Red Robin Gourmet Burgers Reports Earnings for the Fiscal Fourth Quarter and Year Ended December 28, 2008
GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)-- Red Robin Gourmet Burgers, Inc., (NASDAQ: RRGB), a casual dining restaurant chain focused on serving an innovative selection of high-quality gourmet burgers in a family-friendly atmosphere, today reported financial results for the 12 weeks and 52 weeks ended December 28, 2008.
Financial and Operational Highlights
Highlights for the 12 weeks ended December 28, 2008, compared to the 12 weeks ended December 30, 2007, are as follows:
-- Total revenues increased 8.0% to $198.6 million.
-- Restaurant revenue increased 8.4% to $195.6 million.
-- Company-owned comparable restaurant sales decreased 7.4%.
-- Restaurant-level operating profit was 17.1% or $33.4 million.
-- GAAP diluted earnings per share were $0.38, which included $0.05 per
diluted share of asset impairment charges vs. GAAP diluted earnings per
share of $0.60 last year.
-- A total of seven new Red Robin(R) restaurants, four company-owned and
three franchised locations were opened during the 12-week period.
Highlights for the 52 weeks ended December 28, 2008, compared to the 52 weeks ended December 30, 2007, are as follows:
-- Total revenues increased 13.9% to $869.2 million.
-- Restaurant revenue increased 14.3% to $854.7 million.
-- Company-owned comparable restaurant sales decreased 1.4%.
-- Restaurant-level operating profit was 18.4% or $157.2 million.
-- GAAP diluted earnings per share were $1.69 which included $0.09 per
diluted share of asset impairment charges, $0.02 per diluted share of
reacquired franchise costs, and $0.01 per diluted share of
acquisition-related integration costs vs. GAAP diluted earnings per
share of $1.82 last year, which included $0.08 per diluted share for
reacquired franchise costs, $0.01 per diluted share for
acquisition-related integration expenses, and $0.07 per diluted share in
legal settlement expense.
-- A total of 41 new Red Robin(R) restaurants, 31 company-owned and 10
franchised locations were opened during the 52-week period.
"We are in the midst of a very difficult environment for restaurant operators and customers alike, and we are working through the challenges we face with a focus on the factors that we can control," said Dennis Mullen, chairman and chief executive officer. "It is difficult to predict the business impact of the current macroeconomic environment along with the elimination of our national cable advertising, which led to our decision to not provide earnings or revenue guidance for 2009 at this time. We are continuing to take actions to drive efficiencies across all levels of our organization to overcome the challenges, and we're proud of our talented Team Members for their hard work and dedication to taking care of our Guests."
As of the end of fiscal year 2008, there were 294 company-owned and 129 franchised Red Robin(R) restaurants, including one franchised restaurant managed by the Company, which was acquired by the Company on December 31, 2008.
Tender Offer
On February 11, 2009, the Company completed the previously announced cash tender offer for certain stock options held by 514 current employees and officers. As a result of the tender offer, the Company will incur a one-time non-cash pretax charge of approximately $4.0 million, or $0.19 per diluted share, which will be reflected in the fiscal first quarter 2009 financial results and represents the compensation expense related to the acceleration of vesting on the unvested options tendered in the offer, which would have otherwise been expensed over their vesting period in the future if they had not been tendered. There were approximately 1,576,000 options tendered in the offer by 433 employees, which represented 96% of eligible options offered for tender. The gross cash proceeds to be paid for the tendered options will be $3.5 million.
Granting stock options and other equity incentives is a material component of the Company's long-term compensation philosophy. After a comprehensive review by the Company of its compensation program and the impact of the decline in its common stock price on incentive awards, the Company determined that the tender offer was consistent with restoring the incentive value of its long-term awards. Future compensation expense associated with tendered unvested options will be eliminated, as will the overhang associated with outstanding options that were no longer an effective incentive. Any options tendered that were granted under the Company's Amended and Restated 2007 Performance Incentive Plan will also provide additional capacity for future incentive grants under that plan. The Company expects that the majority of after-tax proceeds received by its senior executives from the tender offer will be used to purchase shares of the Company's common stock in the open market during the Company's open stock trading windows.
Acquisitions of Franchised Restaurants
In the first quarter of 2008, the Company acquired 15 existing Red Robin franchised restaurants and one franchised restaurant that was under construction and subsequently opened early in the second quarter of 2008, from three franchisees (the "2008 Acquired Restaurants"). These acquisitions added $25.4 million of revenue and $0.06 per diluted share to earnings in fiscal year 2008.
Fiscal Fourth Quarter 2008 Results
Comparable restaurant sales decreased 7.4% for company-owned restaurants in the fiscal fourth quarter of 2008 compared to the fiscal fourth quarter of 2007, driven by a 2.2% increase in the average guest check, which was more than offset by a 9.6% decline in guest counts. Average weekly comparable sales for company-owned restaurants were $57,073 for the 241 comparable restaurants in the fiscal fourth quarter of 2008, compared to $62,873 for the 192 comparable restaurants in the same period a year ago. Average weekly sales for the 39 non-comparable company-owned restaurants were $55,188 in the fiscal fourth quarter of 2008, compared to $54,022 for the 41 non-comparable restaurants in the fiscal fourth quarter a year ago. Average weekly comparable sales for the 2008 Acquired Restaurants were $50,228 in the fiscal fourth quarter of 2008.
Total Company revenues, which include company-owned restaurant sales and franchise royalties and fees, increased 8.0% to $198.6 million in the fiscal fourth quarter of 2008, versus $183.8 million last year. Franchise royalties and fees in the fiscal fourth quarter of 2008 were $3.0 million, a 14.1% decrease compared to the same period a year ago, primarily driven by the reduction of royalty revenue from the 2008 Acquired Restaurants.
For the fiscal fourth quarter of 2008, the Company's franchise system reported a 9.2% decrease in total U.S. franchise restaurant sales to $68.4 million, compared to $75.3 million in the prior year period, due primarily to the 2008 Acquired Restaurants. Comparable sales in the fiscal fourth quarter of 2008 for franchise restaurants in the U.S. decreased 5.3% and for franchise restaurants in Canada increased 0.5% compared to the fiscal fourth quarter of 2007. Average weekly sales in the fiscal fourth quarter of 2008 for the Company's comparable franchise restaurants were $52,161 in the U.S., versus $54,237 for the same period the prior year, and C$49,072 in Canada versus C$48,809 in the same period last year. Canadian results are in Canadian dollars.
Restaurant-level operating profit margins at company-owned restaurants were 17.1% in the fiscal fourth quarter of 2008, compared to 21.4% in the fiscal fourth quarter of 2007. The decrease is attributed to increased cost of sales and cost deleverage on fixed expenses from the reduction in average restaurant sales volumes.
The Company's restaurant-level operating profit metric does not represent income from operations or net income calculated in accordance with generally accepted accounting principles ("GAAP"). Schedule I of this earnings release reconciles restaurant-level operating profit to income from operations and net income for all periods presented.
General and administrative expense was $11.8 million in the fiscal fourth quarter of 2008 and $14.0 million in the fiscal fourth quarter of 2007, which were 5.9% and 7.6% of total revenue, respectively. Included in the fourth quarter of 2007 general and administrative expense was $2.4 million, or 1.3% of total revenue, of performance-based and acquisition bonus expense compared to a reversal of $1.2 million, or 0.6% of total revenue, of performance-based bonus expense in the fourth quarter of 2008. Also included in fiscal fourth quarter of 2008 general and administrative expense was a reversal of $1.5 million of expenditures related to the Company's national advertising fund, compared to $1.4 million reversed in the same period last year.
Interest expense was $2.1 million in the fiscal fourth quarter of 2008 and $2.5 million in the fiscal fourth quarter of 2007. The decrease is due to lower average quarterly interest rate of 4.0% compared to 7.2% in the prior year, partially offset by additional borrowings under the Company's credit facilities related to the franchise acquisitions and share repurchases during the second quarter of 2008.
During the fiscal fourth quarter of 2008, the Company determined that two restaurants were impaired based on a review of each restaurant's past, present and projected operating performance. The carrying value of each restaurant's assets was compared to the fair value of those assets, resulting in a $978,000 pretax asset impairment charge, or a $0.05 impact on diluted earnings per share.
Net income for the fiscal fourth quarter of 2008 was $5.8 million or $0.38 per diluted share, which included the $0.05 per diluted share of asset impairment charges, compared to net income of $10.1 million, or $0.60 per diluted share, in the fiscal fourth quarter of 2007.
Schedule II of this earnings release reconciles the impact on the net income and diluted earnings per share as reported on a GAAP basis in the fiscal fourth quarter of 2008 and 2007 to adjusted amounts excluding certain asset impairment charges and acquisition costs.
In the fiscal fourth quarter of 2008, the Company realized a reduction in the effective tax rate to 24.9%, less than the 27.0% previously estimated.
Fiscal Year 2008 Results
Comparable restaurant sales decreased 1.4% for company-owned restaurants in the fiscal year ended December 28, 2008, versus the fiscal year ended December 30, 2007, driven by a 3.5% increase in the average guest check, which was more than offset by a 4.9% decrease in guest counts. Average weekly comparable sales for company-owned restaurants were $62,128 for the restaurants in the comparable base in fiscal year 2008, compared to $64,047 for the restaurants in the comparable base in fiscal year 2007. Average weekly sales for the company-owned restaurants in the non-comparable base were $55,640 in fiscal year 2008, compared to $56,635 for the company-owned restaurants in the non-comparable base in fiscal year 2007. Average weekly comparable sales for the 2008 Acquired Restaurants were $53,057 for the time period post acquisition through the end of fiscal year 2008.
Total Company revenues, which include company-owned restaurant sales and franchise royalties and fees, increased 13.9% to $869.2 million for the fiscal year ended December 28, 2008, compared to $763.5 million for the fiscal year ended December 30, 2007. Franchise royalties and fees in the fiscal year 2008 decreased 9.3% to $14.3 million compared to $15.8 million in the same period a year ago. Franchise royalties in the fiscal year ended December 30, 2007, included $2.7 million from royalties attributed to the 2008 Acquired Restaurants and from the 2007 acquired restaurants in California.
For the fiscal year 2008, the Company's franchise system reported a decrease in total U.S. franchise restaurant sales of 9.6% to $320.9 million, compared to $354.8 million in fiscal year 2007, due primarily to franchise restaurants acquired during the 2007 and 2008 fiscal years. Comparable sales in the fiscal year 2008 for franchise restaurants in the U.S. decreased 1.1% and for franchise restaurants in Canada increased 3.6% compared to the comparable period in 2007. Average weekly sales in fiscal year 2008 for the Company's comparable franchise restaurants were $56,020 in the U.S., versus $56,698 for the same period in the prior year, and C$51,567 in Canada, versus C$49,763 in the same period last year. Canadian results are in Canadian dollars.
Restaurant-level operating profit margins from company-owned restaurants were 18.4% for fiscal year 2008 compared to 20.5% for the fiscal year of 2007. The decrease is attributed to increased cost of sales, as well as higher occupancy and other operating costs, including an additional 0.5% of marketing expense in 2008, partially offset by improved labor costs.
General and administrative expense was $64.4 million for the fiscal year 2008 compared to $61.8 million for the same period of 2007, which were 7.4% and 8.1% of total revenue in their respective periods. Included in the general and administrative expense for fiscal year 2007 was $6.4 million of performance-based and acquisition bonus expense, for which there was no expense accrued for fiscal year 2008.
During the fiscal year 2008, the Company determined that four restaurants were impaired based on a review of each restaurant's past, present and projected operating performance. The carrying value of each restaurant's assets was compared to the fair value of those assets, resulting in a $1.9 million pretax asset impairment charge, or a $0.09 impact on diluted earnings per share.
Net income for the 52 weeks ended December 28, 2008 was $27.1 million or $1.69 per diluted share, compared to net income of $30.7 million or $1.82 per diluted share in the prior year period. In the fiscal year 2008, the Company incurred a total of $1.9 million in after-tax charges, or a total of $0.12 per diluted share relating to asset impairment charges, reacquired franchise costs for the 2008 Acquired Restaurants and charges related to integration of the acquisition recorded in general and administrative expenses.
Net income in the fiscal year 2007 included a total of $0.16 per diluted share of one-time charges relating to reacquired franchise costs, general and administrative expenses related to the integration of the acquisition and legal settlement expenses.
Schedule II of this earnings release reconciles the impact on the net income and diluted earnings per share as reported on a GAAP basis in the fiscal year of 2008 and 2007 to adjusted amounts excluding certain asset impairment charges, acquisition costs and legal settlements.
The Company's effective tax rate for the 2008 fiscal year was 26.6%, slightly lower than the 27.0% previously estimated.
Balance Sheet and Liquidity
On December 28, 2008, the Company held $11.2 million in cash and equivalents and had a total outstanding debt balance of $222.6 million, including $133.0 million in borrowings under the $150 million term loan, $82.0 million of borrowing and $4.1 million of letters of credit outstanding under the $150 million revolving credit facility.
The Company is subject to a number of customary covenants under the various credit agreements, including limitations on additional borrowings, acquisitions, dividend payments, and requirements to maintain certain financial ratios. As of December 28, 2008, the Company was in compliance with all debt covenants and expects to remain in compliance through fiscal year 2009.
Based on the Company's development plans and other infrastructure and maintenance capital expenditures, the Company expects fiscal year 2009 capital expenditures to be approximately $45 million. The Company expects to fund its fiscal year 2009 capital expenditures out of operating cash flow. The Company will make scheduled payments of $15 million required by the term loan portion of its existing credit facility from free cash flow after capital expenditures in fiscal year 2009 and expects to use the remaining free cash flow to make payments on the Company's revolving credit facility and may make opportunistic purchases of its common stock.
Outlook
For the fiscal first quarter of 2009, which is a 16-week quarter, the Company expects to open seven new company-owned and three new franchised restaurants. Three new company-owned and two new franchised restaurants have already opened during the fiscal first quarter of 2009, and 10 company-owned and one franchised restaurant are currently under construction. During fiscal year 2009, the Company now expects to open 13 to 14 new company-owned units, and franchisees are expected to open seven to eight new restaurants.
The Company has not made any development decisions for fiscal year 2010 at this time. The Company will maintain broad flexibility and strong discipline in any commitments it makes to enable the Company to alter plans depending on the Company's performance, the macroeconomic environment and the status of individual development projects. The Company expects to have many options available ranging from conversions of former restaurants and shopping center end-caps to free-standing restaurants.
As previously announced, for fiscal year 2009, the Company has reduced the amount that all company-owned and franchised restaurants in the system will contribute to the National Advertising Fund to 0.25% of their restaurant revenue, which is down from the contribution of 1.5% of revenue in 2008. Depending on actual revenue performance in fiscal year 2009, this contribution change could result in approximately $11 million less in marketing expenditures in fiscal year 2009. The fiscal year 2009 marketing investment will be directed to a national on-line advertising effort as well as targeted direct mail campaigns and local restaurant marketing initiatives. The Company does not plan to run national cable advertising in fiscal year 2009.
Comparable restaurant sales comparisons are most difficult in the fiscal first quarter of 2009, as the Company is overlapping its most successful quarter of 2008 and began its 2008 national cable advertising on February 4th. Through February 15, 2009, the first seven weeks of the Company's 16-week fiscal first quarter of 2009, comparable restaurant sales decreased 4.6% from the prior year comparable period for company-owned restaurants.
The Company currently expects that traffic will remain negative in fiscal year 2009. In addition to the general macro economic pressures, the extent of the traffic declines may also be influenced by prior-year marketing activities, which create more difficult comparisons during certain periods. The Company also expects certain costs, such as minimum wage increases and select commodity cost increases, to continue to put pressure on restaurant-level profitability. Based on these factors, the Company currently anticipates that without any menu price increases, restaurant-level operating margins could decline by 50 to 100 basis points during fiscal year 2009, even after considering the benefit from reduced national advertising contributions and other cost reduction activities. For every 10 basis point change in restaurant level operating profit during fiscal year 2009, diluted earnings per share are estimated to be impacted by approximately $0.04.
As a result of the completion of the cash tender offer discussed above, future compensation expense associated with tendered unvested options has been eliminated. The Company expects to record $2.5 million in stock compensation expense for the fiscal year 2009, excluding the $4.0 million one-time pretax charge related to the Tender Offer. The Company recognized $6.8 million in pretax stock compensation for the fiscal year 2008.
During the fiscal first quarter of 2009, the Company plans to close four older, underperforming restaurants that are in declining trade areas and/or in need of significant capital expenditures and are not projected to provide acceptable returns in the foreseeable future. In addition to the non-cash asset impairment charges of $978,000 incurred in the fiscal fourth quarter of 2008 and referenced above, the Company currently anticipates additional charges of up to $800,000 will be recognized during the first quarter of 2009 related to lease terminations and other closing-related costs.
Investor Conference Call and Webcast
Red Robin will host an investor conference call to discuss its fiscal fourth quarter and year-end 2008 results today at 5:00 p.m. ET. The conference call number is (800) 289-0463. To access the webcast, please visit www.redrobin.com and select the "Investors" link from the menu. The financial information that the Company intends to discuss during the conference call is included in this press release and will be available on the "Investors" link of the Company's website at www.redrobin.com following the conference call.
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., serves up wholesome, fun, feel-good experiences in a kid- and family-friendly environment. Red Robin(R) restaurants are famous for serving more than two dozen insanely delicious, high-quality gourmet burgers in a variety of recipes with Bottomless Steak Fries(R), as well as salads, soups, appetizers, entrees, desserts, and signature Mad Mixology(R) Beverages. There are more than 420 Red Robin(R) restaurants located across the United States and Canada, including corporate-owned locations and those operating under franchise agreements.
Forward-Looking Statements:
Certain information and statements contained in this press release, including those under the heading "Outlook," are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical facts. These statements may be identified, without limitation, by the use of forward-looking terminology such as "assumptions," "believes," "continue," "expects," "guidance," "plan," "potential," "projected," "will" or comparable terms or the negative thereof. All forward-looking statements included in this press release are based on information available to the Company on the date hereof. Such statements speak only as of the date hereof and we undertake no obligation to update any such statement to reflect events or circumstances arising after the date hereof. These statements are based on assumptions believed by us to be reasonable, and involve known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: the downturn in general economic conditions including severe volatility in financial markets and decreasing consumer confidence, resulting in changes in consumer preferences, or consumer discretionary spending; potential fluctuation in our quarterly operating results due to economic conditions, seasonality and other factors; potential negative impact of the fluctuation of our stock price on our results and financial position; changes in availability of capital or credit facility borrowings to us and to our franchisees; the adequacy of cash flows generated by our business to fund operations and growth opportunities; our ability to achieve and manage our planned expansion, including both in new markets and existing markets; changes in the cost and availability of building materials and restaurant supplies; the concentration of our restaurants in the Western United States and the associated disproportionate impact of macroeconomic factors; changes in the availability and costs of food; changes in labor and energy costs and changes in the ability of our vendors to meet our supply requirements; labor shortages, particularly in new markets; the effectiveness of our initiative to normalize new restaurant operations; lack of awareness of our brand in new markets; the effectiveness of our advertising strategy; higher percentage of operating weeks from non-comparable restaurants; concentration of less mature restaurants in the comparable restaurant base which impacts profitability; our ability to successfully integrate the acquired franchise restaurants; the ability of our franchisees to open and manage new restaurants; the effect of increased competition in the casual dining market and discounting by competitors; health concerns about our food products and food preparation; our ability to protect our intellectual property and proprietary information; the impact of federal, state or local government regulations relating to our team members or the sale of food or alcoholic beverages; our franchisees' adherence to our practices, policies and procedures; and other risk factors described from time to time in the Company's 10-Q and 10-K filings with the SEC.
RED ROBIN GOURMET BURGERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
December 28, December 30,
2008 2007
Assets:
Current Assets:
Cash and cash equivalents $ 11,158 $ 12,914
Accounts receivable, net 5,611 4,751
Inventories 13,123 10,367
Prepaid expenses and other current assets 9,032 9,246
Income tax receivable 6,208 4,760
Deferred tax asset 3,366 3,159
Restricted current assets--marketing funds 1,590 2,095
Total current assets 50,088 47,292
Property and equipment, net 442,012 399,270
Goodwill 60,982 56,299
Intangible assets, net 51,990 41,059
Other assets, net 4,665 4,869
Total assets $ 609,737 $ 548,789
Liabilities and Stockholders' Equity:
Current Liabilities:
Trade accounts payable $ 11,966 $ 9,263
Construction related payables 9,747 13,416
Accrued payroll and payroll related liabilities 25,489 29,146
Unredeemed gift certificates 11,997 10,789
Accrued liabilities 20,385 19,404
Accrued liabilities--marketing funds 1,590 2,095
Current portion of term loan notes payable 10,313 11,250
Current portion of long-term debt and capital lease 696 558
obligations
Total current liabilities 92,183 95,921
Deferred rent 26,790 21,728
Long-term portion of term loan notes payable 122,687 133,125
Other long-term debt and capital lease obligations 88,876 8,813
Other non-current liabilities 10,293 4,760
Total liabilities 340,829 264,347
Stockholders' Equity:
Common stock 17 17
Treasury stock 1,492,280 and 11,517 shares, at cost (50,125) (83)
Paid-in capital 165,932 156,928
Accumulated other comprehensive loss, net of tax (1,622) --
Retained earnings 154,706 127,580
Total stockholders' equity 268,908 284,442
Total liabilities and stockholders' equity $ 609,737 $ 548,789
RED ROBIN GOURMET BURGERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Twelve Fifty-Two
Weeks Ended Weeks Ended
December 28, December 30, December 28, 2008 December 30, 2007
2008 2007
Revenues:
Restaurant $ 195,604 $ 180,369 $ 854,690 $ 747,530
revenue
Franchise
royalties and 2,956 3,443 14,323 15,792
fees
Rent revenue 36 25 202 150
Total revenues 198,596 183,837 869,215 763,472
Costs and
expenses:
Restaurant
operating
costs:
Cost of sales 46,905 41,157 203,463 171,236
Labor 67,307 59,824 289,702 254,279
Operating 34,256 29,342 147,395 122,686
Occupancy 13,713 11,397 56,908 46,340
Depreciation
and 12,910 10,840 51,687 43,659
amortization
General and
administrative 11,816 14,002 64,404 61,764
expenses
Pre-opening 844 1,279 8,109 7,463
costs
Asset
impairment 978 -- 1,906 --
charge
Reacquired
franchise and
other -- -- 451 1,821
acquisition
costs
Legal -- -- -- 1,653
settlement
Total costs 188,729 167,841 824,025 710,901
and expenses
Income from 9,867 15,996 45,190 52,571
operations
Other expense
(income):
Interest 2,133 2,469 8,237 9,231
expense, net
Other 32 27 14 42
Total other 2,165 2,496 8,251 9,273
expenses
Income before 7,702 13,500 36,939 43,298
income taxes
Provision for 1,919 3,410 9,813 12,647
income taxes
Net income $ 5,783 $ 10,090 $ 27,126 $ 30,651
Earnings per
share:
Basic $ 0.38 $ 0.60 $ 1.70 $ 1.84
Diluted $ 0.38 $ 0.60 $ 1.69 $ 1.82
Weighted
average shares
outstanding:
Basic 15,308 16,685 15,927 16,647
Diluted 15,372 16,856 16,047 16,817
RED ROBIN GOURMET BURGERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year Ended
December 28, December 30,
2008 2007
Cash Flows From Operating Activities:
Net income $ 27,126 $ 30,651
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 51,687 43,659
Asset impairment charge 1,906 --
Provision (benefit) for deferred income taxes 6,670 (1,872 )
Amortization of debt issuance costs 310 387
Stock-based compensation 6,831 6,871
Changes in operating assets and liabilities, net of (3,394) 13,862
effects of acquired business
Net cash provided by operating activities 91,136 93,558
Cash Flows From Investing Activities:
Purchases of property and equipment (83,227 ) (77,798 )
Acquisition of franchise restaurants, net of cash (29,941 ) (47,854 )
acquired
Changes in marketing fund restricted cash 72 457
Net cash used in investing activities (113,096 ) (125,195 )
Cash Flows From Financing Activities:
Borrowings of long-term debt 164,950 166,000
Payments of long-term debt and capital leases (96,486 ) (126,225 )
Purchase of treasury stock (50,042 ) --
Proceeds from exercise of stock options and employee 1,456 2,245
stock purchase plan
Excess tax benefit related to exercise of stock 326 363
options
Debt issuance costs -- (594 )
Net cash provided by financing activities 20,204 41,789
Net increase (decrease) in cash and cash equivalents $ (1,756 ) $ 10,152
Cash and cash equivalents, beginning of year 12,914 2,762
Cash and cash equivalents, end of year $ 11,158 $ 12,914
Schedule I
Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income
from Operations and Net Income
(In thousands, except percentage data)
The Company defines restaurant-level operating profit to be restaurant revenues minus restaurant-level operating costs, excluding restaurant closures and impairment costs. It does not include general and administrative costs, depreciation and amortization, pre-opening costs, reacquired franchise costs and legal settlements. The Company believes that restaurant-level operating profit is an important measure of financial performance 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 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 twelve and fifty-two weeks ended December 28, 2008 and December 30, 2007, expressed as a percentage of total revenues, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenues.
Twelve Weeks Ended Fifty-Two Weeks Ended
December 28, December 30, December 28, December 30,
2008 2007 2008 2007
Restaurant $195,604 98.5% $180,369 98.1% $854,690 98.3% $747,530 97.9%
revenues
Restaurant
operating costs:
Cost of sales 46,905 24.0 41,157 22.8 203,463 23.8 171,236 22.9
Labor 67,307 34.4 59,824 33.2 289,702 33.9 254,279 34.0
Operating 34,256 17.5 29,342 16.3 147,395 17.2 122,686 16.4
Occupancy 13,713 7.0 11,397 6.3 56,908 6.7 46,340 6.2
Restaurant-level 33,423 17.1 38,649 21.4 157,222 18.4 152,989 20.5
operating profit
Add - other 2,992 1.5 3,468 1.9 14,525 1.7 15,942 2.1
revenues
Deduct - other
operating:
Depreciation and 12,910 6.5 10,840 5.9 51,687 5.9 43,659 5.7
amortization
General and 11,816 5.9 14,002 7.6 64,404 7.4 61,764 8.1
administrative
Pre-opening 844 0.4 1,279 0.7 8,109 0.9 7,463 1.0
costs
Asset impairment 978 0.5 -- -- 1,906 0.2 -- --
charge
Reacquired -- -- -- -- 451 0.1 1,821 0.2
franchise costs
Legal settlement -- -- -- -- -- -- 1,653 0.2
Total other 26,548 13.3 26,121 14.2 126,557 14.5 116,360 15.2
operating
Income from 9,867 5.0 15,996 8.7 45,190 5.2 52,571 6.9
operations
Total other 2,165 1.1 2,496 1.4 8,251 0.9 9,273 1.2
expenses
Provision for 1,919 1.0 3,410 1.9 9,813 1.1 12,647 1.7
income taxes
Total other 4,084 2.1 5,906 3.3 18,064 2.0 21,920 2.9
Net income $5,783 2.9% $10,090 5.4% $27,176 3.2% $30,651 4.0%
Certain percentage amounts in the table above do not sum due to rounding as well as the fact that restaurant operating costs are expressed as a percentage of restaurant revenues, as opposed to total revenues.
Schedule II
Reconciliation of Non-GAAP Results to GAAP Results
(In thousands, except per share and 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 twelve and fifty-two weeks ended December 28, 2008, year-over-year change in net income and diluted net income per share, asset impairment charges, the reacquired franchise costs and other acquisition related costs, the legal settlement expense and acquisition-related integration costs incurred during the twelve and fifty-two weeks ended December 28, 2008 and December 30, 2007, as described previously. The non-GAAP measurements are intended to supplement the presentation of the Company's financial results in accordance with GAAP. The Company believes that the presentation of these items provides additional information to facilitate the comparison of past and present financial results.
Twelve Weeks Ended Year Over Year
December 28, 2008 December 30, 2007 Percentage Change
Net Diluted Net Diluted Net Diluted
Income EPS Income EPS Income EPS
Reported $ 5,783 $ 0.38 $10,090 $ 0.60 (42.7)% (36.7)%
After-tax impact of:
Asset impairment charge 734 0.05 -- --
Acquisition-related -- -- 6 --
integration costs
Adjusted $ 6,517 $ 0.43 $10,096 $ 0.60 (35.4)% (28.7)%
Fifty-two Weeks Ended Year Over Year
December 28, 2008 December 30, 2007 Percentage Change
Net Diluted Net Diluted Net Diluted
Income EPS Income EPS Income EPS
Reported $ 27,126 $ 1.69 $30,651 $ 1.82 (11.5)% (7.1)%
After-tax impact of:
Asset impairment charge 1,399 0.09 -- --
Reacquired franchise
and other
acquisition costs 331 0.02 1,289 0.08
Legal settlement -- -- 1,170 0.07
Acquisition-related 193 0.01 194 0.01
integration costs
Adjusted $ 29,049 $ 1.81 $33,304 $ 1.98 (12.8)% (8.7)%
Source: Red Robin Gourmet Burgers, Inc.
Released February 19, 2009