Ignite Restaurant Group Reports Flat Revenues for Second Quarter 2014

2014-08-11
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  • Total revenues were $229.8 million, compared to $228.1 million in the second quarter of 2013

    Ignite Restaurant Group (NASDAQ:IRG) today reported financial results for the second quarter ended June 30, 2014.

    Highlights for the second quarter of 2014 were as follows:

    • Total revenues were $229.8 million, compared to $228.1 million in the second quarter of 2013;
    • Comparable restaurant sales increased 8.5% at Brick House Tavern + Tap, decreased 4.7% at Joe’s Crab Shack and decreased 2.6% at Macaroni Grill;
    • Net income and net income per diluted share were $1.8 million and $0.07, respectively;
    • Adjusted net income and adjusted net income per diluted share (which are non-GAAP financial measures) were $2.0 million and $0.08, respectively.

    Ray Blanchette, Chief Executive Officer of Ignite Restaurant Group, stated, “Our second quarter results were challenged as we faced what we believe were residual effects of 2014’s winter weather, combined with some cannibalization of Joe’s Crab Shack sales as we significantly increased the number of locations in the Northeast over the past three years. Results at Macaroni Grill were generally in line with our internal expectations, however our team continues to focus on a robust pipeline of initiatives to drive sales growth and improve profitability. We remain pleased with the ongoing sales success at Brick House Tavern + Tap and with the improvements in store level execution. Our near-term development strategy is expected to provide further opportunities to expand the Brick House concept as we continue to optimize our real estate portfolio through conversions.”

    Review of Second Quarter 2014 Operating Results

    Total revenues were $229.8 million in the second quarter of 2014, an increase of 0.8% compared to $228.1 million in the second quarter of last year. The increase was largely driven by the inclusion of Macaroni Grill for the full 13 weeks of the second quarter of 2014, versus 12 weeks for the comparable period of 2013 and new restaurant development, partially offset by a 3.1% decrease in comparable restaurant sales.

    • Revenues at Joe’s Crab Shack were $125.5 million during the second quarter of 2014 versus $129.6 million in the prior year. Comparable restaurant sales at Joe’s Crab Shack decreased 4.7%.
    • Revenues at Brick House Tavern + Tap were $17.8 million in the second quarter of 2014 compared to $12.5 million in the prior year. Comparable restaurant sales at Brick House Tavern + Tap increased 8.5%.
    • Revenues at Macaroni Grill were $86.6 million in the second quarter of 2014 compared to $86.0 million in the prior year. Comparable restaurant sales at Macaroni Grill decreased 2.6%. Macaroni Grill was acquired on April 9, 2013.

    Net income for the second quarter of 2014 was $1.8 million, or $0.07 per diluted share. The Company’s net income for the second quarter of 2014 included approximately $330,000 of costs related to three restaurant closures, losses on disposal of assets and transaction related costs. Excluding the impact of these items, adjusted net income and adjusted net income per diluted share (which are non-GAAP financial measures) were $2.0 million and $0.08, respectively, in the second quarter of 2014. Net loss for the second quarter of 2013 was $2.5 million, or a loss of $0.10 per diluted share. The Company incurred approximately $5.3 million of primarily acquisition related and labor related transition costs in connection with the acquisition of Romano's Macaroni Grill in the second quarter of 2013. Excluding the impact of these items, adjusted net income and adjusted net income per diluted share (which are non-GAAP financial measures) were $1.0 million and $0.04, respectively. A reconciliation between GAAP net income (loss) and adjusted net income is included in the accompanying financial data.

    Development

    During the second quarter of 2014, the Company closed three Macaroni Grill locations. Of these closures, one has been converted and re-opened as a Brick House Tavern + Tap and one is currently under construction and will re-open as a Brick House restaurant in the fourth quarter of 2014 or in early 2015. Subsequent to the end of the second quarter, three additional Macaroni Grill locations were closed in July for a total of eight Macaroni Grill closures year to date.

    Liquidity

    At June 30, 2014, the Company had approximately $20.4 million of available borrowing capacity under its current credit facility and was in compliance with the credit facility’s financial covenants. “In light of our desire to move quickly on new Brick House locations and the recent sales volatility in casual dining, we are currently reviewing refinancing alternatives of our existing credit facility,” stated Michael Dixon, President and Chief Financial Officer of Ignite Restaurant Group.

    About Ignite Restaurant Group

    Ignite Restaurant Group, Inc. (NASDAQ: IRG) owns and operates over 300 restaurants throughout the U.S. Headquartered in Houston, Ignite's portfolio of restaurant concepts includes Joe's Crab Shack, Romano's Macaroni Grill and Brick House Tavern + Tap. Each brand offers a variety of high-quality, chef-inspired food and beverages in a distinctive, casual, high-energy atmosphere. The Company is also a franchisor for Macaroni Grill in locations in the U.S., U.S. territories and internationally.

    Results of Operations

    The following tables present the consolidated statements of operations and selected other data for the thirteen and twenty-six weeks ended June 30, 2014 and July 1, 2013, and selected consolidated balance sheet information as of June 30, 2014 and December 30, 2013:

        Thirteen Weeks Ended     Thirteen Weeks Ended
    Consolidated Statements of Operations June 30, 2014 July 1, 2013
        (In thousands, except percent and per share data)
       
    Revenues $ 229,847 100.0 % $ 228,132 100.0 %
    Costs and expenses
    Restaurant operating costs and expenses
    Cost of sales 70,722 30.8 % 66,765 29.3 %
    Labor expenses 68,995 30.0 % 71,465 31.3 %
    Occupancy expenses 19,577 8.5 % 18,896 8.3 %
    Other operating expenses 47,454 20.6 % 48,039 21.1 %
    General and administrative 11,202 4.9 % 16,611 7.3 %
    Depreciation and amortization 7,945 3.5 % 7,356 3.2 %
    Pre-opening costs 558 0.2 % 1,477 0.6 %
    Asset impairments and closures 135 0.1 % 14 0.0 %
    Loss on disposal of property and equipment   504   0.2   %   197   0.1   %
    Total costs and expenses   227,092   98.8   %   230,820   101.2   %
    Income (loss) from operations 2,755 1.2 % (2,688 ) (1.2 ) %
    Interest expense, net   (1,765 ) (0.8 ) %   (1,741 ) (0.8 ) %
    Income (loss) before income taxes 990 0.4 % (4,429 ) (1.9 ) %
    Income tax benefit   (777 ) (0.3 ) %   (1,967 ) (0.9 ) %
    Net income (loss) $ 1,767   0.8   % $ (2,462 ) (1.1 ) %
     
    Basic and diluted net income (loss) per share data:
    Net income (loss) per share
    Basic and diluted $ 0.07 $ (0.10 )
    Weighted average shares outstanding
    Basic 25,651 25,624
    Diluted 25,749 25,624
     
        Twenty-Six Weeks Ended     Twenty-Six Weeks Ended
    Consolidated Statements of Operations June 30, 2014 July 1, 2013
        (In thousands, except percent and per share data)
       
    Revenues $ 444,706 100.0 % $ 346,372 100.0 %
    Costs and expenses
    Restaurant operating costs and expenses
    Cost of sales 134,140 30.2 % 103,086 29.8 %
    Labor expenses 135,842 30.5 % 103,372 29.8 %
    Occupancy expenses 39,035 8.8 % 27,450 7.9 %
    Other operating expenses 91,455 20.6 % 69,843 20.2 %
    General and administrative 23,476 5.3 % 26,902 7.8 %
    Depreciation and amortization 16,081 3.6 % 12,169 3.5 %
    Pre-opening costs 762 0.2 % 2,568 0.7 %
    Asset impairments and closures 1,092 0.2 % 31 0.0 %
    Loss on disposal of property and equipment 769 0.2 % 392 0.1 %
    Total costs and expenses 442,652 99.5 % 345,813 99.8 %
    Income from operations 2,054 0.5 % 559 0.2 %
    Interest expense, net (3,643) (0.8) % (2,136) (0.6) %
    Gain on insurance settlements - 0.0 % 300 0.1 %
    Loss before income taxes (1,589) (0.4) % (1,277) (0.4) %
    Income tax benefit (3,091) (0.7) % (1,000) (0.3) %
    Net income (loss) $ 1,502 0.3 % $ (277) (0.1) %
     
    Basic and diluted net income (loss) per share data:
    Net income (loss) per share
    Basic and diluted $ 0.06 $ (0.01)
    Weighted average shares outstanding
    Basic 25,645 25,624
    Diluted 25,715 25,624
     
       

      June 30,  

      December 30,
    Selected Consolidated Balance Sheet Information 2014 2013
    (In thousands)
    Cash and cash equivalents $ 999 $ 972
    Total assets 344,819 347,084
    Long term debt (including current portion) 118,676 131,982
    Total liabilities 240,452 245,477
    Total stockholders' equity 104,367 101,607
     
        Thirteen   Thirteen   Twenty-Six   Twenty-Six
    Weeks Ended Weeks Ended Weeks Ended Weeks Ended
    June 30, 2014 July 1, 2013 June 30, 2014 July 1, 2013
    (dollars in thousands)
    Selected Other Data(1):
    Restaurants opened during the period - 4 - 6
    Number of restaurants open (end of period):
    Joe's Crab Shack 136 134 136 134
    Brick House Tavern + Tap 20 16 20 16
    Romano's Macaroni Grill   174     186     174     186  
    Total restaurants 330 336 330 336
    Restaurant operating weeks
    Joe's Crab Shack 1,768 1,727 3,536 3,404
    Brick House Tavern + Tap 260 201 520 396
    Romano's Macaroni Grill 2,281 2,232 4,595 2,232
    Average weekly sales
    Joe's Crab Shack $ 71 $ 75 $ 65 $ 69
    Brick House Tavern + Tap $ 68 $ 62 $ 68 $ 61
    Romano's Macaroni Grill $ 37 $ 38 $ 38 $ 38
    Change in comparable restaurant sales
    Joe's Crab Shack (4.7 %) 0.7 % (5.3 %) (0.5 %)
    Brick House Tavern + Tap 8.5 % 6.4 % 9.2 % 5.2 %
    Romano's Macaroni Grill (2.6 %) (7.4 %) (3.4 %) (7.4 %)
    Total (3.1 %) (2.5 %) (3.6 %) (2.2 %)
     

    (1) Activity for Romano's Macaroni Grill commenced from the acquisition date of April 9, 2013.

     

    Reconciliation of Non-GAAP Results to GAAP Results

    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 8-K filed with the Securities and Exchange Commission on August 7, 2014.

        Thirteen   Thirteen   Twenty-Six   Twenty-Six
    Weeks Ended Weeks Ended Weeks Ended Weeks Ended
    June 30, 2014 July 1, 2013 June 30, 2014 July 1, 2013
    (In thousands, except per share data)
    Net income (loss) - GAAP $ 1,767 $ (2,462 ) $ 1,502 $ (277 )
    Adjustments:
    Transaction costs 89 4,185 89 5,203
    Proposed secondary offering expenses - 300 - 300
    Costs related to conversions, remodels and closures 241 - 1,227 -
    Write-off of debt issuance costs - 483 - 483
    Non-recurring recruitment and training expenses - 327 - 327
    Gain on insurance settlements - - - (300 )
    Income tax effect of adjustments above   (130 )   (1,860 )   (518 )   (2,037 )
    Adjusted net income - non-GAAP $ 1,967   $ 973   $ 2,300   $ 3,699  
     
    Weighted average shares outstanding (GAAP)
    Basic 25,651 25,624 25,645 25,624
    Diluted 25,749 25,624 25,715 25,624
    Net income (loss) per share (GAAP)
    Basic and diluted $ 0.07 $ (0.10 ) $ 0.06 $ (0.01 )
    Adjusted net income per share (non-GAAP)
    Basic and diluted $ 0.08 $ 0.04 $ 0.09 $ 0.14
     


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

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