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Red Robin Gourmet Burgers Reports Results for the Fiscal Third Quarter Ended October 6, 2019

GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)--Nov. 5, 2019-- 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 6, 2019.

Third Quarter 2019 Financial Summary Compared to Third Quarter 2018

  • Comparable restaurant revenue increased 1.6% (using constant currency rates), the third consecutive quarter of improved trends;
  • Comparable restaurant guest counts decreased 3.1%;
  • Off-premise sales, including catering, increased 37.3% and comprised 13.2% of total food and beverage sales, including catering;
  • Total revenues were $294.2 million, a decrease of 0.2%;
  • GAAP loss per diluted share was $0.14 compared to earnings per diluted share of $0.13;
  • Adjusted loss per diluted share was $0.24 compared to adjusted earnings per diluted share of $0.16 (see Schedule I);
  • Net loss was $1.8 million compared to net income of $1.7 million; and
  • Adjusted EBITDA was $14.7 million compared to $24.2 million (see Schedule III).

Paul J.B. Murphy III, Red Robin’s President and Chief Executive Officer, said, “I am encouraged by the current momentum at Red Robin, reflected in rising operating and guest metrics, complemented by an effective new omni-channel creative campaign, that are driving better topline results. The team is making progress strengthening and transforming the dine-in business while investing in our strategic priorities. While there still is much work to do, these efforts are enabling us to build our brand reputation and the confidence of our Guests, which are critical to driving sustainable improvements in sales and profitability for years to come.”

Murphy added, “On behalf of the entire Red Robin team, I would like to thank Pattye Moore for her tremendous contributions during her tenure as interim CEO and for her service to the Company over the past 12 years. Under her effective leadership, the executive team established a stronger operational foundation that we can now build upon to create value for stockholders, Guests, Team Members, and other stakeholders.”

Third Quarter 2019 Operating Results

Total revenues, which primarily include Company-owned restaurant revenue and franchise royalties, decreased 0.2% to $294.2 million in the third quarter of 2019, from $294.9 million in the third quarter of 2018. Restaurant revenue decreased $0.4 million due to a $4.8 million decrease from restaurant closures, partially offset by a $4.4 million, or 1.6%, increase in comparable restaurant revenue.

System-wide restaurant revenue (which includes franchised units) for the third quarter of 2019 totaled $351.9 million, compared to $351.0 million for the third quarter of 2018.

Comparable restaurant revenue(1) increased 1.6% in the third quarter of 2019 compared to the same period a year ago, driven by a 4.7% increase in average guest check, partially offset by a 3.1% decrease in guest count. The increase in average guest check comprised a 3.2% increase in menu mix and a 1.5% increase in pricing. The increase in menu mix was primarily driven by the Company’s current menu and promotional strategy, resulting in lower Tavern burger sales and higher Finest burger and entrée sales.

Net loss was $1.8 million for the third quarter of 2019 compared to a net income of $1.7 million for the same period a year ago. Adjusted net loss was $3.1 million for the third quarter of 2019 compared to adjusted net income of $2.1 million for the same period a year ago (see Schedule I).

Restaurant-level operating profit margin (a non-GAAP financial measure) was 16.1% in the third quarter of 2019 compared to 16.8% in the same period a year ago. Cost of sales as a percentage of restaurant revenue remained flat. Restaurant labor costs as a percentage of restaurant revenue increased 90 basis points due to higher average wage rates and increased manager staffing levels. Other restaurant operating costs increased 30 basis points primarily due to a 70 basis point increase in third party delivery fees, partially offset by a 20 basis point decrease in utilities and a 20 basis point decrease in other restaurant expenses. Occupancy costs decreased 60 basis points due to restaurant closures. 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, in each case under GAAP.

________________________________________
 

(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 are comparable for the entirety of both periods presented.

Restaurant Revenue Performance

 

Third Quarter 2019

 

Third Quarter 2018

Average weekly sales per unit(1):

 

 

 

Company-owned – Total

$

51,221

 

$

49,925

Company-owned – Comparable

$

51,304

 

$

50,454

Franchised units – Comparable

$

57,788

 

$

57,267

Total operating weeks:

 

 

 

Company-owned units

 

5,659

 

 

5,805

Franchised units

 

1,080

 

 

1,064

________________________________________
 

(1)

Calculated using constant currency rates. Using historical currency rates, the average weekly sales per unit in the third quarter of 2018 for Company-owned – Total and Company-owned – Comparable was $49,926 and $50,455. The Company calculates non-GAAP constant currency average weekly sales per unit by translating prior year local currency average weekly sales per unit to U.S. dollars based on current quarter average exchange rates. The Company considers non-GAAP constant currency average weekly sales per unit to be a useful metric to investors and management as they facilitate a more useful comparison of current performance to historical performance.

Other Results

Depreciation and amortization costs decreased to $21.3 million in the third quarter of 2019 from $21.8 million in the third quarter of 2018.

General and administrative costs were $19.2 million, or 6.5% of total revenues, in the third quarter of 2019, compared to $16.8 million, or 5.7% of total revenues, in the same period a year ago. The increase was primarily driven by interim CEO expenses and lower incentive based costs in 2018, partially offset by decreases in professional services and travel.

Selling expenses were $17.6 million, or 6.0% of total revenues, in the third quarter of 2019, compared to $12.0 million, or 4.1% of total revenues, during the same period a year ago. The increase was primarily driven by an increase in national and local media spend to support the launch of the Company’s new creative brand campaign.

Other gains in the third quarter of 2019 included $3.9 million in net gains related to lease terminations for previously closed restaurants, partially offset by $1.3 million of board and stockholder matter costs, $0.6 million in executive transition and severance, and $0.3 million in executive retention.

The Company had an effective tax benefit of 74.1% in the third quarter of 2019, compared to an effective tax benefit of 448.3% during the same period a year ago. The change in the twelve week effective tax benefit is primarily due to the decrease in income compared to the same period a year ago. The Company currently anticipates a full year tax benefit of $11 million to $13 million and full year cash tax payments of between $3.5 million and $4.0 million.

Loss per diluted share for the third quarter of 2019 was $0.14 compared to earnings per diluted share of $0.13 in the third quarter of 2018. Excluding a gain included in Other (gains) charges of $0.23 related to lease terminations for previously closed restaurants offset by costs included in Other (gains) charges of $0.07 for board and stockholder matter costs, $0.04 for executive transition and severance, and $0.02 for executive retention, adjusted loss per share for the third quarter ended October 6, 2019 was $0.24. Excluding charges of $0.03 for reorganization costs, adjusted earnings per diluted share for the third quarter ended October 7, 2018 were $0.16. 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

 

Twelve Weeks
Ended

 

Forty Weeks
Ended

 

Forty Weeks
Ended

 

 

October 6, 2019

 

October 7, 2018

 

October 6, 2019

 

October 7, 2018

Company-owned:

 

 

 

 

 

 

 

 

Beginning of period

 

472

 

484

 

484

 

480

Opened during the period(1)

 

1

 

2

 

 

8

Closed during the period

 

(2)

 

(1)

 

(13)

 

(3)

End of period

 

471

 

485

 

471

 

485

Franchised:

 

 

 

 

 

 

 

 

Beginning of period

 

90

 

88

 

89

 

86

Opened during the period

 

 

1

 

1

 

3

End of period

 

90

 

89

 

90

 

89

Total number of restaurants

 

561

 

574

 

561

 

574

_________________________________________________________
 

(1)

The restaurant opened during the twelve weeks ended October 6, 2019 consisted of the reopening of one restaurant which was temporarily closed in the second quarter of 2019. Restaurants opened during the twelve and forty weeks ended October 7, 2018 consisted entirely of completed new restaurant openings.

Balance Sheet and Liquidity

As of October 6, 2019, the Company had cash and cash equivalents of $20.2 million and total debt of $188.9 million. The Company funded capital expenditures with cash flow from operations and made net draws of $7.5 million on its credit facility during the third quarter of 2019. As of October 6, 2019, the Company had outstanding borrowings under its credit facility of $188.0 million, in addition to amounts issued under letters of credit of $7.5 million. Amount issued under letters of credit reduce the amount available under its credit facility but are not recorded as debt.

The Company’s lease adjusted leverage ratio was 4.55x as of October 6, 2019. The lease adjusted leverage ratio is defined in Section 1.1 of the Company’s credit facility, which is filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 5, 2016. On August 19, 2019, the Company entered into a second amendment to its credit facility to increase the lease adjusted leverage ratio to 5.0x through December 29, 2019 (see Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on August 23, 2019).

Refranchising Update

After an in-depth review, the Company has concluded it will suspend its U.S. refranchising program. Based on its analysis, the Company believes the value creation opportunity to stockholders from refranchising will be much greater once the operating fundamentals in the business have been further strengthened and the support capabilities for franchising enhanced. As the Company progresses towards these objectives, it will monitor and reassess its portfolio opportunities.

Outlook for 2019

The Company’s updated 2019 annual outlook remains the same for selling, general and administrative costs and capital expenditures. Comparable restaurant revenue, adjusted EBITDA, net income and adjusted diluted earnings per share have been updated to reflect current estimates.

  • Comparable restaurant revenue of down 1.0% to flat (using constant currency rates);
  • Selling, general and administrative costs of $154 million to $157 million;
  • Net loss of $6.3 million to $1.7 million;
  • Adjusted EBITDA, a non-GAAP measure, of $104 million to $110 million;
  • Adjusted diluted earnings per share, a non-GAAP measure, of $0.64 to $0.99, which includes the impact of an estimated tax benefit of $0.47 to $0.57; and
  • Capital expenditures of $45 million to $55 million.

Guidance Policy

The Company provides guidance as it relates to selected information related to the Company’s financial and operating performance, and such measures may differ from year to year.

Investor Conference Call and Webcast

Red Robin will host an investor conference call to discuss its third quarter 2019 results today at 5:00 p.m. ET. 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 “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 until midnight on Tuesday, November 12, 2019. The replay can be accessed by dialing (412) 317-6671. The conference ID is 13695325.

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. Whether a family dining with kids, adults grabbing a drink at the bar, or teens enjoying a meal, Red Robin offers an unparalleled experience for its Guests. 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 innovative adult beer shakes and cocktails, earning the restaurant a VIBE Vista Award for Best Beer Program in a Multi-Unit Chain Restaurant. There are more than 560 Red Robin restaurants across the United States and Canada, including locations 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, comparable restaurant revenue, selling, general and administrative costs, net (loss) income, EBITDA, earnings per share, capital expenditures, taxes, and statements under the heading “Outlook for 2019”, 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 effectiveness of the Company’s strategic initiatives, including management’s focus on a narrower range of key initiatives, the effectiveness of the Company’s overall value proposition, service, and operational improvement initiatives to drive dine-in traffic and sales; the ability to increase labor productivity through alternative labor models, and to staff and train the Company’s workforce for service execution, including the complexities related to growth of multiple revenue streams within a single restaurant location; the effectiveness of the Company’s marketing strategies and promotions to sustain and grow comparable restaurant sales; the cost and availability of key food products, distribution, labor, and energy; the ability to achieve anticipated revenue and cost savings from anticipated new technology solutions in the restaurants and timing of rollout; the ability to increase online ordering, to-go services, catering, and other off-premise sales; costs associated with increased third-party delivery services; the ability to achieve savings to the Company’s general and administrative expenses, which, by their nature, tend to be fixed costs; the Company's franchising strategy; the Company’s ability to repurchase shares at all or at the times or in the amounts we currently anticipate or to achieve anticipated benefits of a share repurchase program; the impact of the Company’s adoption of a shareholder rights plan; availability of capital or credit facility borrowings to fund the Company’s capital expenditures; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; the impact of federal, state, and local regulation of the Company’s business; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the U.S. Securities and Exchange Commission.

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Twelve Weeks
Ended

 

Twelve Weeks
Ended

 

Forty Weeks
Ended

 

Forty Weeks
Ended

 

 

October 6,
2019

 

October 7,
2018

 

October 6,
2019

 

October 7,
2018

Revenues:

 

 

 

 

 

 

 

 

Restaurant revenue

 

$

289,862

 

 

$

290,218

 

 

$

992,764

 

 

$

1,015,312

 

Franchise royalties, fees and other revenue

 

 

4,360

 

 

 

4,659

 

 

 

19,305

 

 

 

16,472

 

Total revenues

 

 

294,222

 

 

 

294,877

 

 

 

1,012,069

 

 

 

1,031,784

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

Restaurant operating costs (exclusive of depreciation
and amortization shown separately below):

 

 

 

 

 

 

 

 

Cost of sales

 

 

69,017

 

 

 

69,003

 

 

 

235,119

 

 

 

242,392

 

Labor

 

 

104,870

 

 

 

102,322

 

 

 

354,302

 

 

 

351,813

 

Other operating

 

 

44,317

 

 

 

43,612

 

 

 

142,882

 

 

 

141,305

 

Occupancy

 

 

24,942

 

 

 

26,629

 

 

 

85,420

 

 

 

88,099

 

Depreciation and amortization

 

 

21,280

 

 

 

21,819

 

 

 

71,087

 

 

 

73,335

 

General and administrative

 

 

19,220

 

 

 

16,763

 

 

 

71,101

 

 

 

65,752

 

Selling

 

 

17,556

 

 

 

12,017

 

 

 

49,025

 

 

 

44,963

 

Pre-opening costs and acquisition costs

 

 

 

387

 

 

 

319

 

 

 

2,093

 

Other (gains) charges

 

 

(1,757

)

 

 

520

 

 

 

17,488

 

 

 

17,422

 

Total costs and expenses

 

 

299,445

 

 

 

293,072

 

 

 

1,026,743

 

 

 

1,027,174

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

 

(5,223

)

 

 

1,805

 

 

 

(14,674

)

 

 

4,610

 

 

 

 

 

 

 

 

 

 

Other expense:

 

 

 

 

 

 

 

 

Interest expense, net and other

 

 

1,812

 

 

 

2,295

 

 

 

7,203

 

 

 

8,087

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(7,035

)

 

 

(490

)

 

 

(21,877

)

 

 

(3,477

)

Income tax benefit

 

 

(5,214

)

 

 

(2,199

)

 

 

(21,676

)

 

 

(7,692

)

Net (loss) income

 

$

(1,821

)

 

$

1,709

 

 

$

(201

)

 

$

4,215

 

(Loss) earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.14

)

 

$

0.13

 

 

$

(0.02

)

 

$

0.32

 

Diluted

 

$

(0.14

)

 

$

0.13

 

 

$

(0.02

)

 

$

0.32

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

12,959

 

 

 

12,994

 

 

 

12,967

 

 

 

12,977

 

Diluted

 

 

12,959

 

 

 

13,054

 

 

 

12,967

 

 

 

13,064

 

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

 

 

 

(Unaudited)
October 6, 2019

 

December 30, 2018

Assets:

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

20,211

 

 

$

18,569

 

Accounts receivable, net

 

11,470

 

 

25,034

 

Inventories

 

27,053

 

 

27,370

 

Prepaid expenses and other current assets

 

16,450

 

 

27,576

 

Total current assets

 

75,184

 

 

98,549

 

Property and equipment, net

 

522,387

 

 

565,142

 

Right of use assets, net

 

441,701

 

 

 

Goodwill

 

96,162

 

 

95,838

 

Intangible assets, net

 

30,937

 

 

34,609

 

Other assets, net

 

79,288

 

 

49,803

 

Total assets

 

$

1,245,659

 

 

$

843,941

 

 

 

 

 

 

Liabilities and Stockholders’ Equity:

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

 

$

37,050

 

 

$

39,024

 

Accrued payroll and payroll related liabilities

 

37,542

 

 

37,922

 

Unearned revenue

 

37,913

 

 

55,360

 

Current portion of capital lease obligations

 

43,303

 

 

786

 

Accrued liabilities and other

 

41,823

 

 

38,057

 

Total current liabilities

 

197,631

 

 

171,149

 

Deferred rent

 

 

 

75,675

 

Long-term debt

 

188,875

 

 

193,375

 

Long-term portion of capital lease obligations

 

481,295

 

 

9,414

 

Other non-current liabilities

 

10,067

 

 

11,523

 

Total liabilities

 

877,868

 

 

461,136

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

Common stock; $0.001 par value: 45,000 shares authorized; 17,851 and 17,851 shares issued; 12,957 and 12,971 shares outstanding

 

18

 

 

18

 

Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding

 

 

 

 

Treasury stock 4,894 and 4,880 shares, at cost

 

(201,350

)

 

(201,505

)

Paid-in capital

 

213,141

 

 

212,752

 

Accumulated other comprehensive (loss) gain, net of tax

 

(4,986

)

 

(4,801

)

Retained earnings

 

360,968

 

 

376,341

 

Total stockholders’ equity

 

367,791

 

 

382,805

 

Total liabilities and stockholders’ equity

 

$

1,245,659

 

 

$

843,941

 

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 6, 2019 and October 7, 2018, net income and basic and diluted earnings per share, excluding the effects of executive transition and severance, board and shareholder matter costs, asset impairments, litigation contingencies, asset disposals, restaurant closure costs, reorganization costs, executive retention costs and their 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

 

Twelve Weeks
Ended

 

Forty Weeks
Ended

 

Forty Weeks
Ended

 

 

October 6, 2019

 

October 7, 2018

 

October 6, 2019

 

October 7, 2018

Net (loss) income as reported

 

$

(1,821

)

 

$

1,709

 

 

$

(201

)

 

$

4,215

 

Executive transition and severance

 

594

 

 

 

 

2,958

 

 

 

Board and shareholder matter costs

 

1,311

 

 

 

 

2,463

 

 

 

Asset impairment

 

 

 

 

 

14,064

 

 

9,643

 

Litigation contingencies

 

 

 

 

 

 

 

4,000

 

Spiral menu disposal

 

 

 

 

 

 

 

506

 

Restaurant closure gains

 

(3,922

)

 

 

 

(2,617

)

 

 

Reorganization costs

 

 

 

520

 

 

 

 

3,273

 

Executive retention

 

260

 

 

 

 

620

 

 

 

Income tax expense

 

457

 

 

(135

)

 

(4,547

)

 

(4,529

)

Adjusted net (loss) income

 

$

(3,121

)

 

$

2,094

 

 

$

12,740

 

 

$

17,108

 

 

 

 

 

 

 

 

 

 

Basic net (loss) income per share:

 

 

 

 

 

 

 

 

Net (loss) income as reported

 

$

(0.14

)

 

$

0.13

 

 

$

(0.02

)

 

$

0.32

 

Executive transition and severance

 

0.05

 

 

 

 

0.23

 

 

 

Board and shareholder matter costs

 

0.10

 

 

 

 

0.19

 

 

 

Asset impairment

 

 

 

 

 

1.08

 

 

0.74

 

Litigation contingencies

 

 

 

 

 

 

 

0.31

 

Spiral menu disposal

 

 

 

 

 

 

 

0.04

 

Restaurant closure gains

 

(0.30

)

 

 

 

(0.20

)

 

 

Reorganization costs

 

 

 

0.04

 

 

 

 

0.25

 

Executive retention

 

0.02

 

 

 

 

0.05

 

 

 

Income tax expense

 

0.03

 

 

(0.01

)

 

(0.35

)

 

(0.35

)

Adjusted (loss) earnings per share - basic

 

$

(0.24

)

 

$

0.16

 

 

$

0.98

 

 

$

1.31

 

 

 

 

 

 

 

 

 

 

Diluted net (loss) income per share:

 

 

 

 

 

 

 

 

Net (loss) income as reported

 

$

(0.14

)

 

$

0.13

 

 

$

(0.02

)

 

$

0.32

 

Executive transition and severance

 

0.05

 

 

 

 

0.23

 

 

 

Board and shareholder matter costs

 

0.10

 

 

 

 

0.19

 

 

 

Asset impairment

 

 

 

 

 

1.08

 

 

0.74

 

Litigation contingencies

 

 

 

 

 

 

 

0.31

 

Spiral menu disposal

 

 

 

 

 

 

 

0.04

 

Restaurant closure gains

 

(0.30

)

 

 

 

(0.20

)

 

 

Reorganization costs

 

 

 

0.04

 

 

 

 

0.25

 

Executive retention

 

0.02

 

 

 

 

0.05

 

 

 

Income tax expense

 

0.03

 

 

(0.01

)

 

(0.35

)

 

(0.35

)

Adjusted (loss) earnings per share - diluted

 

$

(0.24

)

 

$

0.16

 

 

$

0.98

 

 

$

1.31

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

Basic

 

12,959

 

 

12,994

 

 

12,967

 

 

12,977

 

Diluted(1)

 

12,959

 

 

13,054

 

 

13,047

 

 

13,064

 

________________________________________
 

(1)

For the forty weeks ended October 6, 2019, the impact of dilutive shares is included in the calculation as the adjustments for the quarter 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 net loss for the quarter.

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 our industry. The table below sets forth certain unaudited information for the twelve and forty week periods ended October 6, 2019 and October 7, 2018, 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

 

Twelve Weeks Ended

 

Forty Weeks Ended

 

Forty Weeks Ended

 

 

October 6, 2019

 

October 7, 2018

 

October 6, 2019

 

October 7, 2018

Restaurant revenues

 

$

289,862

 

 

98.5

%

 

$

290,218

 

 

98.4

%

 

$

992,764

 

 

98.1

%

 

$

1,015,312

 

 

98.4

%

Restaurant operating costs (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

69,017

 

 

23.8

%

 

69,003

 

 

23.8

%

 

235,119

 

 

23.7

%

 

242,392

 

 

23.9

%

Labor

 

104,870

 

 

36.2

%

 

102,322

 

 

35.3

%

 

354,302

 

 

35.7

%

 

351,813

 

 

34.7

%

Other operating

 

44,317

 

 

15.3

%

 

43,612

 

 

15.0

%

 

142,882

 

 

14.4

%

 

141,305

 

 

13.9

%

Occupancy

 

24,942

 

 

8.6

%

 

26,629

 

 

9.2

%

 

85,420

 

 

8.6

%

 

88,099

 

 

8.7

%

Restaurant-level operating profit

 

46,716

 

 

16.1

%

 

48,652

 

 

16.8

%

 

175,041

 

 

17.6

%

 

191,703

 

 

18.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add – Franchise royalties, fees and other revenue

 

4,360

 

 

1.5

%

 

4,659

 

 

1.6

%

 

19,305

 

 

1.9

%

 

16,472

 

 

1.6

%

Deduct – other operating:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

21,280

 

 

7.2

%

 

21,819

 

 

7.4

%

 

71,087

 

 

7.0

%

 

73,335

 

 

7.1

%

General and administrative expenses

 

19,220

 

 

6.5

%

 

16,763

 

 

5.7

%

 

71,101

 

 

7.0

%

 

65,752

 

 

6.4

%

Selling

 

17,556

 

 

6.0

%

 

12,017

 

 

4.1

%

 

49,025

 

 

4.8

%

 

44,963

 

 

4.4

%

Pre-opening & acquisition costs

 

 

 

%

 

387

 

 

0.1

%

 

319

 

 

%

 

2,093

 

 

0.2

%

Other (gains) charges

 

(1,757

)

 

(0.6

)%

 

520

 

 

0.2

%

 

17,488

 

 

1.7

%

 

17,422

 

 

1.7

%

Total other operating

 

56,299

 

 

19.1

%

 

51,506

 

 

17.5

%

 

209,020

 

 

20.7

%

 

203,565

 

 

19.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

(5,223

)

 

(1.8

)%

 

1,805

 

 

0.6

%

 

(14,674

)

 

(1.4

)%

 

4,610

 

 

0.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net and other

 

1,812

 

 

0.6

%

 

2,295

 

 

0.8

%

 

7,203

 

 

0.7

%

 

8,087

 

 

0.8

%

Income tax benefit

 

(5,214

)

 

(1.8

)%

 

(2,199

)

 

(0.7

)%

 

(21,676

)

 

(2.1

)%

 

(7,692

)

 

(0.7

)%

Total other

 

(3,402

)

 

(1.2

)%

 

96

 

 

%

 

(14,473

)

 

(1.4

)%

 

395

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(1,821

)

 

(0.6

)%

 

$

1,709

 

 

0.6

%

 

$

(201

)

 

%

 

$

4,215

 

 

0.4

%

________________________________________
 

(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 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 our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for evaluating our ongoing results of operations without the effect of non-cash charges such as executive transition and severance, board and shareholder matter costs, asset impairments, litigation contingencies, asset disposals, restaurant closure costs, reorganization costs, executive retention costs and their 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 income or cash flow from operations, as determined by GAAP, and our calculation thereof may not be comparable to that reported by other companies in our 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 our performance based on our 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 our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by excluded or unusual items. We have not provided a reconciliation of our 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 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

 

Twelve Weeks
Ended

 

Forty Weeks
Ended

 

Forty Weeks
Ended

 

 

October 6, 2019

 

October 7, 2018

 

October 6, 2019

 

October 7, 2018

Net (loss) income as reported

 

$

(1,821

)

 

$

1,709

 

 

$

(201

)

 

$

4,215

 

Interest expense, net

 

2,229

 

 

2,390

 

 

7,896

 

 

8,125

 

Income tax benefit

 

(5,214

)

 

(2,199

)

 

(21,676

)

 

(7,692

)

Depreciation and amortization

 

21,280

 

 

21,819

 

 

71,087

 

 

73,335

 

EBITDA

 

$

16,474

 

 

$

23,719

 

 

$

57,106

 

 

$

77,983

 

 

 

 

 

 

 

 

 

 

Executive transition and severance

 

$

594

 

 

$

 

 

$

2,958

 

 

$

 

Board and shareholder matter costs

 

1,311

 

 

 

 

2,463

 

 

 

Asset impairment

 

 

 

 

 

14,064

 

 

9,643

 

Litigation contingencies

 

 

 

 

 

 

 

4,000

 

Spiral menu disposal

 

 

 

 

 

 

 

506

 

Restaurant closure gains

 

(3,922

)

 

 

 

(2,617

)

 

 

Reorganization costs

 

 

 

520

 

 

 

 

3,273

 

Executive retention

 

260

 

 

 

 

620

 

 

 

Adjusted EBITDA

 

$

14,717

 

 

$

24,239

 

 

$

74,594

 

 

$

95,405

 

 

Source: Red Robin Gourmet Burgers, Inc.

For media relations questions:
Katelyn Kwiatkowski, Coyne PR
(973) 588-2000

For investor relations questions:
Raphael Gross, ICR
(203) 682-8253