RAVE Restaurant Group, Inc. Reports Fourth Quarter and Fiscal Year 2016 Financial Results

New Market Development and Unit Growth for Pie Five Pizza Co.

DALLAS - Sept. 23, 2016 // PRNewswire // - RAVE Restaurant Group, Inc. (NASDAQ: RAVE) today reported financial results for the fourth quarter and fiscal year ended 2016 ended June 26, 2016.

Fourth Quarter Highlights:

  • Total consolidated revenue increased 13.3% to $15.7 million compared to $13.9 million in the fourth quarter of fiscal 2015. 
  • Pie Five comparable store retail sales decreased 12.0% from the same period of the prior year.
  • Pie Five system-wide total retail sales increased 59.2%, and average weekly sales decreased 14.5%, year over year.
  • Pizza Inn domestic comparable store retail sales increased 0.3% from the same period of the prior year, while total domestic retail sales decreased by 5.1%.
  • Net loss of $2.3 million was $1.7 million greater than the same quarter of the prior year primarily due to $0.9 million in impairment expense and reduced income from Company-owned restaurants.
  • Adjusted EBITDA fell by $0.6 million over the same quarter of the prior year to a negative $0.4 million.

Annual Highlights:

  • Total consolidated revenue increased 26.2% to $60.8 million compared to fiscal 2015. 
  • Pie Five comparable store retail sales decreased 5.1% from the prior year.
  • Pie Five system-wide total retail sales increased 110%, and average weekly sales decreased 10.0%, year over year.
  • Pizza Inn domestic comparable store retail sales decreased 1.0% from the prior year, while total domestic retail sales decreased by 4.6%.
  • Net loss of $8.9 million was $7.0 million greater than prior year primarily due to $1.7 million of impairment charges, a $4.9 million valuation allowance against deferred tax assets, and reduced income from Company-owned restaurants.
  • Adjusted EBITDA decreased by $0.9 million over prior year to negative $0.3 million.
  • Net addition of 34 Pie Five restaurants opened during the year bringing the total Pie Five restaurants open at the end of the fiscal year to 88.
  • Pie Five signed ten new development agreements with commitments to build up to 171 restaurants in 12 states.

RAVE Restaurant Group, Inc. (NASDAQ: RAVE) today announced results for its fourth quarter and fiscal year ended June 26, 2016.  The Company's net loss of $2.3 million in the fourth quarter was $1.7 million greater than the comparable period in the prior fiscal year primarily due to impairment expenses and reduced income from Company-owned restaurants.  Similarly, net loss of $8.9 million for fiscal 2016 was $7.0 million greater than prior year primarily due to $1.7 million of impairment charges, a$4.9 million valuation allowance against deferred tax assets, and reduced income from Company-owned restaurants.  Adjusted EBITDA for the year fell by $0.9 million to negative $0.3 million.

"Sales trends in the fourth quarter were very challenging for the Pie Five system, as was the case in much of the fast casual segment," said Clinton Coleman, Interim Chief Executive Officer for Rave Restaurant Group, Inc.  "Comparable store sales in ourDallas-Fort Worth market declined following two years of strongly positive trends, and the newer restaurants that recently entered the comparable store base also experienced a decline in sales compared to their initial year.  While we have been disappointed by the sales volume sustained after the initial opening months by our recently opened Company-owned Pie Five restaurants outside of the DFW market, we continue to be pleased with the growth of the Pie Five franchise system and the average initial sales achieved by the new franchised restaurants."

"We recently added several experienced leaders to the Rave management team and we are fully engaged in addressing these trends at Pie Five," said Coleman.  "Specifically, we are focusing on initiatives to consistently drive and sustain a higher level of store traffic.  We also improved the management of the Company-owned restaurants outside of the DFW market so that those restaurants can recapture sales volume experienced during their initial opening months.  Meanwhile, I am pleased with the recent stability of the Pizza Inn system and its renewed growth potential."

Fourth Quarter Fiscal 2016 Operating Results

Total revenues for the fourth quarter of fiscal 2016 and the comparable prior year quarter were $15.7 million and $13.9 million, respectively, an increase of 13.3% year over year.  Additional franchise development fees previously received from Pie Five franchisees have been deferred and will be recognized as future restaurants are opened.  Pizza Inn domestic comparable store retail sales increased 0.3% from the same period in the prior year. 

For Pie Five, system-wide retail sales increased 59.2% for the fourth quarter of fiscal 2016 when compared to the same period in the prior year driven by an 87.9% increase in average units open and a 14.5% decrease in the system-wide average weekly sales.  The decrease in average weekly sales was due to both weaker sales in newer markets and challenging economic conditions in the restaurant industry.  Comparable store retail sales decreased by 12.0% for the most recent fiscal quarter compared to the same period in the prior year. 

Fiscal Year 2016 Operating Results

Total revenues for the fiscal year 2016 and the comparable prior year were $60.8 million and $48.2 million, respectively, an increase of 26.2% year over year.  Additional franchise development fees previously received from Pie Five franchisees have been deferred and will be recognized as future restaurants are opened.  Pizza Inn domestic comparable store retail sales decreased 1.0% from the prior year. 

For Pie Five, system-wide retail sales increased 110% for fiscal 2016 when compared to the prior year, driven by a 138% increase in average units open and a 10.0% decrease in the system-wide average weekly sales.  The decrease in average weekly sales was due to weaker sales in comparable restaurants and lower than average sales levels of newer Company-owned restaurants.  Comparable store retail sales decreased by 5.1% compared to the prior year. 

"In the current first fiscal quarter, the Pie Five system has continued to experience difficult sales trends," said Coleman.  "Many of the newer restaurants that enter the comparable store base continue to experience a decline in sales from their initial year, particularly in the case of those stores that opened with very high sales volumes.  The Pizza Inn system's sales trends have been flat in the current quarter."

Development Review

In the fourth quarter of fiscal 2016, three new Pie Five franchise restaurants were opened, bringing the fiscal year-end total unit count to 88 Pie Five restaurants in 22 states.  So far in the current first fiscal quarter franchisees have opened six new restaurants and the Company signed two new franchise development agreements in Louisiana and Nevada for up to 16 additional Pie Five restaurants.  The Company currently has Pie Five franchise restaurant development commitments for up to an additional 347 restaurants.

"The Pie Five system continues to grow across the country with a strong pipeline of restaurant openings scheduled for the next several quarters," said Coleman.

Pizza Inn franchisees opened four new restaurants during the year while closing 21 restaurants domestically and 11 internationally, ending the fiscal year at 222 total Pizza Inn Company-owned and franchised restaurants worldwide. 

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures in evaluating operating performance.  These non-GAAP financial measures should not be viewed as an alternative or substitute for its financial statements prepared in accordance with generally accepted accounting principles.  Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, pre-opening expense, costs related to impairment, non-operating store costs and discontinued operations.  A reconciliation of Adjusted EBITDA to net income is included with the accompanying financial statements. 

Note Regarding Forward Looking Statements

Certain statements in this press release, other than historical information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created thereby. These forward-looking statements are based on current expectations that involve numerous risks, uncertainties and assumptions.  Assumptions relating to these forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions, regulatory framework and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of RAVE Restaurant Group, Inc.  Although the assumptions underlying these forward-looking statements are believed to be reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that any forward-looking statements will prove to be accurate.  In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of such information should not be regarded as a representation that the objectives and plans of RAVE Restaurant Group, Inc. will be achieved. 

About RAVE Restaurant Group, Inc.

Founded in 1958, Dallas-based RAVE Restaurant Group [NASDAQ: RAVE] owns, operates and franchises more than 300 Pie Five Pizza Co. and Pizza Inn restaurants domestically and internationally. Pie Five Pizza Co. is a leader in the rapidly growing fast-casual pizza space offering made to order pizzas made in under five minutes. Pizza Inn is an international chain featuring freshly made pizzas, along with salads, pastas, and desserts. The Company's common stock is listed on the Nasdaq Capital Market under the symbol "RAVE". For more information, please visit www.raverg.com.

Contact:

Investor Relations
RAVE Restaurant Group, Inc.
469-384-5000

RAVE RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

                 
                 
   

Fiscal Year Ended

 

Three Months Ended

   

June 26,

 

June 28,

 

June 26,

 

June 28,

   

2016

 

2015

 

2016

 

2015

                 

REVENUES:

$   60,811

 

$   48,199

 

$   15,702

 

$    13,860

                 

COSTS AND EXPENSES:

             
 

Cost of sales

53,303

 

41,307

 

14,044

 

11,982

 

General and administrative expenses

7,247

 

4,792

 

2,099

 

1,316

 

Franchise expenses

3,636

 

3,154

 

904

 

840

 

Pre-opening expenses

883

 

721

 

32

 

354

 

Impairment of long-lived assets and other lease charges

1,698

 

300

 

853

 

-

 

Bad debt

101

 

153

 

(50)

 

25

 

Interest expense

4

 

113

 

-

 

1

   

66,872

 

50,540

 

17,882

 

14,518

                 

LOSS FROM CONTINUING

             

OPERATIONS BEFORE TAXES

(6,061)

 

(2,341)

 

(2,180)

 

(658)

                 
 

Income tax expense (benefit)

2,713

 

(670)

 

76

 

(112)

                 

LOSS FROM

             

CONTINUING OPERATIONS

(8,774)

 

(1,671)

 

(2,256)

 

(546)

                 
 

Loss from discontinued operations, net of taxes

(112)

 

(168)

 

(13)

 

(58)

                 

NET LOSS

$   (8,886)

 

$   (1,839)

 

$   (2,269)

 

$        (604)

                 

LOSS PER SHARE OF COMMON 

             

STOCK - BASIC:

             
 

Loss from continuing operations

$     (0.85)

 

$     (0.17)

 

$     (0.22)

 

$       (0.05)

 

Loss from discontinued operations

$     (0.01)

 

$     (0.02)

 

$             -

 

$       (0.01)

 

Net loss

$     (0.86)

 

$     (0.19)

 

$     (0.22)

 

$       (0.06)

                 

LOSS PER SHARE OF COMMON

             

STOCK - DILUTED:

             
 

Loss from continuing operations

$     (0.82)

 

$     (0.16)

 

$     (0.21)

 

$       (0.05)

 

Loss from discontinued operations

$     (0.01)

 

$     (0.02)

 

$             -

 

$       (0.01)

 

Net loss

$     (0.83)

 

$     (0.18)

 

$     (0.21)

 

$       (0.06)

                 

Weighted average common

             
 

shares outstanding - basic

10,317

 

9,744

 

10,331

 

10,315

                 

Weighted average common

             
 

shares outstanding - diluted

10,749

 

10,306

 

10,622

 

10,957

 

 
 

RAVE RESTAURANT GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

 
         

June 26,

 

June 28,

ASSETS

 

2016

 

2015

               

CURRENT ASSETS

       
 

Cash and cash equivalents

$

1,104

$

5,958

 

Accounts receivable, less allowance for doubtful accounts of $198 and $193, respectively

       
   

2,974

 

3,437

 

Notes receivable

 

167

 

24

 

Inventories

 

197

 

180

 

Income tax receivable

 

-

 

492

 

Deferred income tax assets

 

-

 

729

 

Prepaid expenses and other

 

430

 

872

     

Total current assets

 

4,872

 

11,692

               

LONG-TERM ASSETS

       
 

Property, plant and equipment, net

 

12,979

 

10,020

 

Long-term notes receivable

 

382

 

119

 

Long-term deferred tax asset

 

-

 

1,864

 

Deposits and other

 

272

 

276

     

Total assets

$

18,505

$

23,971

LIABILITIES AND SHAREHOLDERS' EQUITY

       

CURRENT LIABILITIES

       
 

Accounts payable - trade

$

3,815

$

2,875

 

Accrued expenses

 

1,220

 

1,267

 

Deferred rent

 

160

 

155

 

Deferred revenues

 

304

 

374

     

Total current liabilities

 

5,499

 

4,671

               

LONG-TERM LIABILITIES

       
 

Deferred rent, net of current portion

 

2,378

 

893

 

Deferred revenues, net of current portion

 

1,195

 

1,166

 

Deferred gain on sale of property

 

-

 

9

 

Other long-term liabilities

 

30

 

22

     

Total liabilities

 

9,102

 

6,761

               

COMMITMENTS AND CONTINGENCIES (See Notes F and J)

       
               

SHAREHOLDERS' EQUITY

       
 

Common stock, $.01 par value; authorized 26,000,000

       
   

shares; issued 17,460,951 and 17,374,735 shares, respectively;

       
   

outstanding 10,341,551 and 10,255,335 shares, respectively

 

175

 

174

 

Additional paid-in capital

 

25,778

 

24,700

 

Retained earnings

 

8,086

 

16,972

 

Treasury stock at cost

       
   

7,119,400 shares

 

(24,636)

 

(24,636)

     

Total shareholders' equity 

 

9,403

 

17,210

     

Total liabilities and shareholders' equity 

$

18,505

$

23,971

 

 
 

RAVE RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

                   
     

Fiscal Year Ended

 

Three Months Ended

     

June 26,

 

June 28,

 

June 26,

 

June 28,

     

2016

 

2015

 

2016

 

2015

                   

CASH FLOWS FROM OPERATING ACTIVITIES:

             
               
 

Net loss

$      (8,886)

 

$     (1,839)

 

$     (2,269)

 

$        (604)

 

Adjustments to reconcile net loss to cash provided by operating activities:

             
               
   

Impairment of fixed assets and other assets

1,698

 

300

 

853

 

-

   

Stock compensation expense

213

 

128

 

78

 

45

   

Deferred income taxes

2,593

 

(703)

 

-

 

(49)

   

Depreciation and amortization

2,722

 

1,617

 

767

 

464

   

Loss on the sale of assets

432

 

49

 

431

 

49

   

Provision for bad debt

101

 

153

 

(50)

 

25

 

Changes in operating assets and liabilities:

       

-

   
   

Notes and accounts receivable

(44)

 

(240)

 

(886)

 

192

   

Inventories

(17)

 

1,523

 

43

 

(47)

   

Income tax receivable

492

 

(107)

 

492

 

(108)

   

Prepaid expenses and other

419

 

(705)

 

59

 

(84)

   

Deferred revenue

195

 

545

 

292

 

130

   

Accounts payable - trade

940

 

852

 

(301)

 

(995)

   

Accrued expenses

1,088

 

404

 

294

 

322

   

   Cash provided by operating activities

1,946

 

1,977

 

(197)

 

(660)

                   

CASH FLOWS FROM INVESTING ACTIVITIES:

             
                   
 

Proceeds from sale of assets

444

 

-

 

430

 

-

 

Capital expenditures

(8,110)

 

(6,727)

 

(486)

 

(2,910)

   

Cash used for investing activities

(7,666)

 

(6,727)

 

(56)

 

(2,910)

                   

CASH FLOWS FROM FINANCING ACTIVITIES:

             
                   
 

Repayments of bank debt

-

 

(767)

 

-

 

-

 

Proceeds from sale of stock

764

 

8,253

 

(4)

 

-

 

Proceeds from exercise of stock options

102

 

426

 

95

 

936

                   
   

Cash provided by financing activities

866

 

7,912

 

91

 

936

                   

Net increase in cash and cash equivalents

(4,854)

 

3,162

 

(162)

 

(2,634)

Cash and cash equivalents, beginning of year

5,958

 

2,796

 

1,266

 

8,592

Cash and cash equivalents, end of year

$        1,104

 

$       5,958

 

$      1,104

 

$      5,958

                   

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

       
                   

CASH PAID FOR:

             
                   
   

Interest

$               4

 

$          113

 

$             3

 

$         112

   

Income taxes

$               -

 

$            19

 

$              -

 

$           19

 

 
 

RAVE RESTAURANT GROUP, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands)

The Company provided detailed explanation of this non-GAAP financial measure, including a discussion of the usefulness and purpose of the measure, in its Form 10-K filed with the Securities and Exchange Commission on September 22, 2016.

               
 

 Fiscal Year Ended 

 

 Three Months Ended 

 

 June 26, 

 

 June 28, 

 

 June 26, 

 

 June 28, 

 

2016

 

2015

 

2016

 

2015

 Net loss 

$   (8,886)

 

$   (1,839)

 

$     (2,269)

 

$      (604)

 Interest expense 

4

 

113

 

-

 

1

 Income taxes 

2,713

 

(670)

 

76

 

(117)

 Income taxes--discontinued operations 

(58)

 

(86)

 

(27)

 

(26)

 Depreciation and amortization 

2,722

 

1,617

 

767

 

464

 EBITDA 

$   (3,505)

 

$      (865)

 

$     (1,453)

 

$      (282)

 Stock compensation expense 

213

 

128

 

78

 

45

 Pre-opening costs 

883

 

721

 

32

 

354

 Impairment charges, non-operating store costs and discontinued operations 

2,121

 

586

 

963

 

108

 Adjusted EBITDA 

$      (288)

 

$       570

 

$        (380)

 

$       225

SOURCE RAVE Restaurant Group, Inc.

###

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