GREENWOOD VILLAGE, Colo. - (BUSINESS WIRE) - Aug. 14, 2014 - Red Robin Gourmet Burgers, Inc., (NASDAQ:RRGB), a casual dining restaurant chain serving an innovative selection of high-quality gourmet burgers in a family-friendly atmosphere, today reported financial results for the 12 weeks ended July 13, 2014 compared to the 12 weeks ended July 14, 2013.
Revenues were $256.1 million, an increase of 7.5%
Comparable restaurant revenue increased 1.2%
Restaurant-level operating profit, as a percent of restaurant revenue, declined to 22.2% from 23.3% (See Schedule II)
GAAP earnings per diluted share were $0.65, compared to $0.77 for the same period a year ago
Adjusted earnings per diluted share were $0.68, compared to $0.77 a year ago (See Schedule I)
Net income was $9.5 million compared to $11.1 million for the same period a year ago. Adjusted net income of $9.8 million excludes an after-tax adjustment for executive transition costs of $0.4 million or $0.03 per diluted share. Net income has not been adjusted for $0.4 million or $0.03 per diluted share of after-tax acquisition costs. See Schedule I for a reconciliation of adjusted net income and earnings per share.
"Although we are satisfied with our top line performance through the first half of the year, we were disappointed that our marketing efforts in the second quarter did not produce the desired results in an intensely competitive environment," said Steve Carley, Red Robin Gourmet Burgers, Inc. chief executive officer. "Going forward, we remain cautious in the near term but are confident that initiatives we have in place will generate meaningful long-term value. Our plan is to continue elevating the Red Robin brand through guest engagement, operating efficiency and effective expansion while working diligently to improve our sales trends."
Total Company revenues, which include Company-owned restaurant revenue and franchise royalties, increased 7.5% to $256.1 million in the second quarter of 2014 from $238.3 million in the second quarter of 2013.
System-wide restaurant revenue (including franchised units) for the second quarter of 2014 totaled $343.0 million, compared to $323.5 million for the second quarter in 2013 at constant currency rates.
Comparable restaurant revenue increased 1.2% in the second quarter of 2014 compared to the prior year. In the second quarter, guest counts decreased 2.5%, while average guest check increased 3.7%. Comparable restaurants are those Company-owned restaurants that have achieved five full quarters of operations during the period presented, and such restaurants are only included in our comparable metrics if they are comparable for the entirety of both periods presented.
Restaurant-level operating profit margins (a non-GAAP financial measure) were 22.2% in the second quarter of fiscal year 2014 compared to 23.3% in the second quarter of fiscal year 2013, a decline of 110 basis points. The lower margins resulted primarily from higher food and beverage costs, and to a lesser extent, higher other operating costs and occupancy as a percentage of sales. 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.
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Depreciation and amortization costs increased $0.8 million to $14.1 million in the second quarter of 2014 compared to $13.3 million in the second quarter of 2013. The increased depreciation was primarily related to new restaurants opened or acquired since the second quarter 2013 and restaurants remodeled under our brand transformation initiative.
General and administrative costs were $20.4 million, a decrease of $1.4 million from the second quarter of fiscal year 2013, due mainly to a decrease in incentive compensation. Included in second quarter of 2014 general and administrative costs are executive transition costs of $0.5 million related to the departure of the Company's former chief operating officer.
Selling expenses were $9.9 million, or 3.9% of revenue, in the second quarter of fiscal year 2014, compared to $6.5 million, or 2.7% of revenue, a year ago. The increase in selling expenses is primarily due to increased media spend and gift card costs.
Pre-opening and acquisition costs in the fiscal second quarter of 2014 totaled $2.3 million compared to $1.3 million in the comparable period a year ago.
Acquisition costs totaled $0.7 million in the second quarter of 2014 related to the purchase of 32 Red Robin franchised restaurants which closed in the fiscal third quarter.
The Company had an effective tax rate of 27.1% in the second quarter of fiscal year 2014, compared to a 24.3% rate in the same period a year ago.
As of the end of the second quarter of 2014, there were 365 Company-owned Red Robin® restaurants, seven Red Robin Burger Works® and 130 franchised Red Robin restaurants for a total of 502 restaurants. In the second quarter of fiscal year 2014, the Company opened three new Red Robin restaurants and two Red Robin Burger Works restaurants. Additionally, one franchised Red Robin restaurant was opened during the quarter.
As previously announced, on July 14, 2014, the Company completed the acquisition of 32 franchised restaurants in the U.S. and Canada for approximately $40 million. The 32 franchised restaurants generate approximately $90 million in restaurant revenue on an annualized basis.
On July 2, 2014, the Company replaced its existing credit facility with a new Credit Agreement that provides a $250 million revolving line of credit. The company also maintains the option to increase the credit facility in the future, subject to lenders' participation, by up to an additional $100 million in the aggregate.
As of July 13, 2014, the Company had cash and cash equivalents of $60.5 million and total debt of $137.3 million, including $8.9 million of capital lease liabilities. The Company increased debt and cash by $40 million at the end of the second quarter to fund the acquisition of the franchised restaurants.
Red Robin's 2014 fiscal year consists of 52 weeks and will end on December 28, 2014.
The Company's outlook for 2014 has been updated to include expected performance as well as the impact of the acquisition of 32 restaurants.
In fiscal year 2014, the Company expects comparable restaurant revenue growth in the low single digits. The Company plans to open 20 new Red Robin restaurants and four to five Red Robin Burger Works resulting in operating week growth of approximately 6.5% for fiscal year 2014. The newly acquired restaurants are expected to add revenues of $44 million in the second half of 2014 and will reduce franchise royalties by approximately $1.5 million.
Capital investments in fiscal year 2014 are expected to exceed $100 million, excluding approximately $51 million related to acquisitions. In addition to the new restaurant openings, the Company also plans to remodel at least 65 Red Robin restaurants as part of its brand transformation initiative as well as expand patio seating in a few locations.
Restaurant-level operating profit margins in fiscal year 2014 are expected to be approximately 21.3%.
General and administrative costs are expected to be approximately $94 million, while selling expenses are expected to be approximately 3.2% of sales considering increased gift card sales. Pre-opening and acquisition costs are expected to total near $9.0 million in fiscal 2014 of which $2.5 million relates to acquisition and integration costs. Depreciation and amortization is projected to be approximately $64 million, an increase from previous expectations due to the acquisition.
Interest expense is expected to be approximately $3 million while the income tax rate in fiscal year 2014 is expected to be approximately 26%.
The sensitivity of the Company's earnings per diluted share to a 1% change in guest counts for fiscal year 2014 is estimated to be $0.30 on an annualized basis. Additionally, a 10 basis point change in restaurant-level operating margin is expected to impact earnings per diluted share by approximately $0.07, and a change of approximately $200,000 in pre-tax income or expense is equivalent to approximately $0.01 per diluted share.
Red Robin will host an investor conference call to discuss its second quarter 2014 results today at 10:00 a.m. ET. The conference call number is (888) 280-4443, or for international callers (719) 457-2637. The financial information that the Company intends to discuss during the conference call is included in this press release and will be available on the "Investors" link of the Company's website at www.redrobin.com. 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 "Investors" link from the menu. A replay of the live conference call will be available from two hours after the call until midnight on Thursday, August 21, 2014. The replay can be accessed by dialing (877) 870-5176, or (858) 384-5517 for international callers. The conference ID is 7896315.
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., 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. In addition to its many burger offerings, Red Robin serves a wide variety of salads, soups, appetizers, entrees, desserts and signature Mad Mixology® 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, recently earning the restaurant the 2014 VIBE Vista Award for Best Beer Program in a Multi-Unit Chain Restaurant. There are more than 500 Red Robin restaurants across the United States and Canada, including those operating under franchise agreements. Red Robin… YUMMM®! Connect with Red Robin on Facebook and Twitter.
Forward-looking statements in this press release regarding our expectations related to strategic initiatives, restaurant revenue (including acquired franchised restaurants), new restaurant openings and operating weeks, capital investments including our brand transformation initiative and restaurant remodeling, future economic performance, anticipated costs, expenses, tax rate, and other financial measures, statements under the heading "Updated Outlook for 2014" 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," "anticipate," "intend," "plan," "project," "will" or "estimate," or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. We undertake no obligation to update such statements to reflect events or circumstances arising after such date, and we caution 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 marketing strategies, loyalty program, and guest count initiatives to achieve restaurant sales growth; the ability to fulfill planned expansion and restaurant remodeling; the ability to successfully integrate and achieve anticipated revenues from recently acquired restaurants; the cost and availability of key food products, labor and energy; the ability to achieve anticipated revenue and cost savings from our anticipated new technology systems and other initiatives; the macro economic and competitive environment; availability of capital or credit facility borrowings; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; federal, state and local regulation of our 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.
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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.
SOURCE Red Robin Gourmet Burgers, Inc.
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Red Robin Gourmet Burgers, Inc., a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc.