Red Robin Gourmet Burgers Reports Earning per Diluted Share Up 20% for the Fiscal Second Quarter Ended July 12, 2015

GREENWOOD VILLAGE, Colo. - August 11, 2015  - (BUSINESS WIRE) - 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 12, 2015.

Second Quarter 2015 Financial Highlights Compared to Prior Year

  • Total revenues were $293.0 million, an increase of 14.4%
  • Comparable restaurant revenue increased 2.9%
  • Restaurant-level operating profit, as a percent of restaurant revenue, increased to 22.5% from 22.2% (See Schedule II)
  • EBITDA increased 19.6% to $35.0 million from $29.3 million (as adjusted, See Schedule III)
  • Net income increased 13.6% to $11.2 million from $9.8 million (as adjusted, see Schedule I)
  • Earnings per diluted share increased 14.7% to $0.78 compared to $0.68 (as adjusted, see Schedule I)

Year to date net income was $27.7 million, an increase of 29.5%. After adjusting for a change in accounting estimate for gift card breakage in the current year and executive transition costs in the prior year, year to date net income increased 23.1% to $26.8 million. Year to date earnings per diluted share was $1.94, compared to $1.47 a year ago, an increase of 32.0%. Year to date earnings per diluted share on an adjusted basis was $1.88 compared to $1.50 a year ago, an increase of 25.3%. 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, respectively.

“We continue to be pleased with the progress we are making toward a best in class brand experience. Our guests are choosing to visit us more frequently and they are trading up to our newest burgers and beers,” said Steve Carley, Red Robin Gourmet Burgers, Inc. chief executive officer. “As a result, we have now outperformed the casual dining industry in reported comparable sales for the last four years and outpaced them on traffic by over 200 basis points during the second quarter.”

Operating Results

Total Company revenues, which include Company-owned restaurant revenue and franchise royalties, increased 14.4% to $293.0 million in the second quarter of 2015 from $256.1 million in the second quarter of 2014. New restaurant openings, including acquisitions and net of closures, contributed $29.7 million of additional revenue, while comparable restaurant revenue increased $7.2 million.

System-wide restaurant revenue (including franchised units) for the second quarter of 2015 totaled $363.2 million, compared to $341.5 million for the second quarter in 2014 at constant currency rates.

Comparable restaurant revenue increased 2.9% in the second quarter of 2015 compared to the same period a year ago, driven by a 0.5% increase in guest counts and a 2.4% increase in average guest check. 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-level operating profit margin (a non-GAAP financial measure) was 22.5% in the second quarter of 2015 compared to 22.2% in the same period a year ago, an improvement of 30 basis points. The improved margin resulted from a 50 basis point decrease in cost of sales and a 40 basis point decrease in labor costs, partially offset by higher occupancy costs, including rent related to newly opened and acquired restaurants. 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.

               

Restaurant Revenue Performance

             
               
Casual Dining Restaurants (1)     Q2 2015       Q2 2014
Average weekly sales per unit:              
Company-owned – Total     $   58,321       $ 57,549
Company-owned – Comparable     $   59,234       $ 57,556
Franchised units (2)     $   62,676       $ 57,478
Total operating weeks:              
Company-owned units     4,916       4,360
Franchised units     1,188       1,560

 

_________________________________________________________

(1)

 

Excludes Red Robin Burger Works® fast casual restaurants, which had 120 and 64 operating weeks in the second quarter of 2015 and 2014

(2)

 

Calculated at current currency exchange rates

     

Other Results

Depreciation and amortization costs increased to $17.3 million in the second quarter of 2015 from $14.1 million in the second quarter of 2014. The increased depreciation was primarily related to new restaurants opened and acquired since the second quarter 2014 and restaurants remodeled under the Brand Transformation Initiative.

General and administrative costs were $23.0 million, or 7.9% of total revenues, in the second quarter of 2015, compared to $20.4 million, or 8.0% of revenues in the same period a year ago. The increase of $2.6 million resulted primarily from increased incentive compensation, incremental Canadian costs and higher manager hiring and training costs.

Selling expenses were $11.1 million, or 3.8% of total revenues, in the second quarter of 2015, compared to $9.9 million, or 3.9% of total revenues, a year ago due to increased spending associated with higher gift card sales and other marketing initiatives.

Pre-opening costs were $1.4 million in the second quarter of 2015, compared to $2.3 million in the same period a year ago. The decrease is due to fewer restaurant openings in 2015 in addition to $0.7 million in acquisition costs included in the second quarter of 2014.

The Company had an effective tax rate of 28.3% in the second quarter of 2015, compared to a 27.1% rate in the same period a year ago.

Restaurant Development

As of the end of the second quarter of 2015, there were 412 Company-owned Red Robin® restaurants, 10 Red Robin Burger Works® and 99 franchised Red Robin restaurants for a total of 521 restaurants. During the second quarter, the Company opened four Red Robin restaurants, including the reopening of one Red Robin restaurant that was temporarily closed in 2014 due to public construction.

Under the Brand Transformation Initiative, the Company completed 31 remodels during the second quarter towards its goal of 150 remodels this year. The Company anticipates having a total of 295 restaurants conforming to the new brand standards by year end, including new restaurant openings.

Balance Sheet and Liquidity

As of July 12, 2015, the Company had cash and cash equivalents of $22.6 million and total debt of $145.1 million, including $8.2 million of capital lease liabilities. The Company decreased debt by $2.8 million since the beginning of fiscal year 2015.

Outlook for 2015

Red Robin’s 2015 fiscal year consists of 52 weeks and will end on December 27, 2015.

In fiscal year 2015, the Company expects comparable revenue growth of approximately 3.0% and total revenue growth near 12.0%. The Company plans to open 20 new Red Robin restaurants and three to five Red Robin Burger Works resulting in operating week growth, inclusive of 2014 acquisitions, approaching 9.0%.

Capital investments in fiscal year 2015 are expected to be approximately $170 million. In addition to the new restaurant openings, the Company plans to relocate three restaurants and remodel approximately 150 Red Robin restaurants as part of its Brand Transformation Initiative.

Restaurant-level operating profit margin in fiscal year 2015 is expected to approach 22.2%.

General and administrative costs are expected to be between $101 million and $103 million, while selling expenses are expected to be approximately 3.3% of sales. Pre-opening expense is expected to be approximately $7.0 million. Depreciation and amortization is projected to be between $78 million and $79 million.

Interest expense is expected to be approximately $4.0 million while the income tax rate in fiscal year 2015 is expected to be approximately 27.5%.

The sensitivity of the Company’s earnings per diluted share to a 1% change in guest counts for fiscal year 2015 is estimated to be $0.33 on an annualized basis. Additionally, a 10 basis point change in restaurant-level operating profit margin is expected to impact earnings per diluted share by approximately $0.08, and a change of approximately $145,000 in pre-tax income or expense is equivalent to approximately $0.01 per diluted share.

Investor Conference Call and Webcast

Red Robin will host an investor conference call to discuss its second quarter 2015 results today at 10:00 a.m. ET. The conference call number is (888) 609-5701, or for international callers (913) 905-3216. 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 Tuesday, August 18, 2015. The replay can be accessed by dialing (877) 870-5176, or (858) 384-5517 for international callers. The conference ID is 6807530.

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., 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, 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

Forward-looking statements in this press release regarding our strategic initiatives, revenues and profit margins, new restaurant openings (including Red Robin Burger Works) and operating weeks, capital investments including our Brand Transformation Initiative and restaurant remodeling, restaurant relocations, future economic performance, market share, anticipated costs, expenses, tax rate, sensitivity of earnings per share and other projected financial measures, statements under the heading “Outlook for 2015” 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 and initiatives to achieve restaurant sales growth; the ability to fulfill planned expansion and restaurant remodeling; 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; 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.


 
           

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

               
      Twelve Weeks Ended     Twenty-eight Weeks Ended
      July 12, 2015     July 13, 2014     July 12, 2015       July 13, 2014
Revenues:                          
Restaurant revenue     $ 288,704       $ 251,818       $ 677,213         $ 586,813  
Franchise royalties, fees, and other revenue     4,275       4,315       10,667         9,804  
Total revenues     292,979       256,133       687,880         596,617  
                           
Costs and expenses:                          

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

                         
Cost of sales     71,665       63,689       169,615         147,909  
Labor     93,513       82,572       217,869         193,493  
Other operating     35,356       31,022       81,940         71,619  
Occupancy     23,210       18,618       53,357         42,900  
Depreciation and amortization     17,260       14,120       40,263         33,006  
General and administrative     23,044       20,442       58,039         52,540  
Selling     11,082       9,878       24,148         20,203  
Pre-opening costs and acquisition costs     1,369       2,326       2,324         4,439  
Total costs and expenses     276,499       242,667       647,555         566,109  
                           
Income from operations     16,480       13,466       40,325         30,508  
                           
Other expense:                          
Interest expense, net and other     904       475       1,964         1,149  
                           
Income before income taxes     15,576       12,991       38,361         29,359  
Provision for income taxes     4,410       3,521       10,630         7,945  
Net income     $ 11,166       $ 9,470       $ 27,731         $ 21,414  
Earnings per share:                          
Basic     $ 0.79       $ 0.66       $ 1.96         $ 1.49  
Diluted     $ 0.78       $ 0.65       $ 1.94         $ 1.47  
Weighted average shares outstanding:                          
Basic    

14,142

 

   

14,312

 

   

14,134

 

     

14,335

 

Diluted     14,311       14,528       14,322         14,565  
                           

 

             

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

             
      (Unaudited)

July 12, 2015

    December 28, 2014
Assets:            
Current Assets:            
Cash and cash equivalents     $ 22,615       $ 22,408  
Accounts receivable, net     15,835       23,740  
Inventories     26,655       25,947  
Prepaid expenses and other current assets     23,752       23,160  
Deferred tax asset and other     4,461       4,677  
Total current assets     93,318       99,932  
             
Property and equipment, net     530,018       496,262  
Goodwill     83,033       84,115  
Intangible assets, net     41,173       42,479  
Other assets, net     19,295       13,101  
Total assets     $ 766,837       $ 735,889  
             
Liabilities and Stockholders’ Equity:            
Current Liabilities:            
Trade accounts payable     $ 24,581       $ 28,522  
Construction related payables     24,661       15,652  
Accrued payroll and payroll related liabilities     43,158       47,362  
Unearned revenue     31,764       45,049  
Accrued liabilities and other     33,121       27,084  
Total current liabilities     157,285       163,669  
             
Deferred rent     61,122       57,341  
Long-term debt     136,875       139,375  
Long-term portion of capital lease obligations     7,672       7,938  
Other non-current liabilities     10,082       7,795  
Total liabilities     373,036       376,118  
             
Stockholders’ Equity:            
Common stock, $0.001 par value: 45,000 shares authorized; 17,851 and 17,851 shares issued; 14,176 and 14,043 shares outstanding     18       18  
Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding            
Treasury stock 3,675 and 3,808 shares, at cost     (127,627 )     (132,252 )
Paid-in capital     204,082       200,617  
Accumulated other comprehensive loss, net of tax     (3,715 )     (1,924 )
Retained earnings     321,043       293,312  
Total stockholders’ equity     393,801       359,771  
Total liabilities and stockholders’ equity     $ 766,837       $ 735,889  
                     
                     

Schedule I

Reconciliation of Non-GAAP Results to GAAP Results
(In thousands, except per share data)

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 12 and 28 weeks ended July 12, 2015 and the 12 and 28 weeks ended July 13, 2014, net income and basic and diluted earnings per share, excluding the effects of a change in accounting estimate for gift card breakage. The Company believes that 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 expense related to the change in accounting estimate was calculated based on the change in the total tax provision calculation after adjusting for the identified item. The non-GAAP measurements are intended to supplement the presentation of the Company’s financial results in accordance with GAAP.

      Twelve Weeks Ended     Twenty-eight Weeks Ended
      July 12, 2015     July 13, 2014     July 12, 2015     July 13, 2014
Net income as reported     $ 11,166       $ 9,470       $ 27,731       $ 21,414  
Change in estimate for gift card breakage                 (1,369 )      
Executive transition costs           544             544  
Income tax benefit (expense)           (183 )     439       (183 )
Adjusted net income     $ 11,166       $ 9,831       $ 26,801       $ 21,775  
                         
Basic net income per share:                        
Net income as reported     $ 0.79       $ 0.66       $ 1.96       $ 1.49  
Change in estimate for gift card breakage                 (0.10 )      
Executive transition costs           0.04             0.04  
Income tax benefit (expense)           (0.01 )     0.03       (0.01 )
Adjusted earnings per share - basic     $ 0.79       $ 0.69       $ 1.89       $ 1.52  
                         
Diluted net income per share:                        
Net income as reported     $ 0.78       $ 0.65       $ 1.94       $ 1.47  
Change in estimate for gift card breakage                 (0.09 )      
Executive transition costs           0.04             0.04  
Income tax benefit (expense)           (0.01 )     0.03       (0.01 )
Adjusted earnings per share - diluted     $ 0.78       $ 0.68       $ 1.88       $ 1.50  
                         
Weighted average shares outstanding                        
Basic     14,142       14,312       14,134       14,335  
Diluted     14,311       14,528       14,322       14,565  
                                 
                                 

Schedule II

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income
from Operations and Net Income
(In thousands)

The Company believes that 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 closures and impairment costs. The measure includes restaurant- level occupancy costs, which 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 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 occupancy 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 generally accepted accounting principles (“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. The table below sets forth certain unaudited information for the 12 and 28 weeks ended July 12, 2015 and the 12 and 28 weeks ended July 13, 2014, expressed as a percentage of total revenues, except for the components of restaurant-level operating profit, which are expressed as a percentage of restaurant revenue.

      Twelve Weeks Ended     Twenty-eight Weeks Ended
      July 12, 2015     July 13, 2014     July 12, 2015     July 13, 2014
Restaurant revenue     $ 288,704       98.5 %     $ 251,818       98.3 %     $ 677,213       98.4 %     $ 586,813       98.4 %
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):                                                
Cost of sales     71,665       24.8 %     63,689       25.3 %     169,615       25.0 %     147,909       25.2 %
Labor     93,513       32.4 %     82,572       32.8 %     217,869       32.2 %     193,493       33.0 %
Other operating     35,356       12.3 %     31,022       12.3 %     81,940       12.1 %     71,619       12.2 %
Occupancy     23,210       8.0 %     18,618       7.4 %     53,357       7.9 %     42,900       7.3 %
Restaurant-level operating profit     64,960       22.5 %     55,917       22.2 %     154,432       22.8 %     130,892       22.3 %
                                                 
Add – Franchise royalties, fees, and other revenues     4,275       1.5 %     4,315       1.7 %     10,667       1.6 %     9,804       1.6 %
Deduct – other operating:                                                
Depreciation and amortization     17,260       5.9 %     14,120       5.5 %     40,263       5.9 %     33,006       5.5 %
General and administrative     23,044       7.9 %     20,442       8.0 %     58,039       8.4 %     52,540       8.8 %
Selling     11,082       3.8 %     9,878       3.9 %     24,148       3.5 %     20,203       3.4 %
Pre-opening and acquisition costs     1,369       0.5 %     2,326       0.9 %     2,324       0.3 %     4,439       0.7 %
Total other operating     52,755       18.0 %     46,766       18.3 %     124,774       18.1 %     110,188       18.4 %
                                                 
Income from operations     16,480       5.6 %     13,466       5.3 %     40,325       5.9 %     30,508       5.1 %
                                                 
Interest expense, net and other     904       0.3 %     475       0.2 %     1,964       0.3 %     1,149       0.2 %
Income tax expense     4,410       1.5 %     3,521       1.4 %     10,630       1.6 %     7,945       1.3 %
Total other     5,314       1.8 %     3,996       1.6 %     12,594       1.9 %     9,094       1.5 %
                                                 
Net income     $ 11,166       3.8 %     $ 9,470       3.7 %     27,731       4.0 %     21,414       3.6 %
                                                                     

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, provision for income taxes, depreciation and amortization, and non-cash stock based compensation. EBITDA and adjusted EBITDA are presented because the Company believes that 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 depreciation and amortization expenses and asset disposals, stock-based compensation, closure costs and restaurant impairments. 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. 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.

      Twelve Weeks Ended     Twenty-eight Weeks Ended
      July 12, 2015     July 13, 2014     July 12, 2015     July 13, 2014
Net income as reported     $ 11,166     $ 9,470       $ 27,731       $ 21,414
Interest expense, net     805     619       1,893       1,308
Provision for income taxes     4,410     3,521       10,630       7,945
Depreciation and amortization     17,260     14,120       40,263       33,006
Non-cash stock based compensation     1,403     1,021       2,849       2,030
EBITDA     35,044     28,751       83,366       65,703
                         
Change in estimate for gift card breakage      

 

        (1,369 )    
Executive transition         544             544
Adjusted EBITDA     $ 35,044     $ 29,295       $ 81,997       $ 66,247
                                     

SOURCE Red Robin

Contacts:

Jennifer DeNick
Media Relations
Coyne PR
973-588-2000

Stuart Brown
Investor Relations
Red Robin Gourmet Burgers, Inc.
Chief Financial Officer
303-846-6000

###

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Retro Fitness is well positioned for today's economy and to dominate the low cost segment by offering a high quality and value add product in...
Dental Fix
Dental Fix franchise owners repair dental handpieces (drills) and equipment on-site. We are revolutionizing the dental service industry by delivering...
Gloria Jean's Coffees
Gloria Jean's is known for its range of boldly flavored coffees and signature beverages. For nearly four decades, we have continued to innovate and...

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