Red Robin Gourmet Burgers Reports Results for the Fiscal Fourth Quarter and Year Ended December 29, 2013

2014-02-17
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  • Red Robin Gourmet Burgers Fourth quarter revenues were $241.9 million, an increase of 0.5% (12 weeks compared to 13 weeks); comparable sales increased 3.7%

    Red Robin Gourmet Burgers, Inc., (NASDAQ:RRGB) reported financial results for the 12 and 52 weeks ended December 29, 2013 compared to the 13 and 53 weeks ended December 30, 2012.

    Financial Highlights

    • Annual revenues exceeded $1.0 billion; fiscal year 2013 comparable sales grew 4.0%
    • Fourth quarter revenues were $241.9 million, an increase of 0.5% (12 weeks compared to 13 weeks); comparable sales increased 3.7%
    • Restaurant-level operating profit margin increased to 21.7% from 20.6% (See Schedule II)
    • GAAP earnings per diluted share were $0.48 in the fourth quarter (12 weeks), compared to $0.45 a year ago (13 weeks)
    • Adjusted earnings per diluted share were $0.62 in the fourth quarter (12 weeks) versus $0.59 (13 weeks) (See Schedule I)

    Net income for the 12 weeks ended December 29, 2013 was $7.0 million compared to $6.5 million for the 13 weeks ended December 30, 2012. For the 52 weeks ended December 29, 2013, net income was $32.2 million compared to $28.3 million for the 53 weeks ended December 30, 2012.

    For the 12 weeks in the 2013 fiscal fourth quarter, GAAP earnings per diluted share were $0.48 compared to $0.45 for the 13 weeks in the 2012 fourth quarter. Adjusted earnings per diluted share were $0.62 for the 12 weeks ended December 29, 2013 compared to $0.59 per diluted share for the 13 weeks ended December 30, 2012. The Company recorded an impairment charge and a non-recurring special bonus totaling $3.1 million in the fourth quarter of fiscal year 2013 while the 2012 fourth quarter was impacted by a $2.9 million debt refinancing charge.

    GAAP earnings per diluted share for fiscal year 2013 were $2.22 compared to $1.93 in fiscal year 2012. On an adjusted basis, fiscal 2013 diluted earnings per share were $2.37 compared to $2.06 in the prior year. See Schedule I for a reconciliation of adjusted net income and earnings per share.

    The 53rd week in fiscal year 2012 contributed an estimated $3.1 million to net income, or approximately $0.21 per diluted share.

    “In 2013 we engaged our guests through new service and presentation, innovative new menu items, and targeted marketing efforts,” said Steve Carley, Red Robin Gourmet Burgers, Inc. chief executive officer. “Overall, we have made considerable progress in transforming our brand and improving our guest experience but remain mindful that there is still much to be done. 2014 will be a year of continued focus and execution across our engagement, efficiency, and expansion initiatives.”

    Operating Results

    Total Company revenues, which include Company-owned restaurant revenues and franchise royalties, increased 0.5% to $241.9 million for the 12 weeks ended December 29, 2013 from $240.7 million for the 13 weeks ended December 30, 2012. For the 52 weeks ended December 29, 2013, total Company revenues were $1.0 billion, an increase of $40.1 million, or 4.1%, over total revenues of $977.1 million for the 53 weeks ended December 30, 2012.

    System-wide restaurant revenues for the 12 weeks ended December 29, 2013 totaled $325.3 million, compared to $326.8 million for the 13 weeks ended December 30, 2013 at constant currency rates. System-wide restaurant revenues for the 52 weeks ended December 29, 2013 increased 3.2% to $1.4 billion, compared to $1.3 billion for the 53 weeks ended December 30, 2012.

    Comparable restaurant revenues increased 3.7% in the fourth quarter of fiscal year 2013 compared to the prior fiscal year on a 12-week comparable basis. In the fourth quarter, guest counts decreased 1.4% while average guest check increased 5.1%. Comparable restaurants included 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. The Company’s comparable restaurant revenue growth is calculated by comparing the same calendar weeks which, for fiscal year 2012, vary from the Company’s fiscal reporting by one week. Comparable restaurant revenues for fiscal year 2013 increased 4.0% for Company-owned restaurants compared to a year ago.

    Restaurant-level operating profit margins were 21.7% in the fourth quarter of fiscal year 2013 compared to 20.6% in the fourth quarter of fiscal year 2012, an improvement of 110 basis points. The increased margins resulted primarily from the leverage of higher sales on fixed costs. 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)   Q4 2013   Q4 2012
    Average weekly sales per unit:    
    Company-owned – Total $ 56,012 $ 54,441
    Company-owned – Comparable $ 56,016 $ 54,033
    Franchised units $ 53,743 $ 52,232
    Total operating weeks(2):    
    Company-owned units 4,227 4,330
    Franchised units 1,632 1,726

    (1) Excludes Red Robin’s Burger Works fast casual restaurants.

    (2) The fourth quarter of fiscal year 2013 had 12 weeks as compared to 13 weeks in the fourth quarter of fiscal year 2012.

    Other Results

    Depreciation and amortization costs increased slightly from $13.0 million in the fourth quarter of 2012 to $13.6 million in the fourth quarter of fiscal year 2013.

    General and administrative costs were $22.8 million, an increase of $2.3 million from the fourth quarter of fiscal year 2012 due mainly to an increase in salaries and benefits related to investments in talent to support the Company’s business initiatives as well as a $1.6 million non-recurring special bonus awarded by the board.

    Selling expenses were $8.0 million, or 3.3% of revenue, in the fourth quarter of fiscal year 2013, an increase from $6.4 million, or 2.7% of revenue, a year ago, primarily due to costs associated with a 15.7% increase in gift card sales.

    During fiscal year 2013, the Company determined that four Company-owned restaurants were impaired. The Company recognized a non-cash pre-tax impairment charge of $1.5 million resulting from the projected future results of these restaurants.

    The Company had an effective tax rate of 11.9% in the fourth quarter of fiscal year 2013, compared to a 19.3% rate in the same period a year ago. The effective tax rate for fiscal year 2013 was 21.8%, compared to 23.1% for fiscal year 2012.

    Restaurant Development

    As of the end of the fourth quarter of fiscal year 2013, there were 355 Company-owned Red Robin® restaurants, six Red Robin’s Burger Works® and 134 franchised Red Robin restaurants – a total of 495 restaurants. In the fourth quarter of fiscal year 2013, the Company opened ten new Red Robin restaurants and relocated one as well as opened one Red Robin’s Burger Works. During the full year 2013, the Company opened 21 new Red Robin restaurants and relocated two as well as opened one Red Robin’s Burger Works. Franchisees opened two and closed one Red Robin restaurant during 2013.

    Under our brand transformation initiative, the Company remodeled 19 Red Robin restaurants to our new brand standards during 2013.

    Balance Sheet and Liquidity

    On December 29, 2013, the Company had cash and cash equivalents of $17.1 million and total debt of $88.7 million, including $9.3 million of capital lease liabilities.

    Cash generated from operations in fiscal year 2013 totaled $113.5 million compared to $94.4 million in fiscal year 2012, and fiscal year 2013 capital investments amounted to $78.9 million compared to $60.0 million in the prior year.

    During the fourth quarter, the Company repurchased 31,928 shares for a total of $2.5 million under its share repurchase authorization. In fiscal year 2013, the Company repurchased a total of 68,816 shares for a total of $5.0 million.

    Outlook for 2014

    Red Robin’s 2014 fiscal year consists of 52 weeks ending on December 28, 2014.

    In fiscal year 2014, the Company expects comparable restaurant sales growth in the low single digits. Additionally, the Company plans to open 20 new Red Robin restaurants and five Red Robin’s Burger Works resulting in total operating week growth of between 6 and 7%.

    Capital investments in fiscal year 2014 are expected to total between $85 million and $90 million. In addition to the new restaurants, the Company also plans to remodel 50 Red Robin restaurants as part of its brand transformation initiative.

    Restaurant-level operating profit margins in fiscal year 2014 are expected to exceed 21.0% with increases in both commodity and labor costs.

    General and administrative costs are expected to be approximately $93 million, while selling expenses are expected to be approximately 3.1% of sales. Depreciation is projected to be between $59 million and $60 million.

    The income tax rate in fiscal year 2014 is expected to be approximately 26.5%.

    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.

    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 expert, famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries® in a fun environment. Red Robin’s award-winning burgers have earned the title of Best Burger in the full-service category in the Zagat Fast Food Survey four years in a row. 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 GOURMET BURGERS, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    (In thousands, except per share data)

          Twelve

    Weeks Ended

    December 29,

    2013

      Thirteen

    Weeks Ended

    December 30,

    2012

      Fifty-two

    Weeks Ended

    December 29,

    2013

      Fifty-three

    Weeks Ended

    December 30,

    2012

     

     
    Revenues:
    Restaurant revenue $ 237,551 $ 236,666 $ 1,000,198 $ 960,994
    Franchise royalties, fees and other revenue   4,375   4,013   17,049   16,138
    Total revenues   241,926   240,679   1,017,247   977,132
     
    Costs and expenses:

    Restaurant operating costs (exclusive of depreciation

     and amortization shown separately below):

    Cost of sales 59,978 59,696 250,237 242,641
    Labor 79,959 79,690 335,113 323,100
    Other operating 28,463 30,815 123,479 125,471
    Occupancy 17,595 17,758 74,079 70,971
    Depreciation and amortization 13,611 13,000 58,200 55,468
    General and administrative 22,796 20,462 94,276 83,716
    Selling 8,007 6,416 30,002 27,082
    Pre-opening costs 1,923 639 6,530 3,474
    Asset impairment charge   1,517   -   1,517   -
    Total costs and expenses   233,849   228,476   973,433   931,923
     
    Income from operations 8,077 12,203 43,814 45,209
     
    Other expense:
    Interest expense, net and other   178   4,159   2,565   8,352
     
    Income before income taxes 7,899 8,044 41,249 36,857
    Provision for income taxes   940   1,552   9,010   8,526
    Net income $ 6,959 $ 6,492 $ 32,239 $ 28,331
    Earnings per share:
    Basic $ 0.49 $ 0.46 $ 2.27 $ 1.97
    Diluted $ 0.48 $ 0.45 $ 2.22 $ 1.93
    Weighted average shares outstanding:
    Basic   14,346   14,085   14,225   14,411
    Diluted   14,607   14,326   14,510   14,669

    RED ROBIN GOURMET BURGERS, INC.

    CONDENSED CONSOLIDATED BALANCE SHEETS

    (In thousands)

          December 29, 2013   December 30, 2012
     
    Assets:
    Current Assets:
    Cash and cash equivalents $ 17,108 $ 22,440
    Accounts receivable, net 22,568 16,386
    Inventories 21,992 18,371
    Prepaid expenses and other current assets 15,766 13,439
    Income tax receivable 260 858
    Deferred tax asset and other   2,952     3,010  

     Total current assets

      80,646     74,504  
     
    Property and equipment, net 444,727 413,258
    Goodwill 62,525 62,525
    Intangible assets, net 36,800 37,203
    Other assets, net   9,947     9,642  

     Total assets

    $ 634,645   $ 597,132  
     
    Liabilities and Stockholders’ Equity:
    Current Liabilities:
    Trade accounts payable $ 19,117 $ 14,241
    Construction related payables 14,682 4,694
    Accrued payroll and payroll related liabilities 45,919 31,476
    Unearned revenue 35,740 28,187
    Accrued liabilities 23,628 22,901
    Current portion of capital lease obligations   826     784  

     Total current liabilities

      139,912     102,283  
     
    Deferred rent 51,985 44,801
    Long-term debt 79,375 125,000
    Long-term portion of capital lease obligations 8,513 9,211
    Other non-current liabilities   7,457     8,918  

     Total liabilities

      287,242     290,213  
     
    Stockholders’ Equity:

    Common stock, $0.001 par value: 30,000 shares authorized; 17,851 and 17,499 shares issued; 14,350 and 13,999 shares outstanding

    18 17

    Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding

    - -
    Treasury stock, 3,501 and 3,500 shares, at cost (110,486 ) (107,589 )
    Paid-in capital 197,145 185,974
    Accumulated other comprehensive (loss) gain, net of tax (25 ) 5
    Retained earnings   260,751     228,512  
    Total stockholders’ equity   347,403     306,919  
    Total liabilities and stockholders’ equity $ 634,645   $ 597,132  

    Schedule I

    Reconciliation of Non-GAAP Results to GAAP Results

    (In thousands, except percentage 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 52 weeks ended December 29, 2013 and the 13 and 53 weeks ended December 30, 2012, net income and basic and diluted earnings per share, excluding the effects of asset impairment charges in the fourth quarter of fiscal year 2013 and the refinancing of the Company’s debt in the fourth quarter of fiscal year 2012. The Company believes that the presentation of net income and earnings per share exclusive of the identified items 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 asset impairment charges and the loss on debt refinancing was calculated based on the change in the total tax provision calculation after adjusting for the identified items. The non- GAAP measurements are intended to supplement the presentation of the Company’s financial results in accordance with GAAP.

          Twelve

    Weeks Ended

    December 29,

    2013

      Thirteen

    Weeks Ended

    December 30,

    2012

      Fifty-two

    Weeks Ended

    December 29,

    2013

      Fifty-three

    Weeks Ended

    December 30,

    2012

     
    Net income as reported $ 6,959 $ 6,492 $ 32,239 $ 28,331
    Loss on debt refinancing - 2,919 - 2,919
    Asset impairment charges 1,517 - 1,517 -
    Non-recurring bonus 1,626 - 1,626 -
    Income tax expense   (974 )   (1,020 )   (974 )   (1,020 )
     
    Adjusted net income $ 9,128   $ 8,391   $ 34,408   $ 30,230  
     
    Basic net income per share:
    Net income as reported $ 0.49 $ 0.46 $ 2.27 $ 1.97
    Loss on debt refinancing - 0.21 - 0.20
    Asset impairment charges 0.11 - 0.11 -
    Non-recurring special bonus 0.11 - 0.11 -
    Income tax expense   (0.07 )   (0.07 )   (0.07 )   (0.07 )
     
    Adjusted earnings per share - basic $ 0.64   $ 0.60   $ 2.42   $ 2.10  
     
    Diluted net income per share:
    Net income as reported $ 0.48 $ 0.45 $ 2.22 $ 1.93
    Loss on debt refinancing - 0.20 - 0.20
    Asset impairment charges 0.10 - 0.11 -
    Non-recurring special bonus 0.11 - 0.11 -
    Income tax expense   (0.07 )   (0.06 )   (0.07 )   (0.07 )
     
    Adjusted earnings per share - diluted $ 0.62   $ 0.59   $ 2.37   $ 2.06  
     
    Weighted average shares outstanding:
    Basic   14,346     14,085     14,225     14,411  
    Diluted   14,607     14,326     14,510     14,669  

    Schedule II

    Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income

    from Operations and Net Income

    (In thousands, except percentage data)

    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 revenues 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 52 weeks ended December 29, 2013 and the 13 and 53 weeks ended December 30, 2012, expressed as a percentage of total revenues, except for the components of restaurant level operating profit, which are expressed as a percentage of restaurant revenues.

        Twelve

    Weeks Ended

    December 29,

    2013

      Thirteen

    Weeks Ended

    December 30,

    2012

      Fifty-two

    Weeks Ended

    December 29,

    2013

      Fifty-three

    Weeks Ended

    December 30,

    2012

     
    Restaurant revenues $ 237,551   98.2 % $ 236,666   98.3 % $ 1,000,198   98.3 % $ 960,994   98.3 %
    Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
    Cost of sales 59,978 25.2 % 59,696 25.2 % 250,237 25.0 % 242,641 25.2 %
    Labor 79,959 33.7 % 79,690 33.7 % 335,113 33.5 % 323,100 33.6 %
    Other operating 28,463 12.0 % 30,815 13.0 % 123,479 12.3 % 125,471 13.1 %
    Occupancy   17,595 7.4 %   17,758 7.5 %   74,079 7.4 %   70,971 7.4 %
    Restaurant-level operating profit   51,556 21.7 %   48,707 20.6 %   217,290 21.7 %   198,811 20.7 %
     
    Add – Franchise royalties, fees and other revenue 4,375 1.8 % 4,013 1.7 % 17,049 1.7 % 16,138 1.7 %
    Deduct – other operating:
    Depreciation and amortization 13,611 5.6 % 13,000 5.4 % 58,200 5.7 % 55,468 5.7 %
    General and administrative 22,796 9.4 % 20,462 8.5 % 94,276 9.3 % 83,716 8.6 %
    Selling 8,007 3.3 % 6,416 2.7 % 30,002 2.9 % 27,082 2.8 %
    Pre-opening costs 1,923 0.8 % 639 0.3 % 6,530 0.6 % 3,474 0.4 %
    Asset impairment charge   1,517 0.6 %   - 0.0 %   1,517 0.1 %   - 0.0 %
    Total other operating   47,854 19.8 %   40,517 16.8 %   190,525 18.7 %   169,740 17.4 %
     
    Income from operations 8,077 3.3 % 12,203 5.1 % 43,814 4.3 % 45,209 4.6 %
     
    Interest expense, net and other 178 0.1 % 4,159 1.7 % 2,565 0.3 % 8,352 0.9 %
    Income tax expense   940 0.4 %   1,552 0.6 %   9,010 0.9 %   8,526 0.9 %
    Total other   1,118 0.5 %   5,711 2.4 %   11,575 1.1 %   16,878 1.7 %
     
    Net income $ 6,959 2.9 % $ 6,492 2.7 % $ 32,239 3.2 % $ 28,331 2.9 %

    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 revenues and not total revenues.



    Logos, product and company names mentioned are the property of their respective owners.

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