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Ignite Restaurant Group Fourth Quarter Total Revenues Up 11.1%

2013-03-21

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Comparable restaurant sales increased 0.8%, excluding a 0.1% impact due to Hurricane Sandy, marking the Company’s 18th consecutive quarter of positive comparable restaurant sales growth

Ignite Restaurant Group (NASDAQ: IRG) reported financial results for the fourth quarter and full year ended December 31, 2012.

“Looking ahead, we believe the future of Ignite has never looked brighter”

Highlights for the fourth quarter of 2012 compared to the fourth quarter of 2011 were as follows:

Total revenues rose 11.1% to $112.6 million compared to $101.4 million
Comparable restaurant sales increased 0.8%, excluding a 0.1% impact due to Hurricane Sandy, marking the Company’s 18^th consecutive quarter of positive comparable restaurant sales growth
Net loss and net loss per share were ($7.6) million and ($0.30), respectively
Adjusted net loss (which is a non-GAAP financial measure) increased $584k to ($3.9) million and adjusted net loss per share was ($0.15) per share
One new Joe’s Crab Shack restaurant opened during the fourth quarter of 2012

Highlights for the full fiscal year 2012 compared to the full fiscal year 2011 were as follows:

Total revenues rose 14.8% to $465.1 million compared to $405.2 million
Comparable restaurant sales increased 2.2%
Net income decreased $3.4 million to $8.7 million, or $0.37 per share
Adjusted net income (which is a non-GAAP financial measure) increased $6.1 million to $14.7 million and adjusted pro forma net income per share was $0.57 per share
A total of 11 new restaurants opened during 2012

“Our ongoing focus on menu innovation, brand awareness and providing a unique and authentic dining experience for our guests drove our top line during the quarter,” commented Ray Blanchette, Chief Executive Officer of Ignite Restaurant Group. “As a result, we achieved our 18th consecutive quarter of positive comparable sales, despite a challenging consumer environment.”

“Looking ahead, we believe the future of Ignite has never looked brighter,” added Blanchette. “Our brands remain distinct and differentiated. We have a strong development pipeline and we continue to be pleased with the performance of our new units. Furthermore, our pending acquisition of Macaroni Grill will transform Ignite into a company with almost one billion dollars in revenues with the opportunity to elevate the business, achieve meaningful synergies and drive significant growth over time. We continue to be very excited about our brands, the growth in front of our Company, and the ongoing prospect to create value for our shareholders.”

Review of Fourth Quarter 2012 Operating Results

Total revenues increased $11.2 million, or 11.1%, to $112.6 million in the fourth quarter of 2012 from $101.4 million in the same quarter last year. Non-comparable restaurants contributed $10.5 million of the total revenue increase, while comparable restaurants contributed $0.7 million of the total revenue increase.

Comparable restaurant sales increased 0.8% during the fourth quarter of 2012, excluding a 0.1% impact due to Hurricane Sandy.

Net loss for the fourth quarter of 2012 was ($7.6) million, or ($0.30) per diluted share compared to ($1.0) million, or ($0.05) per diluted share in the fourth quarter of 2011. The Company incurred approximately $6.1 million of charges in the fourth quarter of 2012 related primarily to its debt refinancing, restatement related costs, a restaurant closure and losses associated with damage caused by Hurricane Sandy. In the fourth quarter of 2011, the Company realized a benefit of approximately $2.3 million related primarily to the reversal of a deferred tax valuation allowance and an insurance gain, partially offset by transaction expenses and asset write-offs. Excluding the impact of these items, adjusted net loss (which is a non-GAAP financial measure) was ($3.9) million in the fourth quarter of 2012 compared to ($3.3) million in the fourth quarter of 2011. A reconciliation between GAAP net income (loss) and adjusted net income (loss) is included in the accompanying financial data.

Development

During the fourth quarter of 2012, the Company opened one new Joe’s Crab Shack restaurant in Hunt Valley, MD. 11 new Joe’s Crab Shack restaurants opened during fiscal 2012, one Joe’s Crab Shack closed for a conversion to a Brick House Tavern + Tap in 2013, and one Brick House Tavern + Tap closed for a conversion to a Joe’s Crab Shack in 2013. There were 129 Joe’s Crab Shack restaurants and 15 Brick House Tavern + Tap restaurants at the end of the fourth quarter.

In 2013, the Company plans to open as many as 14 new restaurants and to convert as many as four existing restaurants. Two Joe’s Crab Shack restaurants have opened to-date during the first quarter of 2013.

Subsequent Event

On February 6, 2013 the Company announced that it agreed to acquire Romano’s Macaroni Grill for approximately $55.0 million in an all-cash transaction from private equity firm Golden Gate Capital, management and investors. The acquisition will be funded through a $50 million upsizing of the Company’s existing credit facility. The Company plans to close the acquisition in the second quarter of 2013 and expects the transaction to be accretive to earnings in 2014. Romano’s Macaroni Grill, which opened its first restaurant in 1988, currently owns and operates 186 units and franchises five units across 36 states. Additionally, the brand franchises an additional 19 units throughout nine U.S. territories and foreign countries.

About Ignite Restaurant Group

Ignite Restaurant Group, Inc. owns and operates 131 Joe's Crab Shacks and 15 Brick House Tavern + Taps. Each brand offers a variety of high-quality, chef-inspired food and beverages in a distinctive, casual, high-energy atmosphere. Joe's Crab Shack and Brick House Tavern + Tap operate in a diverse set of markets across the United States.

			Sixteen Weeks Ended December 31, 2012						Sixteen Weeks Ended January 2, 2012						Fifty-Two Weeks Ended December 31, 2012						Fifty-Two Weeks Ended January 2, 2012
Consolidated Statements of Operations			Amount			Percent of Revenue			Amount			Percent of Revenue			Amount			Percent of Revenue			Amount			Percent of Revenue
			(In thousands, except percent and per share data)

Revenues			$	112,603		100.0		%	$	101,391		100.0		%	$	465,056		100.0		%	$	405,243		100.0		%
Costs and expenses
	Restaurant operating costs
		Cost of sales		35,001		31.1		%		32,041		31.6		%		145,451		31.3		%		127,607		31.5		%
		Labor and benefits		33,903		30.1		%		29,950		29.5		%		127,331		27.4		%		111,721		27.6		%
		Occupancy expenses		10,401		9.2		%		9,168		9.0		%		33,846		7.3		%		30,708		7.6		%
		Other operating expenses		21,000		18.6		%		18,920		18.7		%		81,219		17.5		%		72,296		17.8		%
	General and administrative			10,084		9.0		%		7,159		7.1		%		31,725		6.8		%		23,556		5.8		%
	Depreciation and amortization			6,019		5.3		%		5,274		5.2		%		18,572		4.0		%		16,011		4.0		%
	Pre-opening costs			362		0.3		%		1,407		1.4		%		3,871		0.8		%		4,855		1.2		%
	Restaurant impairments and closures			(18	)	(0.0	)	%		281		0.3		%		115		0.0		%		333		0.1		%
	Loss on disposal of property and equipment			1,856		1.6		%		941		0.9		%		2,296		0.5		%		1,295		0.3		%
		Total costs and expenses		118,608		105.3		%		105,141		103.7		%		444,426		95.6		%		388,382		95.8		%
Income (loss) from operations				(6,005	)	(5.3	)	%		(3,750	)	(3.7	)	%		20,630		4.4		%		16,861		4.2		%
Interest expense, net				(3,372	)	(3.0	)	%		(2,731	)	(2.7	)	%		(9,366	)	(2.0	)	%		(9,215	)	(2.3	)	%
Gain (loss) on insurance settlements				(1,016	)	(0.9	)	%		1,125		1.1		%		(799	)	(0.2	)	%		1,126		0.3		%
Income (loss) before income taxes				(10,393	)	(9.2	)	%		(5,356	)	(5.3	)	%		10,465		2.3		%		8,772		2.2		%
Income tax expense (benefit)				(2,811	)	(2.5	)	%		(4,349	)	(4.3	)	%		1,751		0.4		%		(3,291	)	(0.8	)	%
Net income (loss)			$	(7,582	)	(6.7	)	%	$	(1,007	)	(1.0	)	%	$	8,714		1.9		%	$	12,063		3.0		%

Basic and diluted net income (loss) per share data:
	Net income (loss) per share
		Basic and diluted	$	(0.30	)				$	(0.05	)				$	0.37					$	0.63
	Weighted average shares outstanding
		Basic		25,624						19,178						23,328						19,178
		Diluted		25,624						19,178						23,329						19,178

Selected Consolidated Balance Sheet Information	December 31, 2012		January 2, 2012
	(In thousands)
Cash and cash equivalents	$	6,929	$	3,725
Total assets		201,438		177,835
Long term debt (1)		45,000		114,750
Total liabilities		95,221		162,036
Stockholders' equity (1)		106,217		15,799
(1) Change from fiscal 2011 to fiscal 2012 reflects the impacts of the initial public offering in May 2012

		Sixteen Weeks Ended						Fifty-Two Weeks Ended
		December 31, 2012			January 2, 2012			December 31, 2012			January 2, 2012

Selected Other Data:
Restaurants opened during the period			1			2			11			11
Number of restaurants open (end of period):
	Joe's Crab Shack		129			119			129			119
	Brick House Tavern + Tap		15			16			15			16
	Total restaurants		144			135			144			135
Average weekly sales (in thousands)		$	49		$	47		$	63		$	59
Restaurant operating weeks			2,319			2,162			7,367			6,871
Comparable Restaurant Data:
Comparable restaurant base (end of period)			123			114			123			114
Average unit volume (in thousands)		$	717		$	700		$	3,050		$	2,970
Comparable restaurant sales percentage change			0.8	%		7.3	%		2.2	%		6.9	%
Average check (Joe's only)		$	23.78		$	23.18		$	23.80		$	23.07

Reconciliation of Non-GAAP Results to GAAP Results

The Company provided detailed explanations of these non-GAAP financial measures, including a discussion of the usefulness and purposes of each measure, in its Form 8-K filed with the Securities and Exchange Commission on March 20, 2013.

		Sixteen Weeks Ended						Fifty-Two Weeks Ended
		December 31, 2012			January 2, 2012			December 31, 2012			January 2, 2012
		(In thousands, except per share data)
Net income (loss) - GAAP		$	(7,582	)	$	(1,007	)	$	8,714		$	12,063
Adjustments:
	IPO-related expenses		-			-			1,864			-
	Write-off of debt issuance costs		2,227			-			3,281			1,378
	Non-cash loss on disposal of fixed assets related to conversion, remodels and closures
			1,549			628			1,549			628
	Loss (gain) on insurance settlements		1,016			(1,124	)		799			(1,126	)
	Restatement expenses		825			-			1,873			-
	Hedge termination		-			-			-			427
	Other expenses		448			319			448			579
	Income tax effect of adjustments above		(2,381	)		70			(3,853	)		(698	)
	Release of deferred tax asset valuation allowance		-			(2,200	)		-			(4,659	)
Adjusted net income (loss) - non-GAAP		$	(3,898	)	$	(3,314	)	$	14,675		$	8,592

Weighted average shares outstanding (GAAP)
	Basic		25,624			19,178			23,328			19,178
	Diluted		25,624			19,178			23,329			19,178
Net income (loss) per share (GAAP)
	Basic and diluted	$	(0.30	)	$	(0.05	)	$	0.37		$	0.63
Pro forma weighted average shares outstanding (non-GAAP)
	Basic and diluted (1)					25,624			25,624			25,624
Adjusted pro forma net income (loss) per share (non-GAAP)
	Basic and diluted(1)				$	(0.13	)	$	0.57		$	0.34
Adjusted net loss per share (non-GAAP)
	Basic and diluted	$	(0.15	)

(1) Reflects 6.4 million shares of common stock issued in the IPO as if it occurred at the beginning of fiscal year 2011. Not presented for the fourth quarter of fiscal 2012 since these shares were oustanding for the entire period.