Form 8-K RED ROBIN GOURMET BURGER For: May 22
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8‑K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 22, 2018
RED ROBIN GOURMET BURGERS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-34851 | 84-1573084 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
6312 S. Fiddler’s Green Circle, Suite 200N Greenwood Village, Colorado | 80111 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (303) 846-6000
Not Applicable
(Former name or former address, if changed since last report.)
___________________________________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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ITEM 2.02 | Results of Operations and Financial Condition |
On May 22, 2018, Red Robin Gourmet Burgers, Inc. issued a press release describing selected financial results for the first fiscal quarter ended April 22, 2018. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. A copy of the supplemental financial information for the first fiscal quarter ended April 22, 2018, that will be referred to during today’s investor conference call and webcast is being furnished as Exhibit 99.2 to this Form 8-K.
The information in this Item 2.02, including the information set forth in Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
ITEM 9.01 Financial Statements and Exhibits
(d) Exhibits
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
RED ROBIN GOURMET BURGERS, INC.
Date: May 22, 2018
By: /s/ Guy J. Constant
Name: Guy J. Constant
Title: Executive Vice President and Chief Financial Officer
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EXHIBIT INDEX
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Exhibit 99.1
Red Robin Gourmet Burgers Reports Results for the Fiscal First Quarter Ended April 22, 2018
Greenwood Village, CO – May 22, 2018 – Red Robin Gourmet Burgers, Inc., (NASDAQ: RRGB), a full-service restaurant chain serving an innovative selection of high-quality gourmet burgers in a family-friendly atmosphere, today reported financial results for the quarter ended April 22, 2018.
First Quarter 2018 Financial Highlights Compared to First Quarter 2017
• | Total revenues were $421.5 million, an increase of 0.2%; |
• | Off-premise sales increased to 9.4% of total food and beverage sales compared to 6.3%; |
• | Comparable restaurant revenue decreased 0.9% (using constant currency rates); |
• | Comparable restaurant guest counts increased 0.1%; |
• | Restaurant labor costs as a percentage of restaurant revenue improved 70 basis points to 34.5%; |
• | GAAP earnings per diluted share were $0.34 compared to $0.89; and |
• | Adjusted earnings per diluted share were $0.69 compared to $0.89 (see Schedule I). |
“While our sales were disappointing in the first quarter, we continued to do much better than casual dining on traffic according to Black Box Intelligence, outpacing the sector by 230 basis points. This makes our seventh quarter in a row of gaining market share. We did this by driving our off-premise sales by almost 40% year over year, increasingly going where the Guest wants us to be,” said Denny Marie Post, Red Robin Gourmet Burgers, Inc. chief executive officer. “We are taking steps to improve sales and traffic trends while continuing to make strides on productivity, which is critical to ensure we can deliver great service and value despite rising costs.”
Operating Results
Total revenues, which primarily include Company-owned restaurant revenue and franchise royalties, increased 0.2% to $421.5 million in the first quarter of 2018 from $420.6 million in the first quarter of 2017. Restaurant revenue increased $1.3 million due to a $5.9 million increase in revenue from new restaurant openings and a $0.6 million favorable foreign currency impact, partially offset by a $3.8 million, or 0.9%, decrease in comparable restaurant revenue and a $1.4 million decrease from closed restaurants.
System-wide restaurant revenue (which includes franchised units) for the first quarter of 2018 totaled $498.0 million, compared to $498.8 million for the first quarter of 2017.
Comparable restaurant revenue(1) decreased 0.9% in the first quarter of 2018 compared to the same period a year ago, driven by a 1.0% decrease in average guest check, partially offset by a 0.1% increase in guest counts. The decrease in average guest check comprised a 2.0% decrease in menu mix, offset by a 1.0% increase in pricing. The Company’s comparable revenue growth is calculated by comparing the same calendar weeks which, for the first quarter of 2017, exclude the first week of the first quarter of 2017 and include the first week of the second quarter of 2017.
Net income was $4.4 million for the first quarter of 2018 compared to $11.6 million for the same period a year ago. Adjusted net income was $9.1 million for the first quarter of 2018 (see Schedule I).
Restaurant-level operating profit margin (a non-GAAP financial measure) was 20.0% in the first quarter of 2018 compared to 21.3% in the same period a year ago. The 130 basis point decrease in the first quarter of 2018 resulted from a 90 basis point increase in cost of sales, a 70 basis point increase in other restaurant operating expenses, and a 40 basis point increase in occupancy costs, offset by a 70 basis point decrease in labor 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, in each case under GAAP.
________________________________________
(1) | Comparable restaurants are those Company-owned restaurants that have operated five full quarters during the period presented, and such restaurants are only included in the comparable metrics if they are comparable for the entirety of both periods presented. |
Restaurant Revenue Performance
Q1 2018 | Q1 2017 | ||||||
Average weekly sales per unit(1): | |||||||
Company-owned – Total | $ | 53,704 | $ | 55,490 | |||
Company-owned – Comparable(2) | $ | 54,003 | $ | 55,446 | |||
Franchised units – Comparable | $ | 60,103 | $ | 61,611 | |||
Total operating weeks: | |||||||
Company-owned units | 7,722 | 7,462 | |||||
Franchised units | 1,386 | 1,381 | |||||
________________________________________
(1) | Calculated using constant currency rates. Using historical currency rates, the average weekly sales per unit in the first quarter of 2017 for Company-owned – Total and Company-owned – Comparable was $55,408 and $55,362. The Company calculates non-GAAP constant currency average weekly sales per unit by translating prior year local currency average weekly sales per unit to U.S. dollars based on current quarter average exchange rates. The Company considers non-GAAP constant currency average weekly sales per unit to be a useful metric to investors and management as they facilitate a more useful comparison of current performance to historical performance. |
(2) | Using the same calendar weeks as compared to the first quarter 2018, the average weekly sales per unit in the first quarter of 2017, using constant currency rates, was $54,503. |
Other Results
Depreciation and amortization costs increased to $29.2 million in the first quarter of 2018 from $28.0 million in the first quarter of 2017. The increased depreciation was primarily related to new restaurant technology implemented beginning in third quarter 2017 and new restaurants opened since the first quarter of 2017.
General and administrative costs were $28.6 million, or 6.8% of total revenues, in the first quarter of 2018, compared to $30.9 million, or 7.3% of total revenues in the same period a year ago. The decrease was primarily due to decreases in salaries related to the reorganization in the first quarter 2018 and project costs related to our off-premise dining initiatives.
Selling expenses were $17.7 million, or 4.2% of total revenues, in the first quarter of 2018, compared to $17.1 million, or 4.1% of total revenues during the same period in the prior year. The increase was primarily due to additional spending in local restaurant marketing activities.
Pre-opening costs were $1.1 million in the first quarter of 2018, compared to $1.9 million in the same period a year ago. The decrease was primarily due to the number of restaurant openings.
Other charges in the first quarter of 2018 included $4.0 million litigation contingencies and $2.3 million reorganization costs.
The Company’s effective tax rate in the first quarter of 2018 was 21.2% benefit, compared to an effective tax rate of 20.1% expense in the first quarter of 2017. The change in the effective tax rate is primarily due to the decrease in income as well as the decrease in the federal statutory rate from 35% to 21% in the first quarter of 2018 compared to the same period a year ago.
Earnings per diluted share for the first quarter of 2018 was $0.34 compared to $0.89 in first quarter of 2017. Excluding charges of $0.22 per diluted share for litigation contingencies and $0.13 per diluted share for reorganization costs, adjusted earnings per diluted share for the first quarter ended April 22, 2018 were $0.69. See Schedule I for a reconciliation of adjusted net income and adjusted earnings per share (each, a non-GAAP financial measure) to net income and earnings per share.
Restaurant Development
During the first quarter of 2018, the Company opened four Red Robin restaurants and our franchisees opened one Red Robin restaurant. The Company plans to open four Red Robin restaurants and our franchisees plan to open three Red Robin restaurants during the remainder of 2018.
The following table details restaurant unit data for Company-owned and franchised locations for the periods indicated:
Sixteen Weeks Ended | ||||||
April 22, 2018 | April 16, 2017 | |||||
Company-owned: | ||||||
Beginning of period | 480 | 465 | ||||
Opened during the period | 4 | 6 | ||||
Acquired from franchisees | — | — | ||||
Closed during the period | — | (2 | ) | |||
End of period | 484 | 469 | ||||
Franchised: | ||||||
Beginning of period | 86 | 86 | ||||
Opened during the period | 1 | 1 | ||||
Sold or closed during the period | — | — | ||||
End of period | 87 | 87 | ||||
Total number of restaurants | 571 | 556 | ||||
Balance Sheet and Liquidity
As of April 22, 2018, the Company had cash and cash equivalents of $23.7 million and total debt of $231.4 million, excluding $10.8 million of capital lease liabilities. The Company funded construction of new restaurants and other capital expenditures with cash flow from operations and made net repayments of $35.0 million on its credit facility during the first quarter of 2018. As of April 22, 2018, the Company had outstanding borrowings under its credit facility of $230.5 million, in addition to amounts issued under letters of credit of $7.5 million, which reduce the amount available under its credit facility but are not recorded as debt.
The Company’s lease adjusted leverage ratio was 3.96x as of April 22, 2018. The lease adjusted leverage ratio is defined in Section 1.1 of the Company’s credit facility, which is filed as Exhibit 10.32 in the Annual Report on Form 10-K filed on February 21, 2017.
Outlook for the Second Quarter of 2018
Earnings per diluted share is projected to range from $0.55 to $0.75 for the second quarter of 2018.
Guidance Policy
The Company provides only annual guidance as it relates to selected information related to the Company's financial and operating performance, and such measures may differ from year to year.
Investor Conference Call and Webcast
Red Robin will host an investor conference call to discuss its first quarter 2018 results today at 5:00 p.m. ET. The conference call number is (800) 239-9838, or for international callers (323) 794-2551. The financial information that the Company intends to discuss during the conference call is included in this press release and will be available in the “Company” section of the Company’s website at www.redrobin.com by selecting the “Investor Relations” link, then the “News Releases” link. Prior to the conference call, the Company will post supplemental financial information that will be discussed during the call and live webcast.
To access the supplemental financial information and webcast, please visit www.redrobin.com and select the “Company” section, then the “Investor Relations” link, then the “Presentations” link. A replay of the live conference call will be available from two hours after the call until midnight on Tuesday, May 29, 2018. The replay can be accessed by dialing (844) 512-2921, or (412) 317-6671 for international callers. The conference ID is 5361118.
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., and under the trade name Red Robin Gourmet Burgers and Brews, is the Gourmet Burger Authority™, famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries® in a fun environment welcoming to guests of all ages. Whether a family dining with kids, adults grabbing a drink at the bar, or teens enjoying a meal, Red Robin offers an unparalleled experience for its guests. In addition to its many burger offerings, Red Robin serves a wide variety of salads, soups, appetizers, entrees, desserts, and signature beverages. Red Robin offers a variety of options behind the bar, including its extensive selection of local and regional beers, and innovative adult beer shakes and cocktails, earning the restaurant a VIBE Vista Award for Best Beer Program in a Multi-Unit Chain Restaurant. There are more than 570 Red
Robin restaurants across the United States and Canada, including locations operating under franchise agreements. Red Robin… YUMMM®! Connect with Red Robin on Facebook, Instagram, and Twitter.
Forward-Looking Statements
Forward-looking statements in this press release regarding the Company’s future performance, restaurant sales and guest traffic, new unit growth, productivity, and statements under the heading “Outlook for the Second Quarter of 2018”, and all other statements that are not historical facts, are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on assumptions believed by the Company to be reasonable and speak only as of the date on which such statements are made. Without limiting the generality of the foregoing, words such as “expect,” “believe,” “anticipate,” “intend,” “plan,” “project,” “will” or “estimate,” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. Except as required by law, the Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date, and cautions investors not to place undue reliance on any such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements based on a number of factors, including but not limited to the following: the effectiveness of the Company’s strategic initiatives; the effectiveness of the Company's marketing strategies and initiatives to achieve restaurant sales growth; the cost and availability of key food products, labor, and energy; the ability to achieve anticipated revenue and cost savings from anticipated new technology systems and tools in the restaurants including upgrading the Company's point-of-sale system and implementing a new inventory management system and other initiatives; the ability to develop, test, implement and increase online ordering, to-go services, catering and other off-premise sales; the ability to increase labor productivity through alternative labor models; availability of capital or credit facility borrowings; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; the impact of federal, state, and local regulation of the Company’s business; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the U.S. Securities and Exchange Commission.
For media relations questions contact:
Brian Farley, Coyne PR
(973) 588-2000
For investor relations questions contact:
PJ Adler
Red Robin Investor Relations
303-846-5040
RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Sixteen Weeks Ended | ||||||||
April 22, 2018 | April 16, 2017 | |||||||
Revenues: | ||||||||
Restaurant revenue | $ | 414,702 | $ | 413,451 | ||||
Franchise and other revenue | 6,817 | 7,178 | ||||||
Total revenues | 421,519 | 420,629 | ||||||
Costs and expenses: | ||||||||
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||||||
Cost of sales | 98,515 | 94,607 | ||||||
Labor | 143,015 | 145,519 | ||||||
Other operating | 55,025 | 52,064 | ||||||
Occupancy | 35,010 | 33,119 | ||||||
Depreciation and amortization | 29,193 | 28,044 | ||||||
General and administrative | 28,588 | 30,913 | ||||||
Selling | 17,730 | 17,050 | ||||||
Pre-opening costs | 1,137 | 1,855 | ||||||
Other charges | 6,287 | — | ||||||
Total costs and expenses | 414,500 | 403,171 | ||||||
Income from operations | 7,019 | 17,458 | ||||||
Other expense: | ||||||||
Interest expense, net and other | 3,407 | 2,984 | ||||||
Income before income taxes | 3,612 | 14,474 | ||||||
(Benefit) provision for income taxes | (768 | ) | 2,907 | |||||
Net income | $ | 4,380 | $ | 11,567 | ||||
Earnings per share: | ||||||||
Basic | $ | 0.34 | $ | 0.90 | ||||
Diluted | $ | 0.34 | $ | 0.89 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 12,960 | 12,853 | ||||||
Diluted | 13,065 | 12,953 | ||||||
RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited) April 22, 2018 | December 31, 2017 | |||||||
Assets: | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 23,673 | $ | 17,714 | ||||
Accounts receivable, net | 12,098 | 26,499 | ||||||
Inventories | 29,388 | 29,553 | ||||||
Prepaid expenses and other current assets | 15,559 | 31,038 | ||||||
Total current assets | 80,718 | 104,804 | ||||||
Property and equipment, net | 626,852 | 638,151 | ||||||
Goodwill | 96,733 | 96,979 | ||||||
Intangible assets, net | 36,991 | 38,273 | ||||||
Other assets, net | 33,351 | 32,408 | ||||||
Total assets | $ | 874,645 | $ | 910,615 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 33,828 | $ | 35,347 | ||||
Accrued payroll and payroll related liabilities | 39,864 | 32,777 | ||||||
Unearned revenue | 43,364 | 55,915 | ||||||
Accrued liabilities and other | 37,222 | 36,300 | ||||||
Total current liabilities | 154,278 | 160,339 | ||||||
Deferred rent | 75,146 | 74,980 | ||||||
Long-term debt | 231,375 | 266,375 | ||||||
Long-term portion of capital lease obligations | 10,003 | 10,197 | ||||||
Other non-current liabilities | 11,139 | 11,289 | ||||||
Total liabilities | 481,941 | 523,180 | ||||||
Stockholders’ Equity: | ||||||||
Common stock; $0.001 par value: 45,000 shares authorized; 17,851 and 17,851 shares issued; 12,980 and 12,954 shares outstanding | 18 | 18 | ||||||
Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Treasury stock 4,871 and 4,897 shares, at cost | (201,443 | ) | (202,485 | ) | ||||
Paid-in capital | 210,828 | 210,708 | ||||||
Accumulated other loss, net of tax | (3,839 | ) | (3,566 | ) | ||||
Retained earnings | 387,140 | 382,760 | ||||||
Total stockholders’ equity | 392,704 | 387,435 | ||||||
Total liabilities and stockholders’ equity | $ | 874,645 | $ | 910,615 | ||||
Schedule I
Reconciliation of Non-GAAP Results to GAAP Results
(In thousands, except per share 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 16 weeks ended April 22, 2018 and April 16, 2017, net income and basic and diluted earnings per share, excluding the effects of litigation contingencies, reorganization costs, and the related income tax effects. The Company believes the presentation of net income and earnings per share exclusive of the identified item 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 effect of reconciling items was calculated based on the change in the total tax provision calculation after adjusting for the identified item. The non-GAAP measurements are intended to supplement the presentation of the Company’s financial results in accordance with GAAP.
Sixteen Weeks Ended | ||||||||
April 22, 2018 | April 16, 2017 | |||||||
Net income as reported | $ | 4,380 | $ | 11,567 | ||||
Litigation contingencies | 4,000 | — | ||||||
Reorganization costs | 2,287 | — | ||||||
Income tax effect of reconciling items | (1,617 | ) | — | |||||
Adjusted net income | $ | 9,050 | $ | 11,567 | ||||
Basic net income per share: | ||||||||
Net income as reported | $ | 0.34 | $ | 0.90 | ||||
Litigation contingencies | 0.31 | — | ||||||
Reorganization costs | 0.17 | — | ||||||
Income tax effect of reconciling items | (0.12 | ) | — | |||||
Adjusted earnings per share - basic | $ | 0.70 | $ | 0.90 | ||||
Diluted net income per share: | ||||||||
Net income as reported | $ | 0.34 | $ | 0.89 | ||||
Litigation contingencies | 0.30 | — | ||||||
Reorganization costs | 0.17 | — | ||||||
Income tax effect of reconciling items | (0.12 | ) | — | |||||
Adjusted earnings per share - diluted | $ | 0.69 | $ | 0.89 | ||||
Weighted average shares outstanding | ||||||||
Basic | 12,960 | 12,853 | ||||||
Diluted | 13,065 | 12,953 | ||||||
Schedule II
Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income
from Operations and Net Income
(In thousands)
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 revenue minus restaurant-level operating costs, excluding restaurant impairment and closure 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 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 in our industry. The table below sets forth certain unaudited information for the 16 weeks ended April 22, 2018 and April 16, 2017, expressed as a percentage of total revenues, except for the components of restaurant-level operating profit, which are expressed as a percentage of restaurant revenue.
Sixteen Weeks Ended | ||||||||||||||
April 22, 2018 | April 16, 2017 | |||||||||||||
Restaurant revenue | $ | 414,702 | 98.4 | % | $ | 413,451 | 98.3 | % | ||||||
Restaurant operating costs (1): | ||||||||||||||
Cost of sales | 98,515 | 23.8 | % | 94,607 | 22.9 | % | ||||||||
Labor | 143,015 | 34.5 | % | 145,519 | 35.2 | % | ||||||||
Other operating | 55,025 | 13.3 | % | 52,064 | 12.6 | % | ||||||||
Occupancy | 35,010 | 8.4 | % | 33,119 | 8.0 | % | ||||||||
Restaurant-level operating profit | 83,137 | 20.0 | % | 88,142 | 21.3 | % | ||||||||
Add – Franchise and other revenue | 6,817 | 1.6 | % | 7,178 | 1.7 | % | ||||||||
Deduct – other operating: | ||||||||||||||
Depreciation and amortization | 29,193 | 6.9 | % | 28,044 | 6.7 | % | ||||||||
General and administrative expenses | 28,588 | 6.8 | % | 30,913 | 7.3 | % | ||||||||
Selling | 17,730 | 4.2 | % | 17,050 | 4.1 | % | ||||||||
Pre-opening costs | 1,137 | 0.3 | % | 1,855 | 0.4 | % | ||||||||
Other charges | 6,287 | 1.5 | % | — | 0.0 | % | ||||||||
Total other operating | 82,935 | 19.7 | % | 77,862 | 18.5 | % | ||||||||
Income from operations | 7,019 | 1.7 | % | 17,458 | 4.2 | % | ||||||||
Interest expense, net and other | 3,407 | 0.8 | % | 2,984 | 0.8 | % | ||||||||
Income tax (benefit) provision | (768 | ) | (0.2 | )% | 2,907 | 0.7 | % | |||||||
Total other | 2,639 | 0.6 | % | 5,891 | 1.5 | % | ||||||||
Net income | $ | 4,380 | 1.0 | % | $ | 11,567 | 2.7 | % | ||||||
(1) | Excluding depreciation and amortization, which is shown separately. |
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 revenue and not total revenues.
Schedule III
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(In thousands, unaudited)
The Company defines EBITDA as net income before interest expense, provision (benefit) for income taxes, and depreciation and amortization. EBITDA and adjusted EBITDA are presented because the Company believes investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for evaluating our ongoing results of operations without the effect of non-cash charges such as depreciation and amortization expenses, asset disposals, and asset impairment and restaurant closure charges. EBITDA and adjusted EBITDA are supplemental measures of operating performance that do not represent and should not be considered as alternatives to net income or cash flow from operations, as determined by GAAP, and our calculation thereof may not be comparable to that reported by other companies in our industry or otherwise. Adjusted EBITDA further adjusts EBITDA to reflect the additions and eliminations shown in the table below. The use of adjusted EBITDA as a performance measure permits a comparative assessment of our operating performance relative to our performance based on our GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance. Adjusted EBITDA as presented may not be comparable to other similarly-titled measures of other companies, and our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by excluded or unusual items. We have not provided a reconciliation of our adjusted EBITDA outlook to the most comparable GAAP measure of net income. Providing net income guidance is potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items that are included in net income, including asset impairments and income tax valuation adjustments. The reconciliations of adjusted EBITDA to net income for the historical periods presented below are indicative of the reconciliations that will be prepared upon completion of the periods covered by the non-GAAP guidance.
Sixteen Weeks Ended | ||||||||
April 22, 2018 | April 16, 2017 | |||||||
Net income as reported | $ | 4,380 | $ | 11,567 | ||||
Interest expense, net | 3,277 | 3,249 | ||||||
(Benefit) provision for income taxes | (768 | ) | 2,907 | |||||
Depreciation and amortization | 29,193 | 28,044 | ||||||
EBITDA | 36,082 | 45,767 | ||||||
Litigation contingencies | 4,000 | — | ||||||
Reorganization costs | 2,287 | — | ||||||
Adjusted EBITDA | $ | 42,369 | $ | 45,767 | ||||
CLASSIFIED – INTERNAL USE May 22, 2018 First Quarter 2018 Results
CLASSIFIED – INTERNAL USE 2 Forward-Looking Statements Forward-looking statements in this presentation regarding the Company’s future performance, restaurant sales and guest traffic, new restaurant openings, and all other statements that are not historical facts, are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on assumptions believed by the Company to be reasonable and speak only as of the date on which such statements are made. Without limiting the generality of the foregoing, words such as “expect,” “believe,” “anticipate,” “intend,” “plan,” “project,” “will” or “estimate,” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. Except as required by law, the Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date, and cautions investors not to place undue reliance on any such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements based on a number of factors, including but not limited to the following: the effectiveness of the Company’s strategic initiatives; the effectiveness of the Company’s marketing strategies and initiatives to achieve restaurant sales growth; the cost and availability of key food products, labor, and energy; the ability to achieve anticipated revenue and cost savings from anticipated new technology systems and tools in the restaurants including upgrading the Company’s point-of-sale system and implementing a new inventory management system and other initiatives; the ability to develop, test, implement and increase online ordering, to-go services, catering and other off- premise sales; the ability to increase labor productivity through alternative labor models; availability of capital or credit facility borrowings; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; the impact of federal, state, and local regulation of the Company’s business; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the U.S. Securities and Exchange Commission. This presentation may also contain non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of the Company’s financial performance, identifying trends in results, and providing meaningful period- to-period comparisons. For a reconciliation of non-GAAP measures presented in this document, see the Appendix of this presentation or the Schedules to the Q1 press release posted on redrobin.com.
CLASSIFIED – INTERNAL USE 3 Red Robin Q1-2018 Results • Total revenues increased 0.2% • Off-premise sales increased to 9.4% of total food and beverage sales • Comparable restaurant revenue decreased 0.9% (using constant currency rates) • Comparable restaurant guest counts increased 0.1% • Restaurant labor costs as a percentage of restaurant revenue improved 70 bps to 34.5% • Earnings per diluted share were $0.34 compared to $0.89 in Q1 2017. Adjusted diluted EPS(1) were $0.69 • Opened 4 new Red Robin® restaurants (1) See reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures in Appendix.
CLASSIFIED – INTERNAL USE 4 Expanding Everyday Value Line-up Red Robin’s Tavern Double Offerings
CLASSIFIED – INTERNAL USE 5 Continued Off-Premise Sales Growth US Comp Locations Off-Premise Sales as a % of Gross F&B Sales 10.0% 9.4% 9.0% 8.3% 8.0% 7.6% 7.0% 7.0% 6.3% 6.0% 5.7% 5.4% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
CLASSIFIED – INTERNAL USE 6 Burger Bar Advertising in Test
CLASSIFIED – INTERNAL USE 7 Red Robin Value vs. “Those Guys”
CLASSIFIED – INTERNAL USE 8 Significant Productivity Improvement US Comp Locations’ Labor Productivity Improvement Year-Over-Year 12.0% 10.9% 10.0% 8.0% 6.3% 6.0% 4.0% 2.4% 2.0% 1.6% 0.0% -0.8% -2.0% Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
CLASSIFIED – INTERNAL USE 9 Emphasizing What We Are Known For • Craveable, customizable burgers • Attentive service at speed appropriate for Guest occasion • Affordable abundance
CLASSIFIED – INTERNAL USE 10 Financial Update
CLASSIFIED – INTERNAL USE 11 Seven Consecutive Quarters of Traffic Outperformance vs. Competitors 5.0% 4.0% 4.0% 3.6% 3.6% 3.0% 2.2% 2.3% 2.0% 1.2% 1.2% 1.0% 0.0% -1.0% -0.6% -0.9% -2.0% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Source: Based on Black Box Intelligence Casual Dining (All Cuisine) peers as of 4/22/2018
CLASSIFIED – INTERNAL USE 12 Q1-18 Sales Highlights Q1-18 Q1-17 Change (16 Weeks) (16 Weeks) Restaurant revenue (millions) $414.7 $413.5 0.3% Total company revenues (millions) $421.5 $420.6 0.2% Company-owned comp revenue(1)(2) -0.9% -1.2% Price/Mix -1.0% 0.5% Guest counts 0.1% -1.7% Franchised comp revenue(2) -0.5% -3.3% Company avg. weekly revenue/unit(1) – total $53,704 $55,490 -3.2% Company avg. weekly revenue/unit(1)(3) – comp $54,003 $55,446 -2.6% Avg. weekly restaurant level operating profit/unit(1) – comp $10,864 $11,794 -7.9% Operating weeks 7,722 7,462 3.5% Net Sales/ sq. ft (TTM) $449 $447 0.4% (1) Calculated at constant currency rates (2) Comparable revenue growth is calculated by comparing the same calendar weeks which, for the first quarter of 2017, exclude the first week of the first quarter of 2017 and include the first week of the second quarter of 2017 (3) Using the same calendar weeks as compared to the first quarter 2018, the average weekly sales per unit in the first quarter of 2017, using constant currency rates, was $54,503 resulting in a change of -0.9%
CLASSIFIED – INTERNAL USE 13 Comparable Restaurant Revenue Trend(1) 5.5% 3.5% 2.7% 1.5% 0.5% -0.5% -0.1% -0.9% -1.2% -2.5% -2.6% -3.2% -3.6% -4.5% -4.3% Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 (1) Calculated at constant currency rates
CLASSIFIED – INTERNAL USE 14 Q1-18 Restaurant Results % of Restaurant % of Restaurant Favorable Revenue Revenue (Unfavorable) Q1-18 Q1-17 Cost of sales 23.8% 22.9% (90 bps) Labor 34.5% 35.2% 70 bps Other operating 13.3% 12.6% (70 bps) Occupancy 8.4% 8.0% (40 bps) Restaurant Level Operating Profit(1) 20.0% 21.3% (130 bps) (1) See Appendix for reconciliation of non-GAAP restaurant-level operating profit to net income (loss) 14
CLASSIFIED – INTERNAL USE 15 Restaurant Level Operating Profit(1)(2) Margins 25.0% 24.0% 23.0% 22.8% 22.0% 21.3% 21.4% 21.0% 20.8% 20.5% 20.0% 20.0% 19.8% 19.1% 19.0% 18.6% 18.0% 17.0% 16.0% Q1 Q2 Q3 Q4 2016 2017 2018 (1) See Appendix for reconciliation of non-GAAP restaurant-level operating profit to net income (loss) (2) Prior period local marketing costs have been reclassified from Other operating to Selling to conform with the current period presentation 15
CLASSIFIED – INTERNAL USE 16 Adjusted EBITDA(1) ($ in millions) $55.0 $50.0 $48.9 $45.8 $45.0 $42.4 $40.0 $35.8 $35.0 $33.5 $32.3 $30.0 $29.2 $26.8 $25.5 $25.0 $20.0 $15.0 $10.0 Q1 Q2 Q3 Q4 2016 2017 2018 (1) See Appendix for reconciliation of non-GAAP Adjusted EBITDA to Net Income (Loss) 16
CLASSIFIED – INTERNAL USE 17 Adjusted Earnings Per Diluted Share $1.35 $1.27 $1.15 $0.95 $0.89 $0.78 $0.75 $0.75 $0.69 $0.61 $0.55 $0.38 $0.35 $0.35 $0.21 $0.15 Q1 Q2 Q3 Q4 2016 2017 2018 See Appendix for reconciliation of non-GAAP Adjusted Earnings Per Diluted Share to Earnings (Loss) Per Diluted Share 17
CLASSIFIED – INTERNAL USE 18 Thank you to all of our Team Members! 17
CLASSIFIED – INTERNAL USE 19 Appendix
CLASSIFIED – INTERNAL USE 20 Adjusted Net Income(1) ($ in millions) $18.0 $17.6 $16.0 $14.0 $12.0 $11.6 $10.3 $10.2 $10.0 $9.1 $7.9 $8.0 $6.0 $5.0 $4.5 $4.0 $2.7 $2.0 Q1 Q2 Q3 Q4 2016 2017 2018 (1) See Appendix for reconciliation of non-GAAP Adjusted Net Income to Net Income (Loss) 20
CLASSIFIED – INTERNAL USE 21 Cash Flow from Operations ($ in millions) $80.0 $70.0 $70.0 $60.0 $57.0 $50.0 $42.5 $40.0 $34.7 $35.0 $30.0 $27.6 $24.6 $20.0 $16.9 $10.0 $4.3 $0.0 Q1 Q2 Q3 Q4 2016 2017 2018 21
CLASSIFIED – INTERNAL USE 22 Q1-18 Commodity Update % of Total Market vs. Contract COGS in Q1-18 Steak fries 13.5% 100% contracted through 10/19 Ground beef 13.0% Market Poultry 9.4% 100% contracted though 12/18 Bacon 100% contracted through 6/18; Meat 7.4% Prime rib 100% contracted through 12/18 Produce 7.2% 70% contracted through 10/18 Bread 6.2% Frozen bread 100% contracted through 9/18 Seafood 3.1% Cod and Shrimp 100% contracted through 9/18 Fry oil 1.7% 100% contracted through 12/18 22
CLASSIFIED – INTERNAL USE 23 Reconciliation of Adjusted Net Income to Net Income (Loss) and Adjusted Earnings Per Diluted Share to Earnings (Loss) Per Diluted Share ($ in thousands, except per share data) 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Net income (loss) as reported $ 14,225 $ 7,552 $ (1,300) $ (8,752) $ 11,567 $ 6,931 $ 2,714 $ 8,807 $ 4,380 Adjustments to net income (loss): Asset impairment and restaurant closure costs 825 3,860 9,321 20,420 - 1,584 - 5,330 - Litigation contingencies 3,900 - - - - - - 4,000 Reorganization costs - - - 1,322 - - - 2,287 Income tax (expense) benefit of adj. (1,356) (1,153) (2,993) (8,470) - (618) - (1,175) (1,617) Deferred tax liability remeasurement due to Tax - - - - - - - (2,808) - Cuts and Jobs Act Adjusted net income $ 17,594 $ 10,259 $ 5,028 $ 4,520 $ 11,567 $ 7,897 $ 2,714 $ 10,154 $ 9,050 Diluted net income (loss) per share(1): Net income (loss) as reported $ 1.03 $ 0.55 $ (0.10) $ (0.68) $ 0.89 $ 0.53 $ 0.21 $ 0.68 $ 0.34 Adjustments to net income (loss): Asset impairment and restaurant closure costs 0.06 0.28 0.70 1.58 - 0.12 - 0.41 - Litigation contingencies 0.28 - - - - - - - 0.30 Reorganization costs - - - 0.10 - - - - 0.17 Income tax (expense) benefit of adj. (0.10) (0.08) (0.22) (0.65) - (0.04) - (0.09) (0.12) Deferred tax liability remeasurement due to Tax - - - - - - - (0.22) - Cuts and Jobs Act Adjusted EPS - diluted $ 1.27 $ 0.75 $ 0.38 $ 0.35 $ 0.89 $ 0.61 $ 0.21 $ 0.78 $ 0.69 (1) For the third and fourth quarters of 2016, the impact of dilutive shares is included in the calculations as the adjustments for the quarter resulted in adjusted net income. In the fourth quarter of 2016, the calculation for Asset impairment and restaurant closure costs includes $0.01 related to the effect of the diluted shares on net loss per share as reported. 23
CLASSIFIED – INTERNAL USE 24 Restaurant Level Operating Profit Reconciliation to Income from Operations and Net Income (Loss) ($ in thousands) 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Restaurant revenue $ 396,770 $ 302,117 $ 293,858 $ 287,924 $ 413,451 $ 312,351 $ 301,100 $ 338,154 $ 414,702 Restaurant operating costs(1): Cost of sales 92,325 70,831 69,447 65,646 94,607 73,903 71,642 80,203 98,515 Labor 132,984 102,847 102,294 101,107 145,519 108,422 106,205 115,286 143,015 Other operating(2) 48,587 38,986 40,834 39,319 52,064 40,057 41,454 44,734 55,025 Occupancy 32,498 24,905 25,121 24,884 33,119 25,140 25,868 28,626 35,010 Restaurant-level operating profit 90,376 64,549 56,161 56,968 88,142 64,828 55,932 69,309 83,137 Add – Franchise and other revenue(2) 7,670 4,957 4,934 4,957 7,178 4,959 4,599 5,770 6,817 Deduct – Other operating: Depreciation and amortization 23,951 19,159 21,468 22,117 28,044 21,173 21,258 22,070 29,913 General and administrative expenses 31,980 19,972 20,328 19,015 30,913 21,927 18,562 21,874 28,588 Selling(2) 14,843 13,862 11,830 12,803 17,050 14,361 15,152 16,818 17,730 Pre-opening and acquisition costs 2,372 2,238 2,382 1,033 1,855 1,377 1,503 835 1,137 Other charges(2) 4,725 3,860 9,321 21,742 - 1,584 - 5,330 6,287 Total other operating 77,871 59,091 65,328 76,710 77,862 60,422 56,475 66,927 82,935 Income (loss) from operations 20,175 10,415 (4,235) (14,785) 17,458 9,366 4,056 8,152 7,019 Interest expense, net and other 1,638 1,486 1,612 2,046 2,984 2,453 2,032 2,543 3,407 Income tax expense (benefit) 4,312 1,377 (4,547) (8,079) 2,907 (18) (690) (3,198) (768) Total other 5,950 2,863 (2,935) (6,033) 5,891 2,435 1,342 (655) 2,639 Net income (loss) $ 14,225 $ 7,552 $ (1,300) $ (8,752) $ 11,567 $ 6,931 $ 2,714 $ 8,807 $ 4,380 (1) Excluding depreciation and amortization, which is shown separately. (2) Certain amounts presented in prior periods have been reclassified to conform with the current period presentation.
CLASSIFIED – INTERNAL USE 25 EBITDA and Adjusted EBITDA Reconciliation to Net Income (Loss) ($ in thousands) 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Net income (loss) as reported $14,225 $ 7,552 $ (1,300) $ (8,752) $ 11,567 $ 6,931 $ 2,714 $ 8,807 $ 4,380 Adjustments to net income (loss): Income tax expense (benefit) 4,312 1,377 (4,547) (8,079) 2,907 (18) (690) (3,198) (768) Interest expense, net 1,655 1,555 1,822 2,161 3,249 2,626 2,222 2,821 3,277 Depreciation and amortization 23,951 19,159 21,468 22,117 28,044 21,173 21,258 22,070 29,193 EBITDA .. $ 44,143 $ 29,643 $ 17,443 $ 7,447 $ 45,767 $ 30,712 $ 25,504 $ 30,500 $ 36,082 Asset impairment and restaurant 825 3,860 9,321 20,420 - 1,584 - 5,330 closure costs Litigation contingencies 3,900 - - - - - - - 4,000 Reorganization costs - - - 1,322 - - - - 2,287 Adjusted EBITDA $ 48,868 $ 33,503 $ 26,764 $ 29,189 $ 45,767 $ 32,296 $ 25,504 $ 35,830 $ 42,369 25