Red Robin Gourmet Burgers Reports Earnings for the Fiscal Third Quarter 2011
Restaurant-level operating profit margin increased to 18.8% from 17.5%
Red Robin Gourmet Burgers, Inc., (NASDAQ: RRGB), reported financial results for the 12 weeks ended October 2, 2011.
“We are very pleased with our third quarter 2011 performance, which continues our growth of restaurant revenues and expanding operating margins”
During the Company’s fiscal third quarter 2011:
- Adjusted, earnings per diluted share were $0.24 compared to $0.08 during the comparable period a year ago; GAAP earnings per diluted share were $0.14 compared to a net loss of $0.27 in the fiscal third quarter of 2010.
- Company-owned comparable restaurant gross sales increased 2.1% and restaurant revenues were up 5.8% compared to the same period a year ago.
- Restaurant-level operating profit margin increased to 18.8% from 17.5% (See Note 1 below).
- The Company opened two company-owned Red Robin® restaurants.
Adjusted net income for the 12 weeks ended October 2, 2011 was $3.7 million compared to $1.2 million earned for the 12 weeks ending October 3, 2010. Adjusted net income excludes asset impairment and executive transition costs of $1.6 million and $5.4 million in 2011 and 2010, respectively, as detailed in Schedule I below.
Third quarter 2011 adjusted earnings per diluted share were $0.24 compared to $0.08 for the third quarter 2010. GAAP net income was $2.1 million or $0.14 per diluted share for the 2011 third quarter. These results compare to a net loss of $4.2 million, or $0.27 per diluted share for the 2010 third quarter. Schedule I of this earnings release reconciles the impact on net income and earnings per share as reported on a GAAP basis to adjusted amounts.
“We are very pleased with our third quarter 2011 performance, which continues our growth of restaurant revenues and expanding operating margins,” said Steve Carley, Red Robin Gourmet Burgers, Inc.’s chief executive officer. “As we continue to execute on our strategic initiatives, we are building a foundation for sustained long-term growth. Our top line performance and expense management during the third quarter this year reflects our team members’ continued focus on achieving our goals.”
Growing Operating Results
Total Company revenues, which include company-owned restaurant sales and franchise royalties, increased 5.9% to $206.2 million in the fiscal third quarter of 2011 versus $194.8 million in the same period last year. Franchise royalties and fees increased 8.6% to $3.3 million in the fiscal third quarter of 2011 compared to $3.0 million for the same period in 2010.
Comparable restaurant gross sales increased 2.1% for company-owned restaurants in the fiscal third quarter of 2011 compared to the fiscal third quarter of 2010, driven by a 5.3% increase in average guest check, partially offset by a 3.2% decrease in guest counts.
Average weekly gross sales in company-owned restaurants increased to $53,966 per unit in the third quarter (3,870 operating weeks) compared to $52,295 a year ago (3,730 operating weeks). In the Company’s franchised restaurants, average weekly gross sales per unit were $51,062 in the third quarter, an increase of 2.7% compared to $49,736 last year.
Restaurant-level operating profit margins at company-owned restaurants were 18.8% in the fiscal third quarter of 2011 compared to 17.5% in the fiscal third quarter of 2010. As a percentage of restaurant revenue, fiscal third quarter 2011 restaurant-level operating profit margins improved 130 basis points as a result of a 200 basis point decrease in labor costs and a 80 basis point decrease in other operating costs, partially offset by a 110 basis point increase in food and beverage costs and a 30 basis point increase in occupancy 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.
Selling, general and administrative (“SG&A”) expenses were $22.9 million in the fiscal third quarter of 2011 and $22.6 million in the fiscal third quarter of 2010. SG&A includes $0.5 million and $2.3 million related to executive transition costs in the third quarter of 2011 and 2010 respectively. The increase in SG&A expenses in the third quarter of 2011 excluding executive transition costs was driven primarily by higher variable compensation costs and expensed investments in the Company’s new information systems.
During the third quarter of 2011, the Company determined that a restaurant was impaired based on expected future financial performance. The carrying value of the restaurant was compared to estimated fair value of those assets resulting in a $1.9 million pre-tax non-cash asset impairment charge.
The Company had an effective tax benefit of 21.7% in the fiscal third quarter of 2011, primarily as a result of Hire Act tax credits, compared to an effective tax benefit of 41.3% in the fiscal third quarter 2010. Year to date, the Company’s effective tax rate has been 7.5% and the Company anticipates that the effective tax rate for the full fiscal year 2011 will be approximately 7.5%.
Balance Sheet and Liquidity
On October 2, 2011, the Company had cash and cash equivalents of $27.1 million and total debt of $157.1 million, including $10.8 million of capital lease liabilities. Year to date through the third quarter 2011, cash from operations totaled $73.1 million compared to $51.6 million for the same period in 2011. Year to date capital expenditures totaled $32.7 million compared to $25.8 million through the third quarter 2010.
The Company’s Board of Directors had previously authorized up to $50.0 million for repurchases of the Company’s common stock. During the fiscal third quarter of 2011, the Company repurchased approximately 681,000 shares for $20.3 million. Year to date in 2011, the Company has repurchased approximately 1.1 million shares for a total $30.7 million. On October 26, 2011, the Company’s Board revised the common share repurchase authorization providing for the repurchase of up to $50.0 million through December 31, 2012.
Restaurant Openings
As of the end of the fiscal third quarter 2011, there were 323 company-owned restaurants, two of which the Company opened in the third quarter, and 137 franchised Red Robin® restaurants. The Company has opened two additional company-owned restaurants in the fourth quarter and plans to open an additional full-size prototype and the first of its smaller prototype restaurants in November 2011. During fiscal year 2011, the Company expects to have opened 12 new full-size company-owned restaurants and one smaller prototype. Franchisees opened three new restaurants in 2011, the last of which opened early in the fiscal fourth quarter.
| RED ROBIN GOURMET BURGERS, INC. | |||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Twelve Weeks Ended | Forty Weeks Ended | ||||||||||||||||
| October 2, | October 3, | October 2, | October 3, | ||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| Revenues: | |||||||||||||||||
| Restaurant revenue | $ | 202,679 | $ | 191,612 | $ | 696,338 | $ | 657,094 | |||||||||
| Franchise royalties and fees and other revenues | 3,565 | 3,231 | 12,531 | 14,602 | |||||||||||||
| Total revenues | 206,244 | 194,843 | 708,869 | 671,696 | |||||||||||||
| Costs and expenses: | |||||||||||||||||
|
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): |
|||||||||||||||||
| Cost of sales | 51,688 | 46,723 | 175,599 | 160,432 | |||||||||||||
|
Labor (includes $133, $211, $508 and $631 of stock-based compensation, respectively) |
68,143 | 68,231 | 235,588 | 233,080 | |||||||||||||
| Operating | 29,226 | 29,080 | 96,968 | 96,695 | |||||||||||||
| Occupancy | 15,458 | 14,074 | 50,215 | 48,361 | |||||||||||||
| Depreciation and amortization | 13,006 | 13,341 | 42,751 | 43,777 | |||||||||||||
|
Selling, general, and administrative (includes $563, $1,349, $1,669 and $3,100 of stock-based compensation, respectively) |
22,926 | 22,612 | 79,508 | 73,455 | |||||||||||||
| Pre-opening costs | 622 | 740 | 2,799 | 1,992 | |||||||||||||
| Asset impairment charge | 1,919 | 6,116 | 1,919 | 6,116 | |||||||||||||
| Total costs and expenses | 202,988 | 200,917 | 685,347 | 663,908 | |||||||||||||
| Income (loss) from operations | 3,256 | (6,074 | ) | 23,522 | 7,788 | ||||||||||||
| Other expense: | |||||||||||||||||
| Interest expense, net and other | 1,556 | 1,106 | 4,424 | 4,228 | |||||||||||||
| Income (loss) before income taxes | 1,700 | (7,180 | ) | 19,098 | 3,560 | ||||||||||||
| Income tax expense (benefit) | (369 | ) | (2,967 | ) | 1,426 | (1,512 | ) | ||||||||||
| Net income (loss) | $ | 2,069 | $ | (4,213 | ) | $ | 17,672 | $ | 5,072 | ||||||||
| Earnings (loss) per share: | |||||||||||||||||
| Basic | $ | 0.14 | $ | (0.27 | ) | $ | 1.17 | $ | 0.33 | ||||||||
| Diluted | $ | 0.14 | $ | (0.27 | ) | $ | 1.15 | $ | 0.32 | ||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 15,024 | 15,519 | 15,154 | 15,494 | |||||||||||||
| Diluted | 15,277 | 15,519 | 15,395 | 15,668 | |||||||||||||
| RED ROBIN GOURMET BURGERS, INC. | ||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
| (In thousands, except share amounts) | ||||||||||
| (Unaudited) | ||||||||||
| October 2, | December 26, | |||||||||
| 2011 | 2010 | |||||||||
| Assets: | ||||||||||
| Current Assets: | ||||||||||
| Cash and cash equivalents | $ | 27,094 | $ | 17,889 | ||||||
| Accounts receivable, net | 8,277 | 6,983 | ||||||||
| Inventories | 16,616 | 16,037 | ||||||||
| Prepaid expenses and other current assets | 9,665 | 7,600 | ||||||||
| Income tax receivable | 540 | 3,822 | ||||||||
| Deferred tax asset | 2,189 | 1,294 | ||||||||
| Total current assets | 64,381 | 53,625 | ||||||||
| Property and equipment, net | 405,453 | 414,048 | ||||||||
| Goodwill | 61,769 | 61,769 | ||||||||
| Intangible assets, net | 39,890 | 43,056 | ||||||||
| Other assets, net | 9,155 | 6,759 | ||||||||
| Total assets | $ | 580,648 | $ | 579,257 | ||||||
| Liabilities and Stockholders’ Equity: | ||||||||||
| Current Liabilities: | ||||||||||
| Trade accounts payable | $ | 12,457 | $ | 12,776 | ||||||
| Construction related payables | 4,009 | 2,943 | ||||||||
| Accrued payroll and payroll related liabilities | 32,967 | 29,137 | ||||||||
| Unearned revenue | 10,461 | 14,391 | ||||||||
| Accrued liabilities | 26,238 | 18,592 | ||||||||
| Current portion of term loan notes payable | 9,375 | 18,739 | ||||||||
| Current portion of long-term debt and capital lease obligations | 734 | 838 | ||||||||
| Total current liabilities | 96,241 | 97,416 | ||||||||
| Deferred rent | 39,437 | 34,214 | ||||||||
| Notes payable, long-term portion | 136,875 | 85,214 | ||||||||
| Other long-term debt and capital lease obligations | 10,069 | 53,731 | ||||||||
| Other non-current liabilities | 5,350 | 8,021 | ||||||||
| Total liabilities | 287,972 | 278,596 | ||||||||
| Stockholders’ Equity: | ||||||||||
|
Common stock; $0.001 par value: 30,000,000 shares authorized; 17,268,395 and 17,101,897 shares issued; 14,663,369 and 15,600,867 shares outstanding |
17 | 17 | ||||||||
|
Preferred stock, $0.001 par value: 3,000,000 shares authorized; no shares issued and outstanding |
- | - | ||||||||
| Treasury stock, 2,605,026 and 1,501,030 shares, at cost | (80,985 | ) | (50,321 | ) | ||||||
| Paid-in capital | 176,779 | 171,558 | ||||||||
| Accumulated other comprehensive income (loss), net of tax | (411 | ) | (197 | ) | ||||||
| Retained earnings | 197,276 | 179,604 | ||||||||
| Total stockholders’ equity | 292,676 | 300,661 | ||||||||
| Total liabilities and stockholders’ equity | $ | 580,648 | $ | 579,257 | ||||||
| Twelve Weeks Ended | Forty Weeks Ended | |||||||||||||||||
| October 2, 2011 | October 3, 2010 | October 2, 2011 | October 3, 2010 | |||||||||||||||
| Net income (loss) as reported | $ | 2,069 | $ | (4,213 | ) | $ | 17,672 | $ | 5,072 | |||||||||
| Executive transition and severance expense | 541 | 2,329 | 2,228 | 2,512 | ||||||||||||||
| Asset impairment | 1,919 | 6,116 | 1,919 | 6,116 | ||||||||||||||
| Initial cumulative gift card breakage income | - | - | (438 | ) | (3,507 | ) | ||||||||||||
| Income tax benefit (expense) | (846 | ) | (3,045 | ) | (1,182 | ) | (2,051 | ) | ||||||||||
| Adjusted net income | $ | 3,683 | $ | 1,187 | $ | 20,199 | $ | 8,142 | ||||||||||
| Basic net income (loss) per share: | ||||||||||||||||||
| Net income (loss) as reported | $ | 0.14 | $ | (0.27 | ) | $ | 1.17 | 0.33 | ||||||||||
| Executive transition and severance expense | 0.04 | 0.15 | 0.15 | 0.16 | ||||||||||||||
| Asset impairment | 0.13 | 0.39 | 0.13 | 0.40 | ||||||||||||||
| Initial cumulative gift card breakage income | - | - | (0.03 | ) | (0.23 | ) | ||||||||||||
| Income tax benefit (expense) | (0.06 | ) | (0.19 | ) | (0.09 | ) | (0.13 | ) | ||||||||||
| Adjusted earnings per basic share | $ | 0.25 | $ | 0.08 | $ | 1.33 | $ | 0.53 | ||||||||||
| Diluted net income (loss) per share: | ||||||||||||||||||
| Net income (loss) as reported | $ | 0.14 | $ | (0.27 | ) | $ | 1.15 | $ | 0.32 | |||||||||
| Executive transition and severance expense | 0.04 | 0.15 | 0.14 | 0.16 | ||||||||||||||
| Asset impairment | 0.13 | 0.39 | 0.12 | 0.39 | ||||||||||||||
| Initial cumulative gift card breakage income | - | - | (0.03 | ) | (0.22 | ) | ||||||||||||
| Income tax benefit (expense) | (0.07 | ) | (0.19 | ) | (0.07 | ) | (0.13 | ) | ||||||||||
| Adjusted earnings per diluted share | $ | 0.24 | $ | 0.08 | $ | 1.31 | $ | 0.52 | ||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||
| Basic | 15,024 | 15,519 | 15,154 | 15,494 | ||||||||||||||
| Diluted | 15,277 | 15,704 | 15,395 | 15,668 | ||||||||||||||
| Twelve Weeks Ended | Forty Weeks Ended | ||||||||||||||||||||||||||||||||||||
| October 2, 2011 | October 3, 2010 | October 2, 2011 | October 3, 2010 | ||||||||||||||||||||||||||||||||||
| Restaurant revenues | $ | 202,679 | 98.3 | % | $ | 191,612 | 98.3 | % | $ | 696,338 | 98.2 | % | $ | 657,094 | 97.8 | % | |||||||||||||||||||||
| Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | |||||||||||||||||||||||||||||||||||||
| Cost of sales | 51,688 | 25.5 | 46,723 | 24.4 | 175,599 | 25.2 | 160,432 | 24.4 | |||||||||||||||||||||||||||||
| Labor | 68,143 | 33.6 | 68,231 | 35.6 | 235,588 | 33.8 | 233,080 | 35.5 | |||||||||||||||||||||||||||||
| Operating | 29,226 | 14.4 | 29,080 | 15.2 | 96,968 | 13.9 | 96,695 | 14.7 | |||||||||||||||||||||||||||||
| Occupancy | 15,458 | 7.6 | 14,074 | 7.3 | 50,215 | 7.2 | 48,361 | 7.4 | |||||||||||||||||||||||||||||
| Restaurant-level operating profit | 38,164 | 18.8 | 33,504 | 17.5 | 137,968 | 19.8 | 118,526 | 18.0 | |||||||||||||||||||||||||||||
| Add – other revenues | 3,565 | 1.7 | 3,231 | 1.7 | 12,531 | 1.8 | 14,602 | 2.1 | |||||||||||||||||||||||||||||
| Deduct – other operating: | |||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 13,006 | 6.3 | 13,341 | 6.8 | 42,751 | 6.0 | 43,777 | 6.5 | |||||||||||||||||||||||||||||
| Selling, general, and administrative | 22,921 | 11.1 | 22,618 | 11.6 | 79,448 | 11.2 | 73,366 | 10.9 | |||||||||||||||||||||||||||||
| Pre-opening costs | 622 | 0.3 | 740 | 0.4 | 2,799 | 0.4 | 1,992 | 0.3 | |||||||||||||||||||||||||||||
| Asset impairment charge | 1,919 | 6,116 | 3.1 | 1,919 | 6,116 | 0.9 | |||||||||||||||||||||||||||||||
| Restaurant closure costs | 5 | 0.0 | (6 | ) | - | 60 | 0.0 | 89 | - | ||||||||||||||||||||||||||||
| Total other operating | 38,473 | 17.7 | 42,809 | 22.0 | 126,977 | 17.7 | 125,340 | 18.7 | |||||||||||||||||||||||||||||
| Income (loss) from operations | 3,256 | 1.6 | (6,074 | ) | (3.1 | ) | 23,522 | 3.3 | 7,788 | 1.2 | |||||||||||||||||||||||||||
| Total other expenses, net | 1,556 | 0.8 | 1,106 | 0.6 | 4,424 | 0.6 | 4,228 | 0.6 | |||||||||||||||||||||||||||||
| Income tax expense (benefit) | (369 | ) | (0.2 | ) | (2,967 | ) | (1.5 | ) | 1,426 | 0.2 | (1,512 | ) | (0.2 | ) | |||||||||||||||||||||||
| Total other | 1,187 | 0.6 | (1,861 | ) | (0.9 | ) | 5,850 | 0.8 | 2,716 | 0.4 | |||||||||||||||||||||||||||
| Net income (loss) | $ | 2,069 | 1.0 | % | $ | (4,213 | ) | 2.2 | % | $ | 17,672 | 2.5 | % | $ | 5,072 | 0.8 | % | ||||||||||||||||||||
Certain percentage amounts in the table above do not total due to rounding as well as the fact that restaurant operating costs are expressed as a percentage of restaurant revenues, as opposed to total revenues.
Logos, product and company names mentioned are the property of their respective owners.
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