RAVE Restaurant Group, Inc. Reports Third Fiscal Quarter Financial Results

Pizza Inn Shows Growth while Pie Five Trims Underperforming Markets

DALLAS - May 10, 2017 // PRNewswire // - RAVE Restaurant Group, Inc. (NASDAQ:RAVE) today reported financial results for the third quarter of fiscal 2017 ended March 26, 2017.

Third Quarter Highlights:

  • Total consolidated revenue decreased 7.7% to $14.1 million compared to $15.3 million in the third quarter of fiscal 2016.
  • Pie Five comparable store retail sales decreased 15.8% from the same period of the prior year.
  • Pie Five system-wide retail sales increased 0.6%, while average weekly sales declined 12.3%, year over year.
  • Pizza Inn domestic comparable store retail sales increased 0.1% from the same period of the prior year, while total domestic retail sales increased by 2.9%.
  • Net loss of $2.0 million was $0.7 million greater than the same quarter of the prior year primarily due to loss on sale of assets, increased general and administrative expenses, and decreased sales.
  • On a fully diluted basis, the loss was $0.18 per share for the third quarter of fiscal 2017, compared to a loss of $0.12 per share for the same period of the prior year.
  • Adjusted EBITDA of ($1.0) million was $0.7 million less than the same quarter of the prior year.
  • Company-owned Pie Five operating cash flow decreased $0.3 million from the same period of the prior year.
  • Net reduction of thirteen Pie Five restaurants during the quarter brought the total Pie Five restaurants open at the end of the quarter to 86.

"We are taking a purposeful approach to improving the overall financial performance of the company by withdrawing from underperforming markets," said Scott Crane, Chief Executive Officer for Rave Restaurant Group, Inc. "In addition, we will be introducing new initiatives that will add occasions and increased incidence."

Third Quarter Fiscal 2017 Operating Results

Revenues of $14.1 million and $44.3 million for the third quarter and year to date fiscal 2017 were 7.7% and 1.7% lower, respectively, than the same periods of the prior year. For the three and nine months ended March 26, 2017, the Company reported a net loss of $2.0 million and $11.4 million, respectively, compared to a loss of $1.2 million and $6.6 million for the comparable periods of the prior year. On a fully diluted basis, the loss was $0.18 per share and $1.07 per share for the third quarter and year to date fiscal 2017, compared to a loss of $0.12 per share and $0.64 per share for the same periods of the prior year. The increased loss for the three month period ended March 26, 2017 was primarily the result of a $0.3 million loss on sale of assets in the third quarter of fiscal 2017 related to equipment disposals at closed stores, as well as executive recruiting fees. The year to date increase in net loss from prior year was primarily due to increased impairments and other lease charges of $5.2 million and $1.0 million of losses from the sale of assets. In addition, the Company continued to provide a full valuation allowance against its deferred tax assets. Adjusted EBITDA declined $0.7 million and $2.4 million for the three and nine month periods ended March 26, 2017, to $(1.0) million and $(2.3) million, respectively. The decline in Adjusted EBITDA was driven by general and administrative expense and a decrease in other income from prior year, as well as decreased average unit volumes at Company Pie Five locations.

Pie Five system-wide retail sales increased 0.6% for the third quarter of fiscal 2017 when compared to the same period in the prior year driven by a 14.3% increase in average units open, while system-wide average weekly sales decreased by 12.3%, year over year. Comparable store retail sales decreased by 15.8% for the most recent fiscal quarter compared to the same period in the prior year. Year to date, Pie Five system-wide retail sales increased 13.8% compared to the prior year driven by a 30.6% increase in average units open, while system-wide average weekly sales declined 9.7% year over year. Pie Five comparable store retail sales decreased 16.0% during the first nine months of fiscal 2017 compared to the same period of the prior year. The Company continues to believe that increased competition within the fast-casual segment and general industry softness contributed to weakened trends within the Pie Five system.

Pizza Inn total domestic retail sales increased 2.9% and 0.5% for the three and nine months ended March 26, 2017 compared to the same periods of the prior year. Pizza Inn domestic comparable store retail sales increased 0.1% and decreased 0.1% for the three and nine months ended March 26, 2017 compared to the same periods of the prior year.

"After a year of challenging sales performance, we are evaluating various elements of the concept from both a service and product standpoint that we believe will ultimately better service the wants of our customers," said Crane.

Development Review

In the third quarter of fiscal 2017, five new franchised Pie Five restaurants were opened, while nine franchised and nine Company restaurants were closed, bringing the quarter-end total unit count to 86 restaurants.

"We continue to see opportunities for traditional and non-traditional development," said Crane. "Our throughput makes Pie Five a great option for airports. We just opened our second airport location at BWI Airport."

Rights Offering Completed

During the third quarter of fiscal 2017, RAVE completed a rights offering of its 4% Convertible Senior Notes due 2022, resulting in net proceeds of $2.9 million. Pursuant to the rights offering, existing RAVE shareholders had the opportunity to purchase their proportionate share of the convertible notes at the par value of $100 per note. The notes are convertible into shares of RAVE common stock at $2.00 per share.

Conference Call

A conference call and audio webcast has been scheduled for 5:00 p.m. Central time today to discuss these results. Details of the conference call are as follows:

  • Date:
    Wednesday, May 10, 2017
  • Time:
    5:00 p.m. Central time
  • Dial-In #:
    1-877-870-4263 U.S. & Canada
    1-412-317-0790 International

Alternatively, the conference call will be webcast at raverg.com. A web-based archive of the conference call will also be available at the above website.

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures in evaluating operating performance. EBITDA, Adjusted EBITDA and restaurant operating cash flow are non-GAAP financial measures that the Company believes are useful to investors in understanding its operating performance. However, 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.

"EBITDA" represents earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, pre-opening expense, gain/loss on sale of assets, costs related to impairment, other lease charges, non-operating store costs and discontinued operations. "Restaurant operating cash flow" represents the pre-tax income earned by Company-owned restaurants before (1) allocated marketing and advertising expenses, (2) depreciation and amortization, (3) pre-opening expenses, (4) operations management and extraordinary expenses, (5) impairment and other lease charges, and (6) non-operating store costs. A reconciliation of these non-GAAP financial measures 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 ready 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.

RAVE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

 
 
         

Three Months Ended

 

Nine Months Ended

         

March 26,

 

March 27,

 

March 26,

 

March 27,

         

2017

 

2016

 

2017

 

2016

                       

REVENUES:

 

$    14,081

 

$    15,262

 

$    44,329

 

$    45,109

                       

COSTS AND EXPENSES:

               
 

Cost of sales

 

12,644

 

13,770

 

39,898

 

39,259

 

General and administrative expenses

 

2,141

 

1,885

 

6,219

 

5,148

 

Franchise expenses

 

893

 

924

 

2,729

 

2,732

 

Pre-opening expenses

 

29

 

115

 

95

 

851

 

Loss on sale of assets

 

345

 

-

 

1,044

 

-

 

Impairment of long-lived assets and other lease charges

 

(123)

 

(165)

 

5,243

 

845

 

Bad debt

 

72

 

(80)

 

423

 

151

 

Interest expense

 

37

 

1

 

39

 

4

 

     Total costs and expenses

 

16,038

 

16,450

 

55,690

 

48,990

                       

LOSS FROM CONTINUING OPERATIONS BEFORE TAXES

 

(1,957)

 

(1,188)

 

(11,361)

 

(3,881)

 

Income tax expense

 

5

 

3

 

24

 

2,637

LOSS FROM CONTINUING OPERATIONS

 

(1,962)

 

(1,191)

 

(11,385)

 

(6,518)

                       
 

Income (loss) from discontinued operations, net of taxes

 

-

 

(39)

 

2

 

(99)

NET LOSS

 

$    (1,962)

 

$    (1,230)

 

$  (11,383)

 

$    (6,617)

                       

LOSS PER SHARE OF COMMON STOCK - BASIC:

               
 

Loss from continuing operations

 

$      (0.18)

 

$      (0.12)

 

$      (1.07)

 

$      (0.63)

 

Income (loss) from discontinued operations

 

-

 

-

 

-

 

(0.01)

 

Net loss

 

$      (0.18)

 

$      (0.12)

 

$      (1.07)

 

$      (0.64)

                       

LOSS PER SHARE OF COMMON STOCK - DILUTED:

               
                       
 

Loss from continuing operations

 

$      (0.18)

 

$      (0.12)

 

$      (1.07)

 

$      (0.63)

 

Income (loss) from discontinued operations

 

-

 

-

 

-

 

(0.01)

 

Net loss

 

$      (0.18)

 

$      (0.12)

 

$      (1.07)

 

$      (0.64)

                       

Weighted average common shares outstanding - basic

 

10,657

 

10,315

 

10,602

 

10,312

                       

Weighted average common and potential dilutive common shares outstanding

               
 

10,657

 

10,315

 

10,602

 

10,312

 

RAVE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

                   
             

March 26,

 

June 26,

ASSETS

   

2017 (unaudited)

 

2016

                   

CURRENT ASSETS

         
 

Cash and cash equivalents

 

$

2,373

 

873

 

Accounts receivable, less allowance for bad debts accounts of $471 and $198, respectively

         
     

2,576

 

2,780

 

Notes receivable

   

85

 

167

 

Inventories

   

132

 

197

 

Income tax receivable

   

194

 

194

 

Property held for sale

   

811

 

-

 

Prepaid expenses and other

   

727

 

430

   

 

Total current assets

   

6,898

 

4,641

                   

LONG-TERM ASSETS

         
 

Property, plant and equipment, net

   

4,427

 

12,979

 

Long-term notes receivable

   

206

 

382

 

Deposits and other

   

463

 

503

   

 

Total assets

 

$

11,994

$

18,505

                   

LIABILITIES AND SHAREHOLDERS' EQUITY

         

CURRENT LIABILITIES

         
 

Accounts payable - trade

 

$

4,327

 

3,815

 

Short-term debt

   

1,000

 

-

 

Accrued expenses

   

1,331

 

1,220

 

Deferred rent

   

192

 

160

 

Deferred revenues

   

386

 

304

   

 

Total current liabilities

   

7,236

 

5,499

                   

LONG-TERM LIABILITIES

         
 

Convertible notes

   

2,758

 

-

 

Deferred rent, net of current portion

   

1,511

 

1,710

 

Deferred revenues, net of current portion

   

1,375

 

1,440

 

Other long-term liabilities

   

21

 

453

   

 

Total liabilities

   

12,901

 

9,102

                   

COMMITMENTS AND CONTINGENCIES  (See Note 3)

         
                   

SHAREHOLDERS' EQUITY

         
 

Common stock, $.01 par value; authorized 26,000,000 shares; issued 17,775,951 and 17,460,951 shares, respectively; outstanding 10,656,551 and 10,341,551 shares, respectively

         
           
     

178

 

175

 

Additional paid-in capital

   

26,848

 

25,778

 

Retained earnings (accumulated deficit)

   

(3,297)

 

8,086

 

Treasury stock at cost

         
 

 

          Shares in treasury: 7,119,400 

   

(24,636)

 

(24,636)

   

 

Total shareholders' equity 

   

(907)

 

9,403

           

$

11,994

$

18,505

 

RAVE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
     

Nine Months Ended

     

March 26,

 

March 27,

     

2017

 

2016

           

CASH FLOWS FROM OPERATING ACTIVITIES:

     
           
 

Net loss

$  (11,383)

 

$    (6,617)

 

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

     
   

Depreciation and amortization

2,117

 

1,955

   

Impairment of long-lived assets

4,773

 

845

   

Stock compensation expense

143

 

135

   

Deferred income taxes

-

 

2,593

   

Loss on sale/disposal of assets

1,044

 

1

   

Provision for bad debt

423

 

151

 

Changes in operating assets and liabilities:

     
   

Notes and accounts receivable

39

 

842

   

Inventories

65

 

(60)

   

Accounts payable - trade

512

 

1,241

   

Accrued expenses

(321)

 

794

   

Deferred rent

(167)

 

(97)

   

Deferred revenue

17

 

-

   

Prepaid expenses and other

(294)

 

360

   

Cash (used in) provided by operating activities

(3,032)

 

2,143

           

CASH FLOWS FROM INVESTING ACTIVITIES:

     
 

Proceeds from sale of assets

102

 

14

 

Capital expenditures

(258)

 

(7,624)

   

Cash used in investing activities

(156)

 

(7,610)

           

CASH FLOWS FROM FINANCING ACTIVITIES:

     
 

Proceeds from sale of stock

-

 

768

 

Proceeds from stock options

806

 

7

 

Proceeds from issuance of convertible notes

2,882

 

-

 

Net change in short-term debt

1,000

 

-

   

Cash provided by financing activities 

4,688

 

775

           

Net increase (decrease) in cash and cash equivalents

1,500

 

(4,692)

Cash and cash equivalents, beginning of period

873

 

5,727

Cash and cash equivalents, end of period

$      2,373

 

$      1,035

           
           

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

           

CASH PAYMENTS FOR:

     
           
 

Interest

$           25

 

$             1

 

Income taxes - net

$           29

 

$              -

 

RAVE RESTAURANT GROUP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

March 26,

 

March 27,

 

March 26,

 

March 27,

 

2017

 

2016

 

2017

 

2016

 Net loss 

$    (1,962)

 

$    (1,230)

 

$  (11,383)

 

$    (6,617)

 Interest expense 

37

 

1

 

39

 

4

 Income taxes 

5

 

3

 

24

 

2,637

 Income taxes--discontinued operations 

-

 

-

 

(9)

 

(31)

 Depreciation and amortization 

578

 

837

 

2,117

 

1,955

 EBITDA 

$    (1,342)

 

$       (389)

 

$    (9,212)

 

$    (2,052)

 Stock compensation expense 

53

 

45

 

143

 

135

 Pre-opening expenses 

29

 

115

 

95

 

851

 Loss on sale/disposal of assets 

345

 

-

 

1,044

 

-

 Impairment charges, non-operating store costs and discontinued operations 

(39)

 

16

 

5,613

 

1,158

 Adjusted EBITDA 

$       (954)

 

$       (213)

 

$    (2,317)

 

$           92

Contact:

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

SOURCE RAVE Restaurant Group, Inc.

###

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