or services to the Company; the Company's ability to continue
to implement our seating expansion plans and the timing thereof,
including factors that are under control of government agencies,
landlords, and other third parties; adverse weather conditions in
regions in which the Company’s restaurants are located and the
timing thereof; the impact of political protests and curfews
imposed by state and local governments; the effect of COVID-19 on
our supply chain and the cost, availability, and timing of
obtaining key products, distribution, labor, and energy; the
effectiveness of the Company's marketing and menu strategies and
promotions; the effectiveness of the Company's strategic
initiatives including service model, technology solutions, and
sales building initiatives; the amount and timing of cash tax
refunds received as a result of the CARES Act; 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
Forty Weeks Ended
October 4, 2020
October 6, 2019
October 4, 2020
October 6, 2019
Revenues:
Restaurant revenue
$
197,009
$
289,862
$
658,587
$
992,764
Franchise royalties, fees and other
revenue
3,469
4,360
9,078
19,305
Total revenues
200,478
294,222
667,665
1,012,069
Costs and expenses:
Restaurant operating costs (exclusive of
depreciation and amortization shown separately below):
Cost of sales
46,037
69,017
155,243
235,119
Labor
74,344
104,870
255,652
354,302
Other operating
37,631
44,317
124,585
142,882
Occupancy
22,099
24,942
76,514
85,420
Depreciation and amortization
19,173
21,280
68,053
71,087
General and administrative
15,190
19,220
56,054
71,101
Selling
6,094
17,556
26,429
49,025
Pre-opening costs and acquisition
costs
89
—
245
319
Other charges (gains)
4,416
(1,757)
138,296
17,488
Total costs and expenses
225,073
299,445
901,071
1,026,743
Loss from operations
(24,595)
(5,223)
(233,406)
(14,674)
Other expense:
Interest expense, net and other
2,280
1,812
7,629
7,203
Loss before income taxes
(26,875)
(7,035)
(241,035)
(21,877)
Income tax benefit
(20,696)
(5,214)
(4,297)
(21,676)
Net loss
$
(6,179)
$
(1,821)
$
(236,738)
$
(201)
Loss per share:
Basic
$
(0.40)
$
(0.14)
$
(16.98)
$
(0.02)
Diluted
$
(0.40)
$
(0.14)
$
(16.98)
$
(0.02)
Weighted average shares outstanding:
Basic
15,540
12,959
13,945
12,967
Diluted
15,540
12,959
13,945
12,967
RED ROBIN GOURMET BURGERS,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except
per share amounts)
(Unaudited)
October 4, 2020
December 29, 2019
Assets:
Current Assets:
Cash and cash equivalents
$
27,367
$
30,045
Accounts receivable, net
9,024
22,372
Inventories
24,496
26,424
Income tax receivable
63,066
5,308
Prepaid expenses and other current
assets
11,652
21,338
Total current assets
135,605
105,487
Property and equipment, net
446,083
518,013
Right of use assets, net
415,948
426,248
Goodwill
—
96,397
Intangible assets, net
25,440
29,975
Other assets, net
10,195
61,460
Total assets
$
1,033,271
$
1,237,580
Liabilities and Stockholders'
Equity:
Current Liabilities:
Accounts payable
$
18,940
$
33,040
Accrued payroll and payroll related
liabilities
26,878
35,221
Unearned revenue
42,564
54,223
Current portion of lease obligations
62,032
42,699
Current portion of long-term debt
9,692
—
Accrued liabilities and other
42,987
29,403
Total current liabilities
203,093
194,586
Long-term debt
206,375
206,875
Long-term portion of lease obligations
450,751
465,435
Other non-current liabilities
19,858
10,164
Total liabilities
880,077
877,060
Stockholders' Equity:
Common stock; $0.001 par value: 45,000
shares authorized; 20,449 and 17,851 shares issued; 15,548 and
12,923 shares outstanding as of October 4, 2020 and December 29,
2019
20
18
Preferred stock, $0.001 par value: 3,000
shares authorized; no shares issued and outstanding as of October
4, 2020 and December 29, 2019
—
—
Treasury stock, 4,901 and 4,928 shares, at
cost as of October 4, 2020 and December 29, 2019
(199,908)
(202,313)
Paid-in capital
242,048
213,922
Accumulated other comprehensive loss, net
of tax
(5,494)
(4,373)
Retained earnings
116,528
353,266
Total stockholders' equity
153,194
360,520
Total liabilities and stockholders'
equity
$
1,033,271
$
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 forty weeks ended October 4, 2020, and
October 6, 2019 net loss and basic and diluted loss per share,
excluding the effects of goodwill impairment, restaurant asset
impairment, litigation contingencies, board and stockholder matters
costs, restaurant closure and refranchising costs (gains),
severance and executive transition costs, COVID-19 related costs,
executive retention costs, and related income tax effects. The
Company believes the presentation of net loss and loss 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
Forty Weeks Ended
October 4, 2020
October 6, 2019
October 4, 2020
October 6, 2019
Net loss as reported
$
(6,179)
$
(1,821)
$
(236,738)
$
(201)
Goodwill impairment
—
—
95,414
—
Restaurant asset impairment
—
—
20,779
14,064
Restaurant closure and refranchising costs
(gains)
3,982
(3,922)
12,990
(2,617)
Litigation contingencies
—
—
4,500
—
Board and stockholder matter costs
4
1,311
2,453
2,463
COVID-19 related costs
430
—
1,279
—
Severance and executive transition
—
594
881
2,958
Executive retention
—
260
—
620
Income tax (benefit) expense
(1,148)
457
(35,957)
(4,547)
Adjusted net (loss) income
$
(2,911)
$
(3,121)
$
(134,399)
$
12,740
Basic loss per share:
Net loss as reported
$
(0.40)
$
(0.14)
$
(16.98)
$
(0.02)
Goodwill impairment
—
—
6.84
—
Restaurant asset impairment
—
—
1.49
1.08
Restaurant closure and refranchising costs
(gains)
0.26
(0.30)
0.93
(0.20)
Litigation contingencies
—
—
0.32
—
Board and stockholder matter costs
—
0.10
0.18
0.19
COVID-19 related costs
0.03
—
0.09
—
Severance and executive transition
—
0.05
0.06
0.23
Executive retention
—
0.02
—
0.05
Income tax (benefit) expense
(0.08)
0.03
(2.57)
(0.35)
Adjusted (loss) earnings per share -
basic
$
(0.19)
$
(0.24)
$
(9.64)
$
0.98
Diluted loss per share:
Net loss as reported
$
(0.40)
$
(0.14)
$
(16.98)
$
(0.02)
Goodwill impairment
—
—
6.84
—
Restaurant asset impairment
—
—
1.49
1.08
Restaurant closure and refranchising costs
(gains)
0.26
(0.30)
0.93
(0.20)
Litigation contingencies
—
—
0.32
—
Board and stockholder matter costs
—
0.10
0.18
0.19
COVID-19 related costs
0.03
—
0.09
—
Severance and executive transition
—
0.05
0.06
0.23
Executive retention
—
0.02
—
0.05
Income tax (benefit) expense
(0.08)
0.03
(2.57)
(0.35)
Adjusted (loss) earnings per share -
diluted
$
(0.19)
$
(0.24)
$
(9.64)
$
0.98
Weighted average shares outstanding
Basic
15,540
12,959
13,945
12,967
Diluted(1)
15,540
12,959
13,945
13,047
(1)
For the forty weeks ended October 6, 2019,
the impact of dilutive shares is included in the calculation as the
adjustments to GAAP net loss for the period resulted in adjusted
net income. For diluted shares reported on the condensed
consolidated statement of operations, the impact of dilutive shares
is excluded due to the reported GAAP net loss for the period.
Schedule II
Reconciliation of Non-GAAP Restaurant-Level
Operating Profit to Loss from Operations and Net Loss (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 loss from operations or net
loss 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 forty weeks ended October 4, 2020 and October 6,
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
Forty Weeks Ended
October 4, 2020
October 6, 2019
October 4, 2020
October 6, 2019
Restaurant revenues
$
197,009
98.3
%
$
289,862
98.5
%
$
658,587
98.6
%
$
992,764
98.1
%
Restaurant operating costs(1):
Cost of sales
46,037
23.4
%
69,017
23.8
%
155,243
23.6
%
235,119
23.7
%
Labor
74,344
37.7
%
104,870
36.2
%
255,652
38.8
%
354,302
35.7
%
Other operating
37,631
19.1
%
44,317
15.3
%
124,585
18.9
%
142,882
14.4
%
Occupancy
22,099
11.2
%
24,942
8.6
%
76,514
11.6
%
85,420
8.6
%
Restaurant-level operating profit
16,898
8.6
%
46,716
16.1
%
46,593
7.1
%
175,041
17.6
%
Add – Franchise royalties, fees and other
revenue
3,469
1.7
%
4,360
1.5
%
9,078
1.4
%
19,305
1.9
%
Deduct – other operating:
Depreciation and amortization
19,173
9.6
%
21,280
7.2
%
68,053
10.2
%
71,087
7.0
%
General and administrative expenses
15,190
7.6
%
19,220
6.5
%
56,054
8.4
%
71,101
7.0
%
Selling
6,094
3.0
%
17,556
6.0
%
26,429
4.0
%
49,025
4.8
%
Pre-opening & acquisition costs
89
—
%
—
—
%
245
—
%
319
—
%
Other charges (gains)
4,416
2.2
%
(1,757)
(0.6)
%
138,296
20.7
%
17,488
1.7
%
Total other operating
44,962
22.4
%
56,299
19.1
%
289,077
43.3
%
209,020
20.7
%
Loss from operations
(24,595)
(12.3)
%
(5,223)
(1.8)
%
(233,406)
(35.0)
%
(14,674)
(1.4)
%
Interest expense, net and other
2,280
1.1
%
1,812
0.6
%
7,629
1.1
%
7,203
0.7
%
Income tax benefit
(20,696)
(10.3)
%
(5,214)
(1.8)
%
(4,297)
(0.6)
%
(21,676)
(2.1)
%
Total other
(18,416)
(9.2)
%
(3,402)
(1.2)
%
3,332
0.5
%
(14,473)
(1.4)
%
Net loss
$
(6,179)
(3.1)
%
$
(1,821)
(0.6)
%
$
(236,738)
(35.5)
%
$
(201)
—
%
(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 to EBITDA and
Adjusted EBITDA (In thousands, unaudited)
The Company defines EBITDA as net loss 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 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 loss. Providing
net loss 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 loss, including
asset impairments and income tax valuation adjustments. The
reconciliations of adjusted EBITDA to net loss 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
Forty Weeks Ended
October 4, 2020
October 6, 2019
October 4, 2020
October 6, 2019
Net loss as reported
$
(6,179)
$
(1,821)
$
(236,738)
$
(201)
Interest expense, net
2,537
2,229
7,965
7,896
Income tax benefit
(20,696)
(5,214)
(4,297)
(21,676)
Depreciation and amortization
19,173
21,280
68,053
71,087
EBITDA
$
(5,165)
$
16,474
$
(165,017)
$
57,106
Goodwill impairment
$
—
$
—
$
95,414
$
—
Restaurant asset impairment
—
—
20,779
14,064
Restaurant closure and refranchising costs
(gains)
3,982
(3,922)
12,990
(2,617)
Litigation contingencies
—
—
4,500
—
Board and stockholder matter costs
4
1,311
2,453
2,463
COVID-19 related costs
430
—
1,279
—
Severance and executive transition
—
594
881
2,958
Executive retention
—
260
—
620
Adjusted EBITDA
$
(749)
$
14,717
$
(26,721)
$
74,594
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105006050/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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