FAT Brands Inc. Announces Fiscal Second Quarter 2018 Financial Results
August 7, 2018–(Business Wire)
FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT Brands” or the “Company”) today announced financial results for the 13-week period ended July 1, 2018.
Andy Wiederhorn, President and CEO of FAT Brands, commented, “We’re pleased to report second quarter results which include positive same-store sales growth across all of our brands. Our flagship Fatburger brand continued to achieve particularly impressive results, with same-store sales growth of 9.5% inclusive of 4.2% transaction growth. Strong Fatburger results continue to be driven by momentum in delivery, as well as by increased traction of the plant-based Impossible Burger. We also saw positive trends in our casual dining brands, supported by the tests of a new media campaign, to-go packaging, and third party delivery.”
“Over the last few months we secured significant financing, which enabled the closing of our previously announced acquisition of Hurricane Grill & Wings, a brand best known for its jumbo fresh wings. The integration of the Hurricane restaurants onto our platform has been smooth, and we now expect to achieve an annualized revenue run-rate of $19-20 million and an annualized EBITDA run-rate of $10-11 million, inclusive of synergies beginning in the fourth quarter of 2018. The financing we secured provides dry powder for future accretive acquisitions; our pipeline of franchise brands is robust, and we are actively working to complete additional transactions.”
The Company was formed as a Delaware corporation on March 21, 2017 as a wholly-owned subsidiary of Fog Cutter Capital Group Inc. (“FCCG”). The Company was formed for the purpose of completing a public offering and related transactions, and to acquire and continue certain businesses previously conducted by subsidiaries of FCCG. These transactions occurred on October 20, 2017. Because this is our initial year of operation, comparative information is not available for the second quarter of 2017.
Fiscal Second Quarter 2018 Highlights
- Total revenues of $3.9 million(1)
- EBITDA of $825,000
- Net income of $373,000, or $0.04 per share
(1) In the first quarter of 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which changed the timing of recognition of franchise fees, including development fees, territory fees, renewal and transfer fees. Adoption of ASU 2014-09 also changed the reporting of advertising fund contributions and related expenditures. Please see the “Adoption of New Accounting Guidance” section below for additional information.
Fiscal Second Quarter 2018 Segment Performance
- Fatburger & Buffalo’s Express
- Same-store sales growth in core domestic market of 8.9%
- System-wide same-store sales growth of 9.5%
- Total revenues of $2.0 million
- EBITDA of $887,000
- Net income of $771,000
- 4 new store openings
- Buffalo’s Cafe
- System-wide same-store sales growth of 10.2%
- Total revenue of $511,000
- EBITDA of $165,000
- Net income of $237,000
- Ponderosa & Bonanza Steakhouse
- System-wide same-store sales growth of 0.9%
- Total revenue of $1.4 million
- EBITDA of $304,000
- Net income of $247,000
Financing Events in the Quarter
On April 27, 2018, FAT Brands established a $5 million credit facility with TCA Global Credit Master Fund, LP (“TCA”). A total of $2 million was funded by TCA as part of the initial closing on April 27, 2018, and the proceeds were used for working capital.
On June 7, 2018, FAT Brands completed $8 million in Series A preferred stock financing. The proceeds are being used for acquisition of new restaurant brands, the repayment of indebtedness, and working capital.
On June 27, 2018, FAT Brands entered into a Note Exchange Agreement under which it agreed with FCCG to exchange most of the remaining balance of the Company’s outstanding Promissory note issued to FCCG on October 20, 2017, in the original principal amount of $30 million (the “Note”). At the time of the exchange, the Note had an estimated outstanding balance of principal plus accrued interest of $10,222,053 (the “Note Balance”). FCCG agreed to cancel the Note, in exchange for shares of capital stock of the Company in the following amounts:
- $2,000,000 of the Note Balance will be exchanged for 20,000 shares of Series A Fixed Rate Cumulative Preferred Stock of the Company at $100 per share; and
- The remaining Note Balance of $7,272,053 will be exchanged for 989,395 shares of Common Stock of the Company, representing an exchange price of $7.35 per share, which was the closing price of the Common Stock on June 26, 2018.
On July 3, 2018, FAT Brands completed the previously announced acquisition of Hurricane AMT, LLC (“Hurricane”), the franchisor of Hurricane Grill & Wings and Hurricane BTW restaurants, for a purchase price of $12,500,000.
Also on July 3, 2018, the Company entered into a new Loan and Security Agreement with FB Lending, LLC, whereby the Company borrowed $16.0 million in a term loan. A portion of the net proceeds were used to fund the Hurricane acquisition, as well as to repay borrowings of $2.0 million plus interest and fees under the Company’s existing loan facility with TCA. The Company intends to use the remaining proceeds for additional acquisitions and general working capital purposes.
Quarterly Cash Dividend
The Company’s Board of Directors approved the payment of a quarterly cash dividend to shareholders of $0.12 per share. The dividend was paid on July 16, 2018 to shareholders of record as of the close of business on July 6, 2018.
Key Financial Definitions
New store openings – The number of new store openings reflects the number of stores opened during a particular reporting period. The total number of new stores per reporting period and the timing of stores openings has, and will continue to have, an impact on our results.
Same-store sales growth – Same-store sales growth reflects the change in year-over-year sales for the comparable store base, which we define as the number of stores open for at least one full fiscal year. Given our focused marketing efforts and public excitement surrounding each opening, new stores often experience an initial start-up period with considerably higher than average sales volumes, which subsequently decrease to stabilized levels after three to six months. Thus, we do not include stores in the comparable base until they have been open for at least one full fiscal year. We expect that this trend will continue for the foreseeable future as we continue to open and expand into new markets.
Conference Call and Webcast
FAT Brands will host a conference call and webcast to discuss its fiscal first quarter 2018 financial results today at 5:00 PM ET. Hosting the call and webcast will be Andy Wiederhorn, President and Chief Executive Officer; and Ron Roe, Chief Financial Officer.
Interested parties may listen to the conference call via telephone by dialing 201-493-6725. A replay will be available after the call until Tuesday, August 14, 2018, and can be accessed by dialing 412-317-6671. The passcode is 13682184.
The webcast will be available at www.fatbrands.com under the “invest” section, and will be archived on the site shortly after the call has concluded.
About FAT (Fresh. Authentic. Tasty.) Brands
FAT Brands (NASDAQ: FAT) is a leading global franchising company that strategically acquires, markets and develops fast casual and casual dining restaurant concepts around the world. The Company currently owns six restaurant brands, Fatburger, Buffalo’s Cafe, Buffalo’s Express, Hurricane Grill & Wings, and Ponderosa and Bonanza Steakhouses, that have over 300 locations open and more than 300 under development in 32 countries.
For more information, please visit www.fatbrands.com.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the future financial and operating results of the Company and our ability to pay a cash dividend to our common stockholders. Forward-looking statements generally use words such as “expect,” “foresee,” “anticipate,” “believe,” “project,” “should,” “estimate,” “will,” “plans,” “forecast,” and similar expressions, and reflect our expectations concerning the future. It is possible that our future performance may differ materially from current expectations expressed in these forward-looking statements. We refer you to the documents we file from time to time with the Securities and Exchange Commission, such as our recent Offering Statement on Form 1-A and our reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks and uncertainties that could cause our actual results to differ materially from our current expectations and from the forward-looking statements contained in this press release. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this press release.
Adoption of New Accounting Guidance
The Company adopted ASU 2014-09 on January 1, 2018 using the modified retrospective method, in which the cumulative effect of applying the standard is recognized at the date of initial application. Amounts presented for the twenty-six weeks ended July 1, 2018 have been adjusted to reflect the adoption of ASU 2014-09, resulting in an increase in revenues of $1,675,000.
FAT Brands Statement of Operations Data
Alexis Tessier, 203-682-8286
Papa John’s Announces Second Quarter 2018 Results and Updates 2018 Outlook
August 7, 2018–(Business Wire)
Papa John’s International, Inc. (NASDAQ: PZZA) today announced financial results for the three and six months ended July 1, 2018.
- Earnings per diluted share of $0.36 and adjusted earnings per diluted share of $0.49 in the second quarter of 2018, excluding the impact of China refranchising; adjusted earnings per diluted share down 24.6% from the second quarter 2017 of $0.65
- System-wide North America comparable sales decrease of 6.1%
- International comparable sales decrease of 0.8%; total international sales increase of 12.2%, driven by unit growth
- 35 net unit openings in second quarter of 2018 driven by international operations
- Company completed the refranchising of 34 company-owned restaurants in China during Q2
- Cash flow from operations of $74.2 million; free cash flow of $52.6 million for the first six months of 2018
- 2018 outlook revised downward including lowered adjusted EPS range of $1.30 to $1.80 as a result of negative sales trends
“Earlier this year, we began implementing key changes in how we operate and market our products to refocus on quality and better connect with customers,” said Steve Ritchie, President and CEO of Papa John’s. “While results have been challenged by recent events, we are committed to these strategic priorities and continue to believe that they will lead to enhanced performance. We have also begun an external audit of Papa John’s culture and will address any improvements that are recommended at its conclusion. Our entire leadership team understands the importance of getting our culture and business improvements right. We have important work ahead of us, and I feel certain that with the collective efforts of our 120,000 corporate and franchise team members that the best days for Papa John’s are ahead.”
All operating highlights are compared to the same period of the prior year, unless otherwise noted.
Adjusted financial results excluding Special items, which impact comparability, are summarized in the following reconciliation. The table reconciles our GAAP financial results to our adjusted financial results, which are non-GAAP measures. All highlights are compared to the same period of the prior year, unless otherwise noted.
On June 15, 2018, we refranchised our China operations including our 34 company-owned restaurants and the quality control center. The refranchising losses, net of tax, of $1.6 million for the second quarter of 2018 and $1.5 million for the six months ended July 1, 2018 are primarily driven by this China refranchise. We also had $2.4 million of additional tax expense associated with the China refranchise. This additional tax expense is primarily attributable to the required recapture of operating losses previously taken by Papa John’s International.
The non-GAAP adjusted results shown above should not be construed as a substitute for or a better indicator of the company’s performance than the company’s GAAP results. Management believes presenting the financial information excluding these Special items is important for purposes of comparison to prior year results. In addition, management uses these metrics to evaluate the company’s underlying operating performance, to analyze trends, and to determine compensation.
Consolidated revenues decreased $26.8 million, or 6.2%, for the second quarter of 2018 and decreased $48.7 million, or 5.5%, for the six months ended July 1, 2018. These decreases were primarily due to lower comparable sales for North America restaurants that resulted in lower company-owned restaurant revenues, lower royalties and decreased North America commissary sales. These decreases were somewhat offset by higher International revenues due to an increase in equivalent units and the favorable impact of foreign exchange rates and the impact of higher commodity prices on North America commissary revenues. Additionally, 2018 included an increase in revenues of approximately $1.8 million and $4.3 million for the quarter and six months ended July 1, 2018, respectively, primarily due to the required reporting of franchise marketing fund contributions as revenues (previously netted with expenses) under the newly adopted revenue recognition standard, Revenue from Contracts with Customers (“Topic 606”); see the “Revenue Recognition and Income Statement Presentation” section below for more details.
Consolidated income before income taxes of $19.7 million for the second quarter of 2018 decreased $15.8 million, or 44.4%, compared to the second quarter of 2017. Income before income taxes, as a percentage of consolidated revenues, was 4.8% for the second quarter of 2018, as compared to 8.2% for the second quarter of 2017. The $15.8 million decrease was primarily driven by lower North America revenues as explained above, higher restaurant operating costs, higher interest expense and a loss on the sale of our China operations. Significant changes in the components of income before income taxes are as follows:
- Domestic Company-owned restaurants operating margin decreased $6.7 million, or 1.4% as a percentage of related revenues, primarily due to lower comparable sales of 7.2% and increased operating costs including higher commodities and minimum wages as well as increased non-owned automobile costs. Additionally, the adoption of Topic 606 reduced the restaurant operating margin due to the revised method of accounting for the customer loyalty program.
- North America franchise royalties and fees decreased $2.7 million, or 10.1% as compared to the second quarter of 2017, primarily due to lower comparable sales of 5.7% and an increase in franchise royalty waivers.
- North America commissary operating margin decreased $400,000, and remained flat as a percentage of related revenues, primarily due to lower sales volumes.
- International operating margin increased $800,000, or 0.6% as a percentage of related revenues, primarily due to higher royalties from increased equivalent units and higher income from the United Kingdom Quality Control Center.
- Other operating margin decreased $1.2 million, or 6.3%, primarily due to higher costs related to various technology initiatives and increased advertising spend in the United Kingdom. The “Revenue Recognition and Income Statement Presentation” section below provides more information on our “Other revenues” and “Other expenses” income statement line items.
- General and administrative (“G&A”) costs decreased $1.5 million, or 3.8%, primarily due to lower management incentive and benefit costs as well as a shift in the timing of the annual operators’ conference to the third quarter of 2018. These cost decreases were partially offset by an increase in various technology initiative costs and higher bad debt expenses.
- Refranchising losses of $2.1 million were incurred in the second quarter of 2018 primarily related to the refranchising of China, as previously discussed.
- Net interest expense increased $3.9 million for the second quarter due to an increase in average outstanding debt, which is primarily due to share repurchases, as well as higher interest rates.
For the six months ended July 1, 2018 consolidated income before income taxes was $42.1 million, a decrease of $35.3 million, or 45.6%, compared to the six months ended June 25, 2017. Income before income taxes, as a percentage of consolidated revenues, was 5.0% for the six months ended July 1, 2018 compared to 8.7% for the six months ended June 25, 2017. These decreases were primarily due to the same reasons noted above for the three-month period. In addition, for the six months ended July 1, 2018, G&A expenses increased $1.8 million, or 2.3%, primarily due to an increase in various technology initiative costs and higher bad debt expenses and legal fees.
Operating margin is not a measurement defined by GAAP and should not be considered in isolation, or as an alternative to evaluation of the company’s financial performance. In addition to an evaluation of GAAP consolidated income before income taxes, we believe the presentation of operating margin is beneficial as it represents an additional measure used by the company to further evaluate operating efficiency and performance of the various business units. Additionally, operating margin discussion may be helpful for comparison within the industry. The operating margin results detailed herein can be calculated by business unit based on the specific revenue and operating expense line items on the face of the Condensed Consolidated Income Statement. Consolidated income before income taxes reported includes G&A expenses, depreciation and amortization, refranchising losses and net interest expense that have been excluded from this operating margin calculation.
The effective income tax rates were 35.7% and 28.6% for the three and six months ended July 1, 2018, respectively, representing an increase of 6.2% and a decrease of 0.5%, respectively, from the prior year comparable periods. The increase for the three months ended July 1, 2018 was due the impact of the China refranchising, as previously discussed. Excluding the China refranchising impact of 12.4% and 5.8%, the effective income tax rates were 23.4% and 22.8% for the three and six months ended July 1, 2018, respectively.
Diluted earnings per share decreased 44.6% to $0.36 for the second quarter of 2018 and decreased 39.4% to $0.86 for the six months ended July 1, 2018. Adjusted diluted earnings per share decreased 24.6% to $0.49 for the second quarter of 2018 and 31.0% to $0.98 for the six months ended.
Global Restaurant and Comparable Sales Information
We believe North America, international and global restaurant and comparable sales growth information, as defined in the table above, is useful in analyzing our results since our franchisees pay royalties that are based on a percentage of franchise sales. Franchise sales also generate commissary revenue in the United States and in certain international markets. Franchise restaurant and comparable sales growth information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of franchise restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in company revenues.
Free Cash Flow
The company’s free cash flow, a non-GAAP financial measure, was as follows for the first six months of 2018 and 2017 (in thousands):
We define free cash flow as net cash provided by operating activities (from the Consolidated Statements of Cash Flows) less the amounts spent on the purchase of property and equipment. We view free cash flow as an important liquidity measure because it is one factor that management uses in determining the amount of cash available for investment. However, it does not represent residual cash flows available for discretionary expenditures. Free cash flow is not a term defined by GAAP, and as a result, our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of the company’s liquidity than the company’s GAAP measures.
See the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (SEC) for additional information concerning our operating results for the three and six months ended July 1, 2018 and cash flow for the six months ended July 1, 2018.
Global Restaurant Unit Data
At July 1, 2018, there were 5,247 Papa John’s restaurants operating in all 50 states and in 46 international countries and territories, as follows:
The company has added 159 net worldwide units over the trailing four quarters ended July 1, 2018. Our development pipeline as of July 1, 2018 included approximately 1,210 restaurants (140 units in North America and 1,070 units internationally), the majority of which are scheduled to open over the next six years.
Share Repurchase Activity
The following table reflects our share repurchases for the three and six months ended July 1, 2018 and subsequent repurchases through July 31, 2018 (in thousands):
There were 32.2 million and 32.9 million diluted weighted average shares outstanding for the three and six months ended July 1, 2018, respectively, representing decreases of 13.6% and 11.9% over the prior year comparable periods. Approximately 31.5 million actual shares of the company’s common stock were outstanding as of July 1, 2018.
As previously disclosed, on March 1, 2018 we announced a $100 million accelerated share repurchase agreement (“ASR Agreement”) with Bank of America, N.A. (“BofAML”). Pursuant to the terms of the ASR Agreement, we paid BofAML $100 million in cash. On March 6, 2018, we received an initial delivery of approximately 1.3 million shares of common stock for $78.0 million or 78% of the total ASR Agreement. The remaining $22.0 million of the ASR Agreement was completed May 14, 2018, delivering approximately 400,000 additional shares. Under the completed ASR Agreement, approximately 1.7 million shares were repurchased for $100.0 million.
The company does not expect to repurchase any more shares in 2018 after the current trading plan expires in early August.
We paid a cash dividend of approximately $7.2 million ($0.225 per common share) during the second quarter of 2018. Subsequent to the second quarter, on August 1, 2018, our Board of Directors declared a third quarter dividend of $0.225 per common share (approximately $7.2 million based on current shareholders of record). The dividend will be paid on August 24, 2018 to shareholders of record as of the close of business on August 13, 2018. The declaration and payment of any future dividends will be at the discretion of our Board of Directors, subject to the company’s financial results, cash requirements, and other factors deemed relevant by our Board of Directors.
Revenue Recognition and Income Statement Presentation
On January 1, 2018, we adopted the new revenue recognition standard using the modified retrospective method. Under the modified retrospective method, prior period results were not restated to reflect the impact of Topic 606, resulting in reduced comparability between 2018 and 2017 operating results. The impact of adoption includes the following:
Additional detail on the adoption and 2018 impact of the new revenue recognition standard can be found in our Form 10-Q for the quarterly period ended July 1, 2018 filed with the SEC.
While not required as part of the adoption of Topic 606, our income statement includes newly created Other revenues and Other expenses line items. Other revenues and Other expenses include the Topic 606 “gross up” of revenues and expenses derived from certain domestic and international marketing fund co-ops we control, as previously discussed. Additionally, Other revenues and Other expenses include various reclassifications from North America commissary and other, International expenses and G&A expenses to better reflect and aggregate various domestic and international services provided by the company for the benefit of franchisees. Related 2017 amounts have also been reclassified to conform to the new 2018 presentation, as detailed in the “Summary of Income Statement Presentation Reclassifications” included with this press release. These reclassifications had no impact on reported total revenues or total costs and expenses. Refer to the ‘Investor Relations’ section on our company website for details of income statement presentation reclassifications for each quarter of 2017.
Update of Previously Issued Financial Guidance
The recent negative publicity surrounding the company’s brand negatively impacted July sales in North America. Our North America comparable sales for the July period decreased approximately 10.5%. At this time, the company cannot predict how long and the extent to which the negative customer sentiment will continue to impact future sales. In addition, the company expects to incur significant costs as a result of the recent negative publicity including, but not limited to, the following:
- re-imaging costs at nearly all domestic and international restaurants,
- costs to accelerate our replacement of certain branded assets and related marketing efforts,
- financial assistance to domestic franchisees, such as short-term royalty reductions, in an effort to mitigate closings,
- additional costs for branding initiatives, including but not limited to, launching a new advertising and marketing campaign and promotional activities to mitigate negative consumer sentiment and negative sales trends,
- costs associated with a third-party audit of the culture at Papa John’s commissioned by the Special Committee as well as costs associated with implementing new policies and procedures to address any findings as a result of the audit, and
- additional legal and advisory costs, including costs associated with the activities of the Special Committee.
Based on the negative consumer sentiment and the expected impact on future sales, the company is lowering its financial and associated outlook items. The below outlook incorporates a range of the potential negative sales impact from these recent events but excludes the related costs the company will incur, as detailed above. The company is still gathering information regarding these costs but has developed a preliminary range of $30 million to $50 million for the remainder of 2018. The below outlook also excludes the $0.13 impact of the China refranchising.
Conference Call and Website Information
A conference call is scheduled for August 7, 2018 at 5:00 p.m. Eastern Time to review the company’s second quarter 2018 earnings results. The call can be accessed from the company’s web page at www.papajohns.com in a listen-only mode, or dial 877-312-8816 (U.S. and Canada) or 253-237-1189 (international). The conference call will be available for replay, including by downloadable podcast, from the company’s web site at www.papajohns.com. The Conference ID is 5177337.
Investors and others should note that we announce material financial information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We intend to use our investor relations website as a means of disclosing information about our business, our financial condition and results of operations and other matters and for complying with our disclosure obligations under Regulation FD. The information we post on our investor relations website, including information contained in investor presentations, may be deemed material. Accordingly, investors should monitor our investor relations website, in addition to following our press releases, SEC filings and public conference calls and webcasts. We encourage investors and others to sign up for email alerts at our investor relations page under Shareholder Tools at the bottom right side of the page. These email alerts are intended to help investors and others to monitor our investor relations website by notifying them when new information is posted on the site.
For more information about the company, please visit www.papajohns.com.
Papa John’s International, Inc.
Joe Smith, 502-261-7272
Senior Vice President, Chief Financial Officer
Paciugo Gelato Caffe Acquired by Dallas-based Sinelli Concepts International
Founder of Genghis Grill, Which Wich Purchases Italian Gelato Franchise, Invests in Growth of Brand
August 7, 2018–(PR Web)
Sinelli Concepts International has purchased Paciugo, a nearly 20-year-old Italian gelato franchise concept based in Dallas. Under the terms of the acquisition, Sinelli Concepts International takes ownership of the 32 locations spanning 10 states in the Paciugo franchise system. Jeff Sinelli, founder of Sinelli Concepts International brings his industry expertise and innovative energy to grow the brand.
“Paciugo has established a solid reputation for quality and has delighted families for almost two decades. Our team is looking forward to sharing the Paciugo experience in even more markets in the years ahead,” said Sinelli. “I am proud of my roots here in Dallas and excited to invest in growing this Dallas-based company and supporting the men and women who make up the Paciugo system.”
Paciugo, which was founded in 2000 based on a secret family gelato recipe and comes from an Italian phrase meaning “messy concoction,” is the largest artisanal gelato chain in the United States with more than 30 franchised and licensed locations. The company is interested in both single- and multi-unit franchise operators and offers flexible real estate footprint options ranging from 120 to 1400 square feet. Paciguo’s artisanal gelato is natural and made by hand daily, incorporating fresh fruits and Italian chocolates for more than 400 gelato flavor combinations. The company also offers additional products spanning a variety of dayparts such as gelato pops, ice cream sandwiches, macarons, smoothies, shakes, coffee, pastries and more while also providing catering options for large orders. In 2017, Paciugo sold more than 3.5 million cups and 75,000 take home packs throughout the U.S.
“With Paciugo, we are giving our guests the chance to experience the incomparable flavor of authentic Italian gelato in a variety of ways that make it the perfect treat to enjoy with family, friends or as a treat for yourself either in our cafes, on the go or to enjoy at home,” said Sinelli.
While Sinelli Concepts International begins work on expanding the presence of Paciugo in markets across the country, the company will continue to own and operate Which Wich Superior Sandwiches independently.
For more information on Paciugo Gelato Caffe and to learn more about franchise opportunities, visit https://paciugo.com/.
ABOUT SINELLI CONCEPTS INTERNATIONAL:
Sinelli Concepts International, based in Dallas, Texas, has more than 500 restaurants and businesses operating across the U.S. and in more than a dozen countries. Founded in 1997 by restaurant entrepreneur, Jeff Sinelli, the company has launched successful concepts such as Genghis Grill in 1997, Which Wich Superior Sandwiches in 2003, Burguesa Burger in 2007, and acquired and sold Submarina of California in 2017. A global leader in branding and entrepreneurial innovation, Sinelli Concepts International is currently developing concepts across industries including restaurants, food trucks, beverages, coffee, real estate, hospitality, speaking and events, branding and more.
Wingstop Inc. Reports Fiscal Second Quarter 2018 Financial Results; Increases Regular Quarterly Dividend
August 2, 2018–(Globe Newswire)
Wingstop Inc. (NASDAQ: WING) today announced fiscal second quarter financial results for the period ended June 30, 2018.
Highlights for the Fiscal Second Quarter 2018 compared to the Fiscal Second Quarter 2017*:
- System-wide sales increased 13.5% to $304.9 million
- System-wide restaurant count increased 12.5% to 1,188 global locations
- System-wide domestic same store sales increased 4.3%
- Total revenue increased 17.3% to $37.0 million
- Net income increased 39.4% to $6.8 million, or $0.23 per diluted share, compared to $4.9 million, or $0.17 per diluted share
- Adjusted EBITDA**, a non-GAAP measure, increased 27.1% to $11.7 million
* In the first quarter of 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which changed the timing of recognition of initial franchise fees, development fees, territory fees for our international business and renewal and transfer fees, as well as the reporting of advertising fund contributions and related expenditures. See the “Adoption of New Accounting Guidance” section below for additional information. Amounts presented for the thirteen weeks ended July 1, 2017 have been adjusted to reflect the adoption of ASU 2014-09.
** Adjusted EBITDA is a non-GAAP measure. A reconciliation of adjusted EBITDA to the most directly comparable financial measure presented in accordance with GAAP is set forth in a schedule accompanying this release. See “Non-GAAP Financial Measures.”
Chairman and Chief Executive Officer Charlie Morrison stated, “Wingstop completed another strong quarter of growth on both the top and bottom lines as we continue positioning ourselves to become a top 10 global restaurant brand. We are effectively executing against our four growth strategies: building greater awareness through national advertising, innovating through technology to enhance the guest experience, optimizing delivery in test markets ahead of a national roll out in 2019, and expanding our international presence.”
Morrison continued, “We believe that raising our quarterly dividend demonstrates the strength of our overall business, our commitment to shareholder value and our confidence in future performance.”
Key Operating Metrics for the Fiscal Second Quarter 2018 Compared to the Fiscal Second Quarter 2017
Fiscal Second Quarter 2018 Financial Results
Total revenue for the fiscal second quarter 2018 increased 17.3% to $37.0 million from $31.6 million in the fiscal second quarter last year.
- Royalty revenue, franchise fees and other increased $1.9 million to $17.2 million from $15.3 million in the fiscal second quarter last year. Royalty revenue increased $1.8 million primarily due to 127 net franchise restaurant openings since July 1, 2017 and domestic same store sales growth of 4.3%.
- Advertising fees and related income increased $0.9 million to $8.4 million from $7.5 million in the fiscal second quarter last year. Advertising fees increased primarily due to the increase in system-wide sales in the thirteen weeks ended June 30, 2018, compared to the prior year fiscal second quarter.
- Company-owned restaurant sales increased $2.6 million to $11.5 million from $8.8 million in the fiscal second quarter last year. The increase was primarily due to the acquisition of five franchised restaurants since the prior year comparable period resulting in additional sales of $2.3 million in the current fiscal second quarter. The remaining increase is due to company-owned domestic same store sales growth of 3.5%, which was driven by an increase in average transaction size.
Cost of sales increased to $7.7 million from $6.9 million in the fiscal second quarter last year. As a percentage of company-owned restaurant sales, cost of sales decreased to 67.5% from 77.6%. The decrease was driven primarily by a 22.9% decrease in the cost of bone-in chicken wings as compared to the prior year period, as well as our ability to leverage costs due to the 3.5% increase in company-owned restaurant same store sales.
Advertising expenses increased to $8.2 million from $7.6 million in the fiscal second quarter last year. Under the new accounting guidance, advertising expenses are recognized at the same time the related revenue is recognized, which does not necessarily correlate to the actual timing of the advertising spend.
Selling, general & administrative expenses (“SG&A”) increased 23.2% to $10.1 million compared to $8.2 million in the fiscal second quarter last year. The increase in SG&A expense is primarily due to an increase in payroll and benefit expenses related to planned headcount additions, as compared to the prior year period.
Net income increased 39.4% to $6.8 million, or $0.23 per diluted share, compared to net income of $4.9 million, or $0.17 per diluted share, in the fiscal second quarter last year.
Adoption of New Accounting Guidance
The Company adopted ASU 2014-09 in the first quarter of 2018, using the full retrospective transition method, which resulted in adjusting each prior reporting period presented and a recording a cumulative effect adjustment as of the first day of 2016. The adoption changed the timing of recognition of initial franchise fees, development fees, territory fees for our international business and renewal and transfer fees, as well as the reporting of advertising fund contributions and related expenditures. Additional information regarding the Company’s adoption of the new revenue recognition guidance and the impact to historical financial results is contained in Exhibit 99.2 to the Company’s current report on Form 8-K, filed with the Securities and Exchange Commission on February 22, 2018.
As of June 30, 2018, there were 1,188 Wingstop restaurants system-wide. This included 1,066 restaurants in the United States, of which 1,040 were franchised restaurants and 26 were company-owned. Our international presence consisted of 122 franchised restaurants across nine countries. During the fiscal second quarter 2018, there were 31 net system-wide Wingstop restaurants opened, including 10 international franchised locations.
Appointment of Independent Board Member
On August 1, 2018, the Board of Directors elected Krishnan (“Kandy”) Anand, an experienced public company director and the Chief Growth Officer of Molson Coors Brewing Co. (NYSE:TAP), to the Board as a new independent Director. Mr. Anand served on the Popeyes Louisiana Kitchen, Inc. board from November 2010 to April 2017. Prior to his current role at Molson Coors, Mr. Anand served as President and Chief Executive Officer of Molson Coors International from December 2009 to October 2016. Before joining Molson Coors, Mr. Anand held a variety of positions at The Coca Cola Company, most recently as president of Coca Cola’s Philippine business from 2007 to 2009. He also served as Vice President of Coca Cola’s Global Commercial Leadership from 2004 to 2007, and prior to that as Vice President of Global Brands Strategy.
In recognition of the Company’s strong cash flow generation, confidence in the business, and commitment to returning value to shareholders, our Board of Directors approved a 29% increase in the quarterly dividend payable to Wingstop shareholders from $0.07 to $0.09 per share of common stock, totaling approximately $2.6 million. This dividend will be paid on September 18, 2018 to shareholders of record as of September 4, 2018.
The Company is confirming our long-term guidance of low single digit domestic same store sales growth and 10%+ system-wide unit growth. For the fiscal year ending December 29, 2018, the Company is reiterating previous guidance, which is consistent with its long-term targets, with the exception of updating certain items impacting fully diluted Adjusted earnings per share:
- Depreciation and amortization of approximately $4.5 million, reflecting the impact of amortization of reacquired franchise rights associated with restaurant acquisitions
- An on-going effective tax rate of approximately 25% (previously 23%), excluding the impact of excess tax benefits from stock option exercises
- Stock-based compensation expense of approximately $3.7 million (previously $3.0 million)
Additionally, we expect unit development growth will be between 12.0 – 12.5%.
A reconciliation of diluted earnings per share to Adjusted diluted earnings per share is provided below, which reflects 29.6 million diluted shares outstanding. This estimate is comparable to fully diluted Adjusted earnings per share of $0.69 for fiscal year 2017, which has been restated to reflect the new revenue recognition standards. Fiscal year 2017 included a benefit of $0.08 to Adjusted earnings per share associated with excess tax benefits for stock options exercised. Our 2018 guidance includes a benefit of $0.05 to Adjusted earnings per share due to excess tax benefits realized in the first two quarters of 2018.
The following definitions apply to these terms as used in this release:
Same store sales reflects the change in year-over-year sales for the comparable restaurant base. We define the comparable restaurant base to include those restaurants open for at least 52 full weeks. This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures.
System-wide sales represents net sales for all of our company-owned and franchised restaurants, as reported by franchisees.
Adjusted EBITDA is defined as net income before interest expense, net, income tax expense, and depreciation and amortization (EBITDA) further adjusted for transaction costs, gains and losses on the disposal of assets, and stock-based compensation expense. We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the same manner.
Conference Call and Webcast
Chairman and Chief Executive Officer, Charlie Morrison, and Chief Financial Officer, Michael Skipworth, will host a conference call today to discuss the fiscal second quarter and fiscal year 2018 financial results at 4:30 PM Eastern Time.
The conference call can be accessed live by dialing 604-235-2082. A replay will be available two hours after the call and can be accessed by dialing 412-317-6671; the passcode is 10005248. The replay will be available through Thursday, August 9, 2018.
The conference call will also be webcast live and later archived on the investor relations section of Wingstop’s corporate website at ir.wingstop.com under the ‘News & Events’ section.
Founded in 1994 and headquartered in Dallas, Texas, Wingstop Inc. (NASDAQ:WING) operates and franchises more than 1,100 restaurants across the United States, Mexico, Singapore, the Philippines, Indonesia, the United Arab Emirates, Malaysia, Saudi Arabia, Colombia, and Panama. The Wing Experts’ menu features classic and boneless wings with 11 bold, distinctive flavors including Original Hot, Cajun, Atomic, Mild, Teriyaki, Lemon Pepper, Hawaiian, Garlic Parmesan, Hickory Smoked BBQ, Louisiana Rub, and Mango Habanero. Wingstop’s wings are always cooked to order, hand-sauced and tossed and served with a variety of house-made sides including fresh-cut, seasoned fries. Having grown its domestic same store sales for 14 consecutive years, the Company has been ranked #3 on the “Top 100 Fastest Growing Restaurant Chains” by Nation’s Restaurant News (2016), #7 on the “Top 40 Fast Casual Chains” by Restaurant Business (2016), and was named “Best Franchise Deal in North America” by QSR magazine (2014). Wingstop was ranked #88 on Fortune’s 100 Best Medium Workplaces list in October 2016. For more information visit www.wingstop.com or www.wingstopfranchise.com. Follow us on facebook.com/Wingstop and Twitter @Wingstop.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures including those indicated above. By providing non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. These measures are not intended to be considered in isolation or as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures used in this press release may be different from the measures used by other companies. A reconciliation of each measure to the most directly comparable GAAP measure is available in this news release. In addition, the Current Report on Form 8-K furnished to the SEC concurrent with the issuance of this press release includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.
Certain statements contained in this news release, as well as other information provided from time to time by Wingstop Inc. or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “guidance,” “anticipate,” “estimate,” “expect,” “forecast,” “outlook,” “target,” “project,” “plan,” “intend,” “believe,” “confident,” “may,” “should,” “can have,” “likely,” “future” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Examples of forward-looking statements in this news release include our fiscal year 2018 outlook for new restaurant openings, domestic same store sales growth, SG&A expenses, net income, EBTIDA, adjusted EBITDA, adjusted net income, adjusted earnings per diluted share and our diluted share count, as well as our anticipated potential domestic restaurant expansion opportunity, positioning to make progress towards domestic restaurant potential, and progress toward our goal of becoming a top 10 global restaurant brand.
Any such forward-looking statements are not guarantees of performance or results and involve risks, uncertainties (some of which are beyond the Company’s control), and assumptions. Although we believe any forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in any forward-looking statements. Please refer to the risk factors discussed in our Form 10-K for the year ended December 30, 2017, which can be found at the SEC’s website www.sec.gov. The discussion of these risks is specifically incorporated by reference into this news release.
Any forward-looking statement made by Wingstop Inc. in this press release speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Real Mex To Sell Its Assets To Z Capital Group; Company To File Chapter 11 To Facilitate Sale; Restaurants Open And Operating As Usual
August 6, 2018–(PR Newswire)
RM Holdco LLC and its subsidiaries (“Real Mex”), the operator of Chevys Fresh Mex, El Torito, and other full-service Mexican restaurant brands, today announced that it has executed an Asset Purchase Agreement with an affiliate of Z Capital Group, LLC. In order to facilitate the sale, the Company has voluntarily filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
Real Mex’s restaurants will remain open and operating as usual during the Ch. 11 process and customers can expect to continue to enjoy the great food, festive environment, and genuine hospitality for which the Company is known.
Under the asset purchase agreement, Z Capital Croup has agreed to purchase substantially all of Real Mex’s assets and assume certain liabilities, subject to higher or otherwise better offers. Z Capital Croup is currently a partial owner in the Company and, along with co-owner Tennenbaum Capital Partners, has agreed to provide $5.5 million in Debtor-in-Possession financing to ensure an efficient bankruptcy and sale process.
“Today’s filing is an important step in completing the sale process that Real Mex began late last year,” said CEO Bryan Lockwood. “The support from Z Capital and Tennenbaum will help minimize any disruptions and ensure that the process is seamless for our guests, employees, and vendors. We’re looking forward to completing this transaction as swiftly as possible and emerging from Ch. 11 in a stronger financial position, poised for future growth.”
Real Mex has established a Restructuring Information Hotline for interested parties at 888-251-3046 (toll-free domestic) or 310-751-2615 (direct dial international). Additional information can be found on Real Mex’s website at www.Realmexrestaurants.com/sale. Court filings and information about the claims process can be found at a separate website maintained by the Company’s claims agent, KCC LLC, at www.kccllc.net/RealMex.
Sidley Austin LLP is serving as legal advisor, Alvarez & Marsal is serving as financial advisor, and Piper Jaffray & Co is serving as M&A advisor to Real Mex.
Yum! Brands Reports Second-Quarter GAAP Operating Profit Growth of 7%; Second-Quarter Core Operating Profit Decline of (6)%; Maintains Full-Year Guidance
Yum! Brands Reports Second-Quarter GAAP Operating Profit Growth of 7%; Second-Quarter Core Operating Profit Decline of (6)%; Maintains Full-Year Guidance
August 2, 2018–(Business Wire)
Yum! Brands, Inc. (NYSE: YUM) today reported results for the second quarter ended June 30, 2018. Second-quarter GAAP EPS was $0.97, an increase of 68%. Second-quarter EPS excluding Special Items was $0.82, an increase of 20%.
GREG CREED COMMENTS
Greg Creed, CEO, said, “We continue to execute against our multi-year transformation strategy and remain on track with our full-year 2018 guidance. Second quarter core operating profit was consistent with our expectations and we are seeing good progress against our plans as we start the second half of the year. Importantly, I remain confident our actions to become more focused, more franchised and more efficient are establishing the foundation required for sustainable, long-term growth that will translate to strong returns for all Yum! Brands stakeholders.”
- Worldwide system sales excluding foreign currency translation grew 4%, with KFC at 6%, Taco Bell at 5% and Pizza Hut flat.
- We opened 243 net new units for 4% net new unit growth.
- We refranchised 51 restaurants, including 28 KFC and 23 Pizza Hut units, for pre-tax proceeds of $47 million. We recorded net refranchising gains of $29 million in Special Items. As of quarter end, our global franchise ownership mix was 97%.
- We repurchased 7.6 million shares totaling $643 million at an average price of $84.
- We reflected the change in fair value of our investment in Grubhub by recording $25 million of pre-tax investment income, resulting in $0.06 in EPS.
- Foreign currency translation favorably impacted divisional operating profit by $8 million.
All comparisons are versus the same period a year ago. As required, we adopted a new accounting standard on revenue recognition effective January 1, 2018. Prior year results have not been restated for this change. See the Other Items section of this release for further details.
System sales growth figures exclude foreign currency translation (“F/X”) and core operating profit growth figures exclude F/X and Special Items. Special Items are not allocated to any segment and therefore only impact worldwide GAAP results. See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further details.
- KFC Division opened 301 gross new international restaurants in 52 countries.
- Operating margin increased 4.6 percentage points driven by refranchising, partially offset by the gross up of advertising fund revenues and offsetting expenses required by the revenue recognition accounting standard and lapping higher renewal and transfer fees.
- Foreign currency translation favorably impacted operating profit by $7 million.
PIZZA HUT DIVISION
- Pizza Hut Division opened 176 gross new international restaurants in 47 countries.
- Operating margin decreased 3.5 percentage points driven by the gross up of advertising fund revenues and offsetting expenses required by the revenue recognition accounting standard, partially offset by refranchising and lower G&A related to litigation costs.
- Foreign currency translation favorably impacted operating profit by $1 million.
TACO BELL DIVISION
- Taco Bell Division opened 43 gross new restaurants, including 9 new international restaurants.
- Operating margin decreased 2.6 percentage points driven by the gross up of advertising fund revenues and offsetting expenses required by the revenue recognition accounting standard, higher restaurant-level costs and lapping lower litigation costs, partially offset by refranchising and same-store sales growth.
Effective January 1, 2018, we adopted the new accounting standard on revenue recognition. As a result, we are now required to recognize upfront fees, such as initial and renewal fees we receive from franchisees, as revenue over the term of the related franchise agreement. We also record incentive payments we may make to franchisees (e.g., equipment funding provided under the KFC U.S. Acceleration Agreement) as a reduction of revenue over the period of expected cash flows from the franchise agreements to which the payment relates. Under our historical accounting, we recognized upfront fees from franchisees in full upon commencement of the related franchise agreements and incentive payments made to franchisees when we were obligated to make the payment.
Additionally, the new accounting standard requires us to begin recording other revenues we receive from franchisees and the related expenses on a gross basis within our Income Statement. Previously, these revenues and expenses, the largest of which relate to franchisee contributions to and subsequent expenditures from advertising cooperatives we consolidate, were reported on a net basis within our Income Statement. We have reported these revenues and expenses in our Income Statement on the two new line items of Franchise contributions for advertising and other services and Franchise advertising and other services expense.
Prior results have not been restated for the impact of this accounting change and therefore remain reported as they have been historically. However, the adoption was done on a modified retrospective basis resulting in the current year impact being reported as if the now-required accounting had been in place since the inception of currently active franchise agreements or when franchise incentive payments were originally made. On a full-year basis we anticipate that the non-cash impacts of adopting the new revenue recognition standard will negatively impact core operating profit growth by 2 to 3 percentage points. As a result of the new standard, core operating profit growth was negatively impacted by two percentage points during the second quarter and one percentage point year-to-date through June 30, 2018. The lower first half impact was expected as the majority of our new unit development for which we receive upfront fees, which will now be spread versus recognized upfront, is expected to occur later in the year.
Disclosures pertaining to outstanding debt in our Restricted Group capital structure will be provided at the time of the filing of the second-quarter Form 10-Q.
Yum! Brands, Inc.
Keith Siegner, 888-298-6986
Vice President, Investor Relations, Corporate Strategy and Treasurer
Kelly Knybel, 888-298-6986
Director, Investor Relations
Virginia Ferguson, 502-874-8200
Director, Public Relations
Focus Brands and Jamba Juice Announce Definitive Merger Agreement
August 2, 2018–(Business Wire)
Article here Focus Brands Inc. (“FBI”) and Jamba, Inc. (Nasdaq:JMBA) (”Jamba”) today announced that the companies have entered into a definitive merger agreement under which FBI will acquire Jamba for $13.00 per share in cash, in a transaction valued at approximately $200 million.
Statement by Steve DeSutter, Chief Executive Officer of Focus Brands Inc.
“Benefiting from an extremely loyal customer base and strong franchise operators, Jamba Juice is one of the category leaders in the fast growing smoothie and juice category,” said Steve DeSutter, CEO of Focus Brands Inc. “We are excited to welcome Jamba Juice with such an iconic heritage into our family of well-known and highly loved ’fan favorite’ brands.”
Statement by Dave Pace, Chief Executive Officer of Jamba, Inc.
“We are delighted to have reached this agreement with Focus Brands and are confident that it will result in a positive outcome for our guests, our franchisees and our employees,” said Dave Pace, CEO of Jamba, Inc. “Over the last few years, we have worked hard to strengthen our foundation and reposition this iconic brand for the future. Partnering with Focus Brands will allow us to build on this work and further accelerate the Company’s growth.”
Under the terms of the agreement, a subsidiary of FBI will commence a tender offer to purchase all of the outstanding shares of Jamba common stock for $13.00 per share in cash. The tender offer is subject to customary conditions, including antitrust clearance and the tender of a majority of the outstanding shares of Jamba common stock. Following successful completion of the tender offer, FBI would acquire all remaining shares not tendered in the offer through a merger at the same price as in the tender offer. The transaction is expected to close during the third quarter of 2018 and will be funded by FBI using cash on hand and available borrowing capacity under its existing credit facilities.
Following the close of the transaction, Jamba will be a privately-held subsidiary of FBI and will continue to be operated as an independent brand.
Focus Brands is majority owned by affiliates of Roark, an Atlanta based private equity firm that focuses on investing in franchised and multi-unit businesses in the restaurant, retail and other consumer sectors.
Certain funds advised by Engaged Capital, LLC and Indus Capital Partners, LLC, which collectively own approximately 27% of the outstanding shares of Jamba, have entered into agreements to tender their shares in the tender offer.
North Point Advisors LLC is serving as financial advisor and DLA Piper LLP is serving as legal counsel to Jamba. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as legal counsel to FBI.
About Focus Brands Inc.
Atlanta-based Focus Brands Inc. is a leading developer of global multi-channel foodservice brands. FBI, through its affiliate brands, is the franchisor and operator of more than 5,000 restaurants, cafes, ice cream shoppes and bakeries in the United States, the District of Columbia, Puerto Rico and over 50 foreign countries under the brand names Carvel®, Cinnabon®, Schlotzsky’s®, Moe’s Southwest Grill®, Auntie Anne’s® and McAlister’s Deli®, as well as Seattle’s Best Coffee® on certain military bases and in certain international markets. Please visit www.focusbrands.com to learn more.
About Jamba, Inc.
Jamba, Inc. (Nasdaq:JMBA) through its wholly-owned subsidiary, Jamba Juice Company, is a global healthy lifestyle brand that inspires and simplifies healthful living through freshly blended whole fruit and vegetable smoothies, bowls, juices, cold-pressed shots, boosts, snacks, and meal replacements. Jamba’s blends are made with premium ingredients free of artificial flavors and preservatives so guests can feel their best and blend the most into life. Jamba Juice® has more than 800 locations worldwide. For more information, visit www.jambajuice.com.
Roark focuses on investing in franchised and multi-unit businesses in the retail, restaurant, consumer and business services sectors. Since inception, affiliates of Roark have invested in 64 franchise/multi-unit brands, which collectively generate $32 billion in annual system revenues from 32,000 locations in 50 states and 81 countries. For more information, please visit www.roarkcapital.com.
Notice to Investors
The tender offer described in this press release has not yet commenced. This press release is not a recommendation, an offer to purchase or a solicitation of an offer to sell shares of Jamba stock. At the time the tender offer is commenced, Jay Merger Sub, Inc., a wholly owned subsidiary of FBI (“Merger Sub”), will file a tender offer statement and related exhibits with the U.S. Securities and Exchange Commission (the “SEC”) and Jamba will file a solicitation/recommendation statement with respect to the tender offer. Investors and stockholders of Jamba are strongly advised to read the tender offer statement (including the related exhibits) and the solicitation/recommendation statement, as they may be amended from time to time, when they become available, because they will contain important information that stockholders should consider before making any decision regarding tendering their shares. The tender offer statement (including the related exhibits) and the solicitation/recommendation statement will be available at no charge on the SEC’s website at www.sec.gov. In addition, the tender offer statement and other documents that Merger Sub files with the SEC will be made available to all stockholders of Jamba free of charge from the information agent for the tender offer. The solicitation/recommendation statement and the other documents filed by Jamba with the SEC will be made available to all stockholders of Jamba free of charge at www.ir.jambajuice.com.
Cautionary Note Regarding Forward-Looking Statements
Certain forward-looking statements made in this press release, including any statements as to future results of operations and financial projections, may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements include, among other things, statements about the potential benefits of the proposed transaction; the prospective performance and outlook of the surviving company’s business, performance and opportunities; the ability of the parties to complete the proposed transaction and the expected timing of completion of the proposed transaction; as well as any assumptions underlying any of the foregoing. Forward-looking statements are based on management’s current expectations, beliefs, estimates, projections and assumptions. As such, forward-looking statements are not guarantees of future performance and involve inherent risks and uncertainties that are difficult to predict. As a result, actual future results and trends may differ materially from what is forecast in forward-looking statements. The following are some of the factors that could cause actual future results to differ materially from those expressed in any forward-looking statements: (i) uncertainties as to the timing of the tender offer; (ii) the risk that the proposed transaction may not be completed in a timely manner or at all; (iii) the possibility that competing offers or acquisition proposals for Jamba will be made; (iv) uncertainty surrounding how many of Jamba’s stockholders will tender their shares in the tender offer; (v) the possibility that any or all of the various conditions to the consummation of the tender offer may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities; (vi) the possibility that prior to the completion of the transactions contemplated by the merger agreement, Jamba’s business may experience significant disruptions due to transaction-related uncertainty; (vii) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; (viii) the risk that stockholder litigation in connection with the proposed transaction may result in significant costs of defense, indemnification and liability; and (ix) other factors as set forth from time to time in Jamba’s filings with the SEC, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as well as the tender offer statement, solicitation/recommendation statement and other tender offer documents that will be filed by FBI, Merger Sub and Jamba, as applicable. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Focus Brands, Merger Sub and Jamba do not undertake any obligation to update or publicly release any revisions to any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.
Lucas Bravo, 404-978-4755
Vice President, Finance and Treasury
Todd Wilson, 469-294-9749
Vice President, Finance and Investor Relations
Restaurant Brands International, Inc. Reports Second Quarter 2018 Results
Good progress against ‘Winning Together’ plan to drive improved comparable sales at TIM HORTONS®
BURGER KING® continues system-wide sales growth and crosses 17,000 restaurants worldwide
POPEYES® achieves double-digit profitability growth through accelerated restaurant expansion
August 1, 2018–(PR Newswire)
Restaurant Brands International Inc. (TSX/NYSE: QSR, TSX: QSP) today reported financial results for the second quarter ended June 30, 2018.
Daniel Schwartz, Chief Executive Officer of Restaurant Brands International Inc. (“RBI”) commented, “During the second quarter, we continued to grow each of our three iconic brands, and we made good progress against the 2018 priorities that we outlined last quarter. At Tim Hortons, we have implemented a number of initiatives under our ‘Winning Together’ plan – including the launch of Breakfast Anytime – which we believe will drive improved comparable sales over the long run. We also delivered strong system-wide sales growth at Burger King and Popeyes, driven by accelerated net restaurant growth. We are very optimistic about the long-term growth potential for each of our brands and remain focused on driving improved guest satisfaction and franchisee profitability.”
Note: System-wide sales growth and comparable sales are calculated on a constant currency basis and include sales at franchise restaurants and company-owned restaurants. System-wide sales are driven by sales at franchised restaurants, as approximately 100% of current restaurants are franchised. We do not record franchise sales as revenues; however, our franchise revenues include royalties based on a percentage of franchise sales.
Consolidated Financial Highlights
Effective January 1, 2018, we adopted the new revenue recognition accounting standard (“New Standard”). Our consolidated financial statements for 2018 reflect the application of the New Standard, while our consolidated financial statements for 2017 were prepared under the guidance of previously applicable accounting standards (“Previous Standards”). Our results presented herein indicate which revenue recognition methodology applies in each respective period.
The implementation of the New Standard impacted our year-over-year results on a consolidated basis and for each segment as follows:
- Total Revenues increased primarily as a result of the inclusion of advertising fund contributions
- Selling, General, and Administrative Expenses increased as a result of the inclusion of advertising fund expenditures
Under Previous Standards, Total Revenues for the second quarter grew primarily as a result of system-wide sales growth, as well as a favorable impact of FX movements, partially offset by a decrease in supply chain related revenues at TH.
Net Income Attributable to Common Shareholders for the quarter, under both Previous Standards and the New Standard, was driven by growth in segment income, the change in other operating expenses (income), net (driven by FX), and the redemption of our preferred shares in December of 2017.
Under Previous Standards, Adjusted EBITDA for the quarter grew 3.7% on an organic basis versus prior year results, driven primarily by an increase in revenues at BK and PLK, partially offset by a decrease in supply chain related revenues at TH.
TH Segment Results
For the second quarter of 2018, system-wide sales growth was primarily driven by net restaurant growth of 3.0%. Comparable sales were flat, including Canada comparable sales of 0.3%.
Under Previous Standards, Total Revenues for the quarter declined (0.3)% ((3.8)% excluding the impact of FX movements) versus prior year, primarily reflecting a decrease in supply chain related revenues, partially offset by a favorable impact of FX movements.
Under Previous Standards, Adjusted EBITDA for the quarter increased 2.7% ((1.0)% excluding the impact of FX movements) versus prior year, primarily as a result of a favorable impact of FX movements, partially offset by a decrease in Total Revenues.
BK Segment Results
For the second quarter of 2018, system-wide sales growth was driven by net restaurant growth of 6.4% and comparable sales of 1.8%, including US comparable sales of 1.8%.
Under Previous Standards, Total Revenues for the quarter grew 4.3% (3.3% excluding the impact of FX movements) versus prior year, reflecting growth in system-wide sales.
Under Previous Standards, Adjusted EBITDA for the quarter grew 7.0% (6.3% excluding the impact of FX movements) versus prior year, primarily as a result of an increase in Total Revenues.
PLK Segment Results
For the second quarter of 2018, system-wide sales growth was driven by net restaurant growth of 7.5% and comparable sales of 2.9%, including US comparable sales of 1.8%.
Under Previous Standards, Total Revenues for the quarter grew 1.6% (1.8% excluding the impact of FX movements) versus prior year, reflecting growth in system-wide sales.
Under Previous Standards, Adjusted EBITDA for the quarter grew 28.0% (28.4% excluding the impact of FX movements) versus prior year, as a result of an increase in Total Revenues as well as effective cost management.
Cash and Liquidity
As of June 30, 2018, total debt was $12.2 billion, and net debt (total debt less cash and cash equivalents of $1.0 billion) was $11.3 billion. The RBI Board of Directors has declared a dividend of $0.45 per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the third quarter of 2018. The dividend will be payable on October 1, 2018 to shareholders and unitholders of record at the close of business on September 7, 2018.
About Restaurant Brands International Inc.
Restaurant Brands International Inc. (“RBI”) is one of the world’s largest quick service restaurant companies with more than $30 billion in system-wide sales and over 24,000 restaurants in more than 100 countries and U.S. territories. RBI owns three of the world’s most prominent and iconic quick service restaurant brands – TIM HORTONS®, BURGER KING®, and POPEYES®. These independently operated brands have been serving their respective guests, franchisees and communities for over 40 years. To learn more about RBI, please visit the company’s website at www.rbi.com.
Red Robin Reports Preliminary Revenue Results for the Fiscal Second Quarter of 2018
August 1, 2018–(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 announced preliminary, unaudited results for its fiscal second quarter ended July 15, 2018.
The Company expects to report the following financial results for the fiscal second quarter 2018:
- Total revenues of approximately $315.4 million
- Comparable restaurant revenue decrease of 2.6%
- Comparable guest count decrease of 0.7%, which represents a 160 basis point outperformance on guest traffic vs. the casual dining sector according to Black Box Intelligence
- GAAP loss per diluted share of $0.14, driven by $0.54 in asset impairment charges, $0.06 in reorganization and other charges, as well as higher food costs and other operating expenses, offset by continued favorability in labor productivity and income tax expense
- Adjusted earnings per diluted share of $0.46, excluding the asset impairment, reorganization and other charges outlined above.
The above results are preliminary and subject to quarter-end closing adjustments. The Company plans to report fiscal second quarter 2018 results on August 21, 2018.
“We are disappointed with our performance in the second quarter. Consistent with our commitment to providing timely disclosure and transparency, we are announcing preliminary results for our second quarter today because they are significantly lower than expected. While we remain confident in the strategy that we have in place to address the shifts going on within casual dining, we simply didn’t execute as well as we should have,” said Denny Marie Post, Red Robin Gourmet Burgers, Inc., chief executive officer. “We continue to make progress on driving off-premise traffic growth and differentiation through everyday affordability. However, we have yet to see the needed lift in dine-in traffic to offset the lower check average associated with the higher mix of our Tavern Double Menu.”
“We have opportunities to improve our service execution, which has been impacted by the growing complexity of the multiple revenue streams within our four walls. We must also refresh our marketing message and move quickly on the digital guest experience. We will share more insights about these shortfalls, and our plans to address them, on our upcoming earnings call,” said Ms. Post.
For the full year 2018, the Company expects total revenues to range from $1.350 billion to $1.365 billion, including a comparable restaurant revenue decrease of 1.0% to 2.0% and earnings per diluted share to range from $1.80 to $2.20.
Second Quarter 2018 Release and Conference Call
Final results for the fiscal second quarter of 2018 will be released shortly after 4:00 p.m. ET on Tuesday, August 21, 2018. The Company will also host an investor conference call to discuss its second quarter 2018 results at 5:00 p.m. ET that same day. The conference call can be accessed live over the phone by dialing (888) 254-3590, or for international callers (323) 994-2093. A replay will be available from two hours after the end of the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 2893335. The replay will be available through Tuesday, August 28, 2018.
The call will be webcast live from the Company’s website at www.redrobin.com under the investor relations section.
Forward-looking statements in this press release regarding the Company’s financial results, including anticipated revenues, comparable restaurant revenues, comparable guest count, earnings per share, 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. 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 affordability initiatives to drive traffic and sales; the effectiveness of our marketing strategies and promotions 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, service improvements, and other initiatives; the ability to increase to-go and other off-premise offerings; availability of capital or credit facility borrowings; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; 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.
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. At Red Robin, burgers are more than just something guests eat; they’re a bonding experience that brings together friends and families, kids and adults. 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. It’s now easy to take Red Robin anywhere with online ordering for to-go and Gourmet Burger Bar catering pickups through Yummm2Go. 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.
Red Robin Gourmet Burgers, Inc.
PJ Adler, 303-846-5040
Red Robin Investor Relations
The Cheesecake Factory Reports Results for Second Quarter of Fiscal 2018
The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the second quarter of fiscal 2018, which ended on July 3, 2018.
Total revenues were $593.2 million in the second quarter of fiscal 2018 as compared to $569.9 million in the second quarter of fiscal 2017. Net income and diluted net income per share were $28.4 million and $0.61, respectively, in the second quarter of fiscal 2018.
The Company recorded a pre-tax charge of $2.6 million during the second quarter of fiscal 2018 related to the termination of a lease for one The Cheesecake Factory restaurant. Excluding the after-tax impact from this item, net income and diluted net income per share for the second quarter of fiscal 2018 would have been $30.3 million and $0.65, respectively. Please see the Company’s reconciliation of non-GAAP financial measures at the end of this release.
Comparable restaurant sales at The Cheesecake Factory restaurants increased 1.4% in the second quarter of fiscal 2018.
“Comparable sales at The Cheesecake Factory and core restaurant operating performance were in line with our expectations during the second quarter,” said David Overton, Chairman and Chief Executive Officer. “However, $4.6 million in higher group medical insurance costs year-over-year and $4.5 million in increased legal expenses impacted our bottom line results this quarter.”
Overton continued, “We generated over $65 million in operating cash flow during the quarter. The consistency of our cash flow enabled us to increase our dividend for the sixth consecutive year. We continue to execute a balanced capital allocation strategy, investing in long-term growth while returning substantially all of our free cash flow to shareholders through our dividend and share repurchase program.”
The Company now expects to open as many as six restaurants in fiscal 2018, including one Grand Lux Cafe, scheduled to open in August 2018, as well as the first location of Social Monk Asian Kitchen, a fast casual concept under development and expected to open in the fourth quarter of 2018.
In addition, the Company now expects three restaurants to open internationally under licensing agreements in fiscal 2018. This includes the second location in Saudi Arabia, which opened in April.
The Company’s Board of Directors declared a quarterly cash dividend of $0.33 per share on the Company’s common stock. The dividend is payable on August 28, 2018 to shareholders of record at the close of business on August 15, 2018.
During the second quarter of fiscal 2018, the Company repurchased approximately 140,000 shares of its common stock at a cost of $7.1 million.
About The Cheesecake Factory Incorporated
The Cheesecake Factory Incorporated created the upscale casual dining segment in 1978 with the introduction of its namesake concept. The Company, through its subsidiaries, owns and operates 213 full-service, casual dining restaurants throughout the U.S.A., including Puerto Rico, and Canada, comprised of 198 restaurants under The Cheesecake Factory® mark; 13 restaurants under the Grand Lux Cafe® mark; and two restaurants under the RockSugar Southeast Asian Kitchen® mark. Internationally, 21 The Cheesecake Factory® restaurants operate under licensing agreements. The Company’s bakery division operates two bakery production facilities, in Calabasas Hills, CA and Rocky Mount, NC, that produce quality cheesecakes and other baked products for its restaurants, international licensees and third-party bakery customers.
Dine Brands Global, Inc. Reports Second Quarter 2018 Results
Applebee’s Achieves Highest Quarterly Comparable Sales Increase in Ten Years
IHOP Continues Positive Quarterly Comparable Sales Momentum
August 1, 2018–(PR Newswire)
Dine Brands Global, Inc. (NYSE: DIN), the parent company of Applebee’s Neighborhood Grill & Bar® and IHOP® restaurants, today announced financial results for the second quarter of fiscal 2018.
“Applebee’s and IHOP’s domestic same-restaurant sales increased 5.7% and 0.7%, respectively. Positive sales momentum for both brands continued into the second quarter. I am pleased to report that for the third consecutive quarter, both Applebee’s and IHOP outperformed their respective categories based on sales and traffic. The execution of our strategic growth plans over the past year are producing meaningful results. Applebee’s achieved its highest quarterly domestic sales increase in over a decade. Additionally, IHOP successfully launched its all new Ultimate Steakburgers platform, further establishing the brand as a destination beyond breakfast. We also recently announced that IHOP will be introduced in South America for the first time through an agreement with a new franchisee to open 25 restaurants in Peru over the next ten years,” said Steve Joyce, Chief Executive Officer of Dine Brands Global, Inc.
Mr. Joyce added, “We’ve made great progress stabilizing the performance of our brands and we are excited about the results to date. We are also working on a number of key initiatives that we believe will create significant long-term value for our shareholders, including the refinancing of our debt this year.”
Second Quarter of Fiscal 2018 Financial Highlights
- GAAP net income available to common stockholders was $12.3 million, or earnings per diluted share of $0.69 for the second quarter of 2018. This compares to net income available to common stockholders of $21.8 million, or earnings per diluted share of $1.23, for the second quarter of fiscal 2017. The decrease in net income was primarily due to lower segment profit as the result of $16.5 million in franchisor contributions to the Applebee’s national advertising fund, partially offset by a decline in bad debt expense, IHOP restaurant development over the past twelve months and improvement in Applebee’s and IHOP’s domestic same-restaurant sales.
- Adjusted net income available to common stockholders was $18.3 million, or adjusted earnings per diluted share of $1.03, for the second quarter of fiscal 2018. This compares to adjusted net income available to common stockholders of $23.8 million, or adjusted earnings per diluted share of $1.34, for the second quarter of fiscal 2017. The decrease in adjusted net income was mainly due to lower segment profit as the result of $16.5 million in franchisor contributions to the Applebee’s national advertising fund, partially offset by a decline in bad debt expense, IHOP restaurant development over the past twelve months and improvement in Applebee’s and IHOP’s domestic same-restaurant sales. (See “Non-GAAP Financial Measures” below.)
- General and administrative expenses were $38.8 million for the second quarter of fiscal 2018 compared to $37.4 million for the second quarter of fiscal 2017. The increase was primarily due to higher personnel-related costs, partially offset by a decline in professional services expenses.
First Six Months of Fiscal 2018 Financial Highlights
- GAAP net income available to common stockholders was $28.8 million, or earnings per diluted share of $1.61 for the first six months of fiscal 2018. This compares to net income available to common stockholders of $37.1 million, or earnings per diluted share of $2.09, for the first six months of fiscal 2017. The decrease in net income was primarily due to lower segment profit as the result of $30.0 million in franchisor contributions to the Applebee’s national advertising fund, partially offset by a decline in bad debt expense, IHOP restaurant development over the past twelve months and improvement in Applebee’s and IHOP’s domestic same-restaurant sales. The impact of lower segment profit was partially offset by lower income tax expense and a decline in general and administrative expenses.
- Adjusted net income available to common stockholders was $38.0 million, or adjusted earnings per diluted share of $2.13, for the first six months of fiscal 2018. This compares to adjusted net income available to common stockholders of $46.6 million, or adjusted earnings per diluted share of $2.63, for the first six months of fiscal 2017. The decrease in adjusted net income was mainly due to lower segment profit, as explained in the paragraph above. The impact of lower segment profit was partially offset by lower income taxes and a decline in general and administrative expenses. (See “Non-GAAP Financial Measures” below.)
- General and administrative expenses were $80.7 million for the first six months of fiscal 2018 compared to $87.7 million for the same period of fiscal 2017. The decline was primarily due to approximately $8.8 million in executive separation costs incurred during the first six months of 2017 that did not recur in the comparable period of fiscal 2018.
- Cash flows from operating activities were approximately $25.8 million for the first six months of fiscal 2018 compared to approximately $20.9 million for the first six months of fiscal 2017. Adjusted free cash flow was $28.1 million for the first six months of fiscal 2018. This compares to $19.2 million for the first six months of fiscal 2017. (See “Non-GAAP Financial Measures” below.)
Same-Restaurant Sales Performance
Second Quarter of Fiscal 2018
- Applebee’s domestic system-wide comparable same-restaurant sales increased 5.7% for the second quarter of 2018.
- IHOP’s domestic system-wide comparable same-restaurant sales increased 0.7% for the second quarter of 2018.
First Six Months of Fiscal 2018
- Applebee’s domestic system-wide comparable same-restaurant sales increased 4.5% for the first six months of 2018.
- IHOP’s domestic system-wide comparable same-restaurant sales increased 0.9% for the first six months of 2018.
- GAAP Effective Tax Rate
Our effective tax rates for the three and six months ended June 30, 2018 were impacted by two events. The Tax Cuts and Jobs Act (the “Tax Act”) enacted in December 2017 lowered the federal statutory corporate tax rate from 35% to 21%, beginning in 2018. However, during the three months ended June 30, 2018, we increased our tax provision by $5.7 million related to adjustments resulting from IRS audits for tax years 2011 through 2013. This adjustment increased our effective tax rates for the three and six months ended June 30, 2018, offsetting the lower federal statutory corporate tax rate resulting from the Tax Act. Completion of the IRS audits for tax years 2011 through 2013 will allow us to accelerate the collection of certain tax benefits recognized in prior years. As a result, we expect to receive a cash refund of approximately $12 million within the next 12 months. The expected refund is currently included in Prepaid Income Taxes in the Consolidated Balance Sheets.
Financial Performance Guidance for Fiscal 2018
Dine Brands reiterates its financial performance guidance for fiscal 2018 contained in the press release issued on February 20, 2018 and the Form 8-K filed on the same day, except for the revisions noted below.
- Revised expectations for Applebee’s domestic system-wide comparable same-restaurant sales performance to range between positive 3.5% and positive 4.5%. This compares to previous expectations of between flat and positive 3.0%.
- Revised expectations for IHOP’s domestic system-wide comparable same-restaurant sales performance to range between positive 0.5% and positive 2.0%. This compares to previous expectations of between flat and positive 3.0%.
- Revised expectations for the closure of approximately 80 to 90 domestic Applebee’s restaurants and approximately 10 international Applebee’s restaurants. This compares to previous expectations for the closure of approximately 60 to 80 restaurants for domestic and international combined. The expected closures will be based on several criteria, including meeting our brand and image standards as well as operational results.
- Revised expectations for adjusted free cash flow (See “Non-GAAP Financial Measures” below) to range between $99 million and $119 million. This compares to previous expectations for adjusted free cash flow to range between $94 million and $114 million.
- Reiterates expectations for Applebee’s franchisees to develop between 10 and 15 new restaurants globally, the majority of which are expected to be international openings.
- Reiterates expectations for IHOP franchisees and its area licensee to develop between 85 and 100 restaurants globally, the majority of which are expected to be domestic openings. We expect the closure of approximately 30 to 40 restaurants, or on a full-year net development basis, a range of 45 to 70 incremental restaurants.
- Reiterates expectations for Franchise segment profit to be between approximately $289 million and $307 million. Included in this amount is a one-time $30 million franchise expense that was contributed to the Applebee’s national advertising fund in the first half of 2018. This is in addition to the 2017 contribution of $9.5 million.
- Reiterates expectations for Rental and Financing segments to generate approximately $37 million in combined profit.
- Reiterates expectations for general and administrative expenses to range between $147 million and $156 million, including non-cash stock-based compensation expense and depreciation of approximately $21 million.
- Reiterates expectations for interest expense to be approximately $61 million. Approximately $3 million is projected to be non-cash interest expense.
- Reiterates expectations for weighted average diluted shares outstanding to be approximately 18 million shares.
- Reiterates expectations for the income tax rate to be approximately 26%.
- Reiterates expectations for cash flows provided by operating activities to range between $100 million and $120 million.
- Reiterates expectations for capital expenditures to be approximately $16 million.
- Reiterates expectations for GAAP earnings per diluted share to range between $4.31 and $4.61.
- Reiterates expectations for adjusted earnings per diluted share (See “Non-GAAP Financial Measures” below) to range from $4.95 to $5.25.
About Dine Brands Global, Inc.
Based in Glendale, California, Dine Brands Global, Inc. (NYSE: DIN), through its subsidiaries, franchises restaurants under both the Applebee’s Neighborhood Grill & Bar and IHOP brands. With approximately 3,700 restaurants combined in 18 countries and approximately 380 franchisees, Dine Brands is one of the largest full-service restaurant companies in the world. For more information on Dine Brands, visit the Company’s website located at www.dinebrands.com.
Denny’s Corporation Reports Results for Second Quarter 2018
July 30, 2018–(Globe Newswire)
Denny’s Corporation (NASDAQ:DENN), franchisor and operator of one of America’s largest franchised full-service restaurant chains, today reported results for its second quarter ended June 27, 2018.
Second Quarter 2018 Highlights
- Total Operating Revenue grew 18.0% to $157.3 million, primarily due to the benefit of revenue recognition changes.
- Domestic system-wide same-store sales** decreased 0.7%, including decreases of 0.1% at company restaurants and 0.8% at domestic franchised restaurants. Excluding the negative holiday shift, domestic system-wide same-store sales** would have been nearly flat.
- Completed 51 remodels, including 48 at franchised restaurants.
- Operating Income grew 11.5% to $19.0 million.
- Company Restaurant Operating Margin* was $16.2 million and Franchise Operating Margin* was $25.5 million.
- Net Income was $11.6 million, or $0.18 per diluted share.
- Adjusted Net Income* was $11.7 million, or $0.18 per diluted share.
- Adjusted EBITDA* increased 0.2% to $27.2 million.
- Adjusted Free Cash Flow* increased 4.0% to $13.7 million.
- Reiterated prior annual guidance for company and domestic franchised restaurant same-store sales** growth, Adjusted EBITDA* and Adjusted Free Cash Flow* while revising certain other guidance.
- Repurchased $12.7 million of common stock.
John Miller, President and Chief Executive Officer, stated, “Denny’s generated strong cash flows during the second quarter, and we are pleased to be reiterating our annual guidance for same-store sales** growth, Adjusted EBITDA* and Adjusted Free Cash Flow*. Although sales were challenged by a formidable year-ago comparison, a negative holiday shift, and a highly competitive value environment, we generated strong total operating margins through effective cost management and grew Adjusted Net Income Per Share* by 28.2%. Going forward, we remain committed to delivering positive and profitable system sales growth by executing our on-going brand revitalization strategy, enhancing the overall guest experience, and expanding our global reach.”
Second Quarter Results
The following table summarizes the impact of adopting Topic 606 on the line items within the Company’s Consolidated Statement of Income for the quarter ended June 27, 2018.
Denny’s total operating revenue grew 18.0% to $157.3 million primarily due to recognizing franchise advertising revenue on a gross basis in accordance with Topic 606 and an increase in company restaurant sales. Company restaurant sales grew 4.5% to $102.7 million due to a greater number of company restaurants compared to the prior year quarter. Franchise and license revenue grew 55.9% to $54.6 million compared to $35.0 million in the prior year quarter. The increase was primarily due to recognizing $19.5 million of advertising revenue in accordance with Topic 606 and an increase in initial fees that benefited from revenue recognition changes, partially offset by lower occupancy revenue due to scheduled lease terminations.
Company Restaurant Operating Margin* was $16.2 million, or 15.7% of company restaurant sales, compared to $16.7 million, or 16.9%, in the prior year quarter. The change was primarily due to increases in minimum wages and third-party delivery costs, partially offset by higher sales. Franchise Operating Margin* was $25.5 million, or 46.8% of franchise and license revenue, compared to $24.8 million, or 70.7%, in the prior year quarter. This was primarily due to recording advertising revenue and related costs on a gross basis, an increase in initial fees, and an improving occupancy margin, partially offset by other direct costs.
Total general and administrative expenses improved 5.9% to $15.6 million, compared to $16.6 million in the prior year quarter. This was primarily due to reductions in share-based compensation and market valuation changes in the Company’s deferred compensation plan liabilities. Interest expense, net was $5.4 million versus $3.7 million in the prior year quarter primarily due to increases in the credit facility balance and related interest rates. Denny’s ended the quarter with $313.0 million of total debt outstanding, including $282.0 million of borrowings under its revolving credit facility.
The provision for income taxes was $2.6 million, reflecting an effective tax rate of 18.1%, primarily due to the new 21.0% federal statutory income tax rate and a $0.7 million benefit associated with the settlement of share-based compensation. Given the Company’s utilization of tax credit carryforwards, approximately $1.1 million in cash taxes was paid during the quarter.
Net Income was $11.6 million, or $0.18 per diluted share, compared to $8.7 million, or $0.12 per diluted share, in the prior year quarter. Adjusted Net Income Per Share* grew 28.2% to $0.18 compared to $0.14 in the prior year quarter.
Adjusted Free Cash Flow* and Capital Allocation
Denny’s generated $13.7 million of Adjusted Free Cash Flow* in the quarter after investing $7.4 million in cash capital expenditures, including the acquisition of real estate and one franchised restaurant, as well as the remodel of three company restaurants.
During the quarter, the Company allocated $12.7 million to share repurchases. As of June 27, 2018, the Company had approximately $167 million remaining in authorized share repurchases under its existing $200 million share repurchase authorization.
The following full year 2018 expectations reflect the current business environment, the impacts of recent tax reform, and revenue recognition changes.
- Same-store sales** growth at company and domestic franchised restaurants between 0% and 2%.
- 35 to 45 new restaurant openings (vs. 40 to 50), with net restaurant decline of 5 to 10 restaurants (vs. approximately flat net restaurant growth).
- Total operating revenue between $626 and $634 million (vs. $634 and $642 million) including franchise and license revenue between $216 and $219 million (vs. $222 and $225 million).
- Company Restaurant Operating Margin* between 15% and 16% and Franchise Operating Margin* between 47% and 48% (vs. 46% and 47%).
- Total general and administrative expenses between $67 and $69 million (vs. $68 and $70 million).
- Adjusted EBITDA* between $105 and $107 million.
- Depreciation and amortization expense between $27 and $28 million.
- Net interest expense between $19.5 and $20.5 million (vs. $18.5 and $19.5 million).
- Effective income tax rate between 16% and 19% with cash taxes between $3 and $5 million.
- Cash capital expenditures between $33 and $35 million.
- Adjusted Free Cash Flow* between $48 and $50 million.
* Please refer to the Reconciliation of Net Income to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income to Non-GAAP Financial Measures included in the following tables. The Company is not able to reconcile the forward-looking non-GAAP estimates set forth above to their most directly comparable GAAP estimates without unreasonable efforts because it is unable to predict, forecast or determine the probable significance of the items impacting these estimates, including gains, losses and other charges, with a reasonable degree of accuracy. Accordingly, the most directly comparable forward-looking GAAP estimates are not provided.
** Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open the same period in the prior year. Total operating revenue is limited to company restaurant sales and royalties, fees and occupancy revenue from franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, our results as reported under GAAP.
Revenue Recognition Changes
Effective December 28, 2017, the first day of fiscal 2018, the Company adopted Accounting Standards Update 2014-09, “Revenue from Contracts with Customers (Topic 606),” and all subsequent ASUs that modified Topic 606 on a modified retrospective basis. Results for reporting periods beginning after December 28, 2017 are presented under Topic 606. Prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 605 “Revenue Recognition.”
The adoption of Topic 606 did not impact the recognition of company restaurant sales or royalties from franchised restaurants. The most significant effects of the new guidance on the comparability of our results of operations between 2018 and 2017 include the following:
- Under Topic 606, advertising revenues and expenditures are recorded on a gross basis within the Consolidated Statements of Income. Under the previous guidance of Topic 605, the Company recorded franchise advertising expense net of contributions from franchisees to our advertising programs, including local co-operatives. While this change materially impacts the gross amount of reported franchise and license revenue and costs of franchise and license revenue, the impact is generally an offsetting increase to both revenue and expense with little, if any, impact on operating income and net income. Similarly, upon adoption, other franchise services fees are recorded on a gross basis within the Consolidated Statements of Income, whereas, under previous guidance, they were netted against the related expenses.
- Under Topic 606, recognition of initial franchise fees is deferred until the commencement date of the agreement and occurs over time based on the term of the underlying franchise agreement. In the event a franchise agreement is terminated, any remaining deferred fees are recognized in the period of termination. Under the previous guidance, initial franchise fees were recognized upon the opening of a franchise restaurant. The effect of the required deferral of initial franchise fees received in a given year is mitigated by the recognition of revenue from fees received in prior periods. Upon adoption, the Company recorded deferred franchise revenue of $21.0 million, and increases of $15.6 million to opening deficit and $5.4 million to deferred tax assets. The deferred franchise revenue will be amortized over the term of the individual franchise agreements.
- Under previous guidance, we recorded gift card breakage when the likelihood of redemption was remote. Breakage was recorded as a benefit to our advertising fund or reduction to other operating expenses, depending on where the gift cards were sold. Under Topic 606, gift card breakage is recognized proportionally as redemptions occur. The Company’s gift card breakage primarily relates to cards sold by third parties. Breakage revenue related to third party sales is recorded as advertising revenue (included as a component of franchise and license revenue) with an offsetting amount recorded as advertising expense (included as a component of costs of franchise and license revenue).
Denny’s Corporation is the franchisor and operator of one of America’s largest franchised full-service restaurant chains, based on the number of restaurants. As of June 27, 2018, Denny’s had 1,720 franchised, licensed, and company restaurants around the world including 128 restaurants in Canada, Puerto Rico, Mexico, New Zealand, Honduras, the Philippines, Costa Rica, the United Arab Emirates, Guam, Curaçao, El Salvador, Guatemala, and the United Kingdom. For further information on Denny’s, including news releases, links to SEC filings, and other financial information, please visit the Denny’s investor relations website at investor.dennys.com.
The Company urges caution in considering its current trends and any outlook on earnings disclosed in this press release. In addition, certain matters discussed in this release may constitute forward-looking statements. These forward-looking statements, which reflect its best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny’s Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: competitive pressures from within the restaurant industry; the level of success of our operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses, such as avian flu, or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 27, 2017 (and in the Company’s subsequent quarterly reports on Form 10-Q).
US Foods to Acquire SGA’s Food Group of Companies for $1.8 Billion
July 30, 2018–(Restaurant News Resource)
US Foods Holding Corp. (NYSE: USFD) and Services Group of America today announced that they have entered into a definitive agreement under which US Foods will acquire five operating companies collectively known as SGA’s Food Group of Companies, for $1.8 billion in cash. The transaction has been unanimously approved by US Foods’ Board of Directors.
Headquartered in Scottsdale, Arizona, SGA’s Food Group of Companies has combined 2017 net sales of $3.2 billion and approximately 3,400 employees. SGA’s Food Group of Companies currently operates as five separate operating companies:
- Food Services of America, Inc. (FSA): One of the largest regional broadline distribution companies in the U.S. serving 16 states in the West and Midwest from nine distribution centers; 75% of net sales;
- Systems Services of America, Inc. (SSA): Multi-unit distribution foodservice company specializing in distribution to casual and fast casual dining establishments and regional and national QSR chains; 21% of net sales;
- Amerifresh, Inc.: Strong produce sourcing and marketing capabilities, 2% of net sales;
- Ameristar Meats, Inc.: Provider of custom meat products, including 18 different beef programs to meet customer specifications; 1% of net sales; and
- GAMPAC Express, Inc: Supply chain planning and logistics; 1% of net sales.
These five operating companies together deliver superior solutions for the diverse customers served by SGA’s Food Group of Companies. FSA has a strong focus on serving independent restaurants, which account for approximately 40% of its net sales base, and employs a forward-thinking approach to technological leadership to serve customer needs.
“This acquisition will significantly increase US Foods’ reach across key markets in the attractive and growing Northwest region of the U.S. and adds one of the most well-regarded regional distributors to our company,” commented US Foods Chairman and CEO Pietro Satriano. “With a shared commitment to customer service, including a proven track record of leveraging technology and private brands to meet customer needs, SGA’s Food Group of Companies is an ideal fit. The company’s unique merchandising programs, mature local sourcing capabilities and track record of operational excellence will be strong additions to our business. We look forward to welcoming the talented teams at SGA’s Food Group of Companies to US Foods, providing customers with even better service and expanded capabilities, and delivering accelerated growth and value to our shareholders.”
Services Group of America Executive Vice President and COO Slade Stewart said, “For the past 46 years, we have had the vision to become a leading national foodservice company. This is an exciting milestone on our journey and provides more success and growth opportunities for our customers and our Associates.”
Compelling Strategic and Financial Benefits
- Complementary Geographic Footprint: The transaction expands US Foods’ network in the attractive and growing Northwest.
- Increased Scale and Accelerated Growth: SGA’s Food Group of Companies approximately 33,000 customers, 12 distribution centers and more than 20 private brands will enhance US Foods’ overall scale. In addition, combining the best of both companies’ processes and technologies, along with the potential to roll out US Foods’ leading product portfolio and suite of value-added services to the customers of SGA’s Food Group of Companies, will drive increased growth within the combined company.
- Attractive Synergy Opportunity: US Foods expects to achieve approximately $55 million in annual run-rate cost synergies by the end of fiscal 2022, primarily driven by savings in distribution, procurement and administrative expenses.
- Attractive Valuation: The purchase price reflects a multiple of 12.5x SGA’s Food Group of Companies 2018E Adjusted EBITDA of $123 million, after taking into account the approximately $260 million estimated present value of cash tax benefits to be realized as a result of the acquisition. Including $55 million in annual run-rate synergies, the price reflects a 2018E Adjusted EBITDA multiple of 8.6x.
- Accretive to Adjusted EPS: Excluding amortization, the transaction is expected to become accretive to US Foods’ Adjusted EPS in the second full year following closing.
Acquisition Financing Details
US Foods will finance the acquisition primarily with $1.5 billion in fully committed term loan financing from J.P. Morgan and Bank of America Merrill Lynch and will fund the balance of the purchase price through its existing liquidity resources. At the closing of the acquisition, US Foods’ pro forma net leverage is expected to be 4.1x. Given the combined company’s strong cash flow generation, including synergies, US Foods expects to reduce net leverage to approximately 3.0x by the end of fiscal 2020.
The acquisition is subject to regulatory approval and other customary closing conditions.
Centerview Partners is acting as financial advisor to US Foods, Cravath, Swaine & Moore LLP is acting as its legal advisor, and KKR Capital Markets is acting as its debt capital markets advisor. Morgan Stanley & Co. LLC is acting as financial advisor to Services Group of America, and Davis Polk & Wardwell LLP is acting as its legal advisor.
Texas Roadhouse, Inc. Announces Second Quarter 2018 Results
July 30, 2018–(Globe Newswire)
Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 26 week periods ended June 26, 2018.
Results for the second quarter included the following highlights:
- Comparable restaurant sales increased 5.7% at company restaurants and 3.9% at domestic franchise restaurants;
- Diluted earnings per share increased 16.9% to $0.62 from $0.53 in the prior year;
- Restaurant margin dollars increased 6.5% to $113.4 million from $106.5 million in the prior year, and restaurant margin, as a percentage of restaurant and other sales, decreased 77 basis points to 18.2% primarily due to higher labor costs;
- General and administrative expenses increased primarily due to higher costs of $2.5 million associated with our annual managing partner conference, which marked our 25th anniversary;
- Our income tax rate decreased to 15.6% from 27.9% in the prior year period primarily due to the impact of new tax legislation; and
- Seven company restaurants, including three Bubba’s 33 restaurants, and one international franchise restaurant were opened.
Results for the year-to-date period included the following highlights:
- Comparable restaurant sales increased 5.3% at company restaurants and 4.0% at domestic franchise restaurants;
- Diluted earnings per share increased 36.5% to $1.37 from $1.01 in the prior year;
- Restaurant margin dollars increased 6.4% to $232.8 million from $218.7 million in the prior year, and restaurant margin, as a percentage of restaurant and other sales, decreased 76 basis points to 18.7% primarily due to higher labor costs;
- General and administrative expenses decreased primarily due to a pre-tax charge of $14.9 million ($9.2 million after-tax), or $0.13 per diluted share, recorded in the first quarter of 2017, related to the settlement of a legal matter, which was partially offset by higher costs associated with our annual managing partner conference in 2018;
- Our income tax rate decreased to 14.2% from 27.2% in the prior year period primarily due to the impact of new tax legislation; and
- 14 company restaurants, including four Bubba’s 33 restaurants, and three international franchise restaurants were opened.
Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, “Our top-line results for the second quarter were strong with double-digit revenue growth, including 5.7% comparable restaurant sales growth. We are pleased with the consistency of our traffic gains this year and the continued strength headed into the third quarter.”
Taylor continued, “On the development front, with 14 company restaurants opened in the first half of 2018, we are on track to open 27 or 28 restaurants for the year. We continue to fund our new restaurant growth through internal cash flow, while also returning excess capital to our shareholders through dividends, further driving shareholder value.”
Comparable restaurant sales at company restaurants for the first four weeks of our third quarter of fiscal 2018 increased approximately 4.7% compared to the prior year period.
Management updated the following expectations for 2018:
- 27 or 28 company restaurant openings, including up to five Bubba’s 33 restaurants; and
- An income tax rate of 14.0% to 15.0%.
Management reiterated the following expectations for 2018:
- Positive comparable restaurant sales growth;
- Commodity cost inflation of approximately 1.0%;
- Mid-single digit growth in labor dollars per store week, excluding the impact of higher guest counts; and
- Total capital expenditures of approximately $165.0 million to $175.0 million.
We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). Within our press release, we make reference to restaurant margin (in dollars and as a percentage of sales). Restaurant margin represents restaurant and other sales less restaurant-level operating costs, including cost of sales, labor, rent and other operating costs. Restaurant margin should not be considered in isolation, or as an alternative, to income from operations. This non-GAAP measure is not indicative of overall company performance and profitability in that this measure does not accrue directly to the benefit of shareholders due to the nature of the costs excluded. Restaurant margin is widely regarded as a useful metric by which to evaluate restaurant-level operating efficiency and performance. In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, including pre-opening and general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance. We also exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants. We also exclude impairment and closure expense, as we believe this provides a clearer perspective of ongoing operating performance and a more useful comparison to prior period results. Restaurant margin as presented may not be comparable to other similarly titled measures of other companies in our industry. A reconciliation of income from operations to restaurant margin is included in the accompanying financial tables.
About the Company
Texas Roadhouse is a casual dining concept that first opened in 1993 and today has grown to over 565 restaurants system-wide in 49 states and eight foreign countries. For more information, please visit the Company’s Web site at www.texasroadhouse.com.
Bloomin Brands Announces Second Quarter 2018 Results
Bloomin’ Brands Announces 2018 Q2 Diluted EPS of $0.28 and Adjusted Diluted EPS of $0.38
Q2 Comparable Restaurant Sales Growth of 4.0% at Outback and 2.4% Combined U.S.
Reaffirms Full Year 2018 Guidance for Adjusted Diluted EPS; Increases 2018 Guidance For Combined U.S. Comparable Restaurant Sales
July 30, 2018–(PR Newswire)
Bloomin’ Brands, Inc. (Nasdaq: BLMN) today reported results for the second quarter 2018 (“Q2 2018”) compared to the second quarter 2017 (“Q2 2017”).
Highlights for Q2 2018 include the following:
- Comparable restaurant sales were up 4.0% at U.S. Outback Steakhouse with traffic up 0.6%(1);
- Combined U.S. comparable restaurant sales were up 2.4%(1);
- Comparable restaurant sales were down 6.1% for Outback Steakhouse in Brazil; and
- Opened eight new restaurants, including seven in international markets.
(1) For Q2 2018, comparable restaurant sales and traffic compare the thirteen weeks from April 2, 2018 through July 1, 2018 to the thirteen weeks from April 3, 2017 through July 2, 2017.
Diluted EPS and Adjusted Diluted EPS
The following table reconciles Diluted earnings per share to Adjusted diluted earnings per share for the periods as indicated below.
“Our strong momentum continued in the second quarter, and we remain on track for a very good year at Bloomin’ Brands,” said Liz Smith, CEO. “At Outback, sales and traffic continued to out-pace the industry, and it is clear that our investments are working. Our strong domestic performance enables us to deliver our financial objectives for the year despite a challenging environment in Brazil.”
- The decrease in total revenues was primarily due to domestic refranchising and foreign currency translation, partially offset by the net impact of restaurant openings and closures and higher U.S. comparable restaurant sales.
- The decrease in GAAP operating income margin was primarily due to impairment expenses associated with international restructuring as well as labor inflation, commodity inflation and lower sales in Brazil. These decreases were partially offset by increases in average check, productivity initiatives and lower advertising expense.
- The primary difference between GAAP and adjusted operating income margin is Q2 2018 adjusted operating income margin excludes impairment charges related to international restructuring.
- The effective income tax rate in Q2 2018 includes $6.2 million of tax benefit driven primary by exercises of certain legacy stock options. These exercises benefited Q2 2018 diluted earnings per share by approximately $0.07.
Second Quarter Comparable Restaurant Sales(1)
Dividend Declaration and Share Repurchases
On July 25, 2018, our Board of Directors declared a quarterly cash dividend of $0.09 per share to be paid on August 22, 2018 to all stockholders of record as of the close of business on August 9, 2018.
On February 16, 2018, our Board of Directors approved a $150.0 million share repurchase program. As of July 30, 2018, we had $69.0 million remaining under this authorization. This authorization will expire on August 16, 2019.
Fiscal 2018 Financial Outlook
We are updating our 2018 financial outlook for GAAP diluted earnings per share, U.S. comparable restaurant sales and our tax rate. All other aspects of our full-year financial outlook as previously communicated in our April 26, 2018 earnings release remain intact. Our tax rate is now expected to be lower due to the tax benefit from the exercise of certain legacy stock options in Q2 2018. See the table below for more detail.
We are reaffirming our full-year adjusted diluted earnings per share guidance of $1.38 to $1.45. The benefit of stronger than expected U.S. comparable restaurant sales and our lower than expected tax rate are expected to be offset by political headwinds and foreign currency translation losses impacting our business in Brazil.
Impact of the Adoption of New Revenue Recognition Standard
Effective January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09 “Revenue Recognition (Topic 606), Revenue from Contracts with Customers”. Refer to Exhibit 99.2 to our April 26, 2018 Form 8-K for additional information regarding the Company’s adoption of this standard and the impact to our historical financial results.
In addition to the results provided in accordance with GAAP, this press release and related tables include certain non-GAAP measures, which present operating results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with GAAP and include the following: (i) Adjusted restaurant-level operating margin, (ii) Adjusted income from operations and the corresponding margin, (iii) Adjusted net income, (iv) Adjusted diluted earnings per share, (v) Adjusted segment restaurant-level operating margin and (vi) Adjusted segment income from operations and the corresponding margin.
We believe that our use of non-GAAP financial measures permits investors to assess the operating performance of our business relative to our performance based on GAAP results and relative to other companies within the restaurant industry by isolating the effects of certain items that may vary from period to period without correlation to core operating performance or that vary widely among similar companies. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. We believe that the disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and Board of Directors evaluate our operating performance, allocate resources and administer employee incentive plans.
These non-GAAP financial measures are not intended to replace GAAP financial measures, and they are not necessarily standardized or comparable to similarly titled measures used by other companies. We maintain internal guidelines with respect to the types of adjustments we include in our non-GAAP measures. These guidelines endeavor to differentiate between types of gains and expenses that are reflective of our core operations in a period, and those that may vary from period to period without correlation to our core performance in that period. However, implementation of these guidelines necessarily involves the application of judgment, and the treatment of any items not directly addressed by, or changes to, our guidelines will be considered by our disclosure committee. You should refer to the reconciliations of non-GAAP measures in tables four, five, and six included later in this release for descriptions of the actual adjustments made in the current period and the corresponding prior period.
In this release, we have also included forward-looking non-GAAP information under the caption “Fiscal 2018 Financial Outlook”. This relates to our current expectations for fiscal year 2018 adjusted diluted EPS, combined U.S. comparable restaurant sales and adjusted effective income tax rate. We have also provided information with respect to our expectations for the corresponding GAAP measures.
The differences between our disclosed GAAP and non-GAAP expectations are described to the extent practicable under “Fiscal 2018 Financial Outlook”. However, in addition to the general cautionary language regarding all forward-looking statements included elsewhere in this release, we note that, because the items we adjust for in our non-GAAP measures may vary from period to period without correlation to our core performance, they are by nature more difficult to predict and estimate, so additional adjustments may occur in the remainder of the fiscal year and they may significantly impact our GAAP results.
About Bloomin’ Brands, Inc.
Bloomin’ Brands, Inc. is one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. The Company has four founder-inspired brands: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. The Company operates approximately 1,500 restaurants in 48 states, Puerto Rico, Guam and 19 countries, some of which are franchise locations. For more information, please visit www.bloominbrands.com.
Vice President, IR & Finance
Bloomin’ Brands, Inc.
Del Taco Restaurants, Inc. Reports Fiscal Second Quarter 2018 Financial Results
System-wide Comparable Restaurant Sales Increased 3.3%
July 30, 2018–(Restaurant News Resource)
Del Taco Restaurants, Inc., (NASDAQ: TACO), the second largest Mexican-American quick service restaurant chain by units in the United States, last week reported fiscal second quarter 2018 financial results. Additionally, the Company reaffirmed guidance for fiscal year 2018 on an adjusted basis and announced a $25 million increase in its repurchase program for common stock and warrants to $75 million.
Fiscal Second Quarter 2018 Highlights
- System-wide comparable restaurant sales grew 3.3%, marking the 19th consecutive quarter of gains;
- Company-operated comparable restaurant sales grew 2.5%, marking the 24th consecutive quarter of gains. Company-operated comparable restaurant sales growth was comprised of average check growth of 3.7%, including approximately 1% of menu mix growth, offset by a transaction decrease of 1.2%;
- Franchised comparable restaurant sales grew 4.2%;
- Total revenue increased 8.5% to $117.8 million (including $3.1 million of franchise advertising contributions and $0.2 million of other franchise revenue required as part of the new revenue recognition rules adopted in the first fiscal quarter whereby the offsetting impact is an increase to expenses such that there is no impact on operating income and net income) compared to $108.6 million in the fiscal second quarter 2017;
- Company restaurant sales increased 5.6% to $109.8 million compared to $104.0 million in the fiscal second quarter 2017;
- Net income was $4.2 million, or $0.11 per diluted share, compared to $5.3 million in the fiscal second quarter 2017, or $0.13 per diluted share;
- Adjusted net income* was $5.4 million, or $0.14 per diluted share, compared to $5.3 million in the fiscal second quarter 2017, or $0.13 per diluted share;
- Restaurant contribution* margin was 19.7% compared to 20.3% in the fiscal second quarter 2017; and
- Adjusted EBITDA* was $16.8 million compared to $17.0 million in the fiscal second quarter 2017.
John D. Cappasola, Jr., President and Chief Executive Officer of Del Taco, commented, “During the quarter we were proud to achieve our company average unit volume (AUV) goal of $1.5 million on a trailing 12 month basis, that we set following our entrance to the public markets several years ago. Since fiscal 2013 our company and franchise AUV’s have each grown by more than 25%, helping us achieve enhanced unit economics that are driving company and franchise growth opportunities.”
Cappasola continued, “Our second quarter was in line with our expectations and we remain on track to achieve our annual guidance on an adjusted basis. We are particularly pleased with our system-wide comparable restaurant sales growth of 3.3%, or 10.4% on a two-year basis, and our restaurant contribution margin performance, which improved sequentially in the quarter, contracting only 10 basis points after adjusting for the timing of advertising expenses.
Cappasola concluded, “Early in the third quarter we launched Elevated Combined Solutions which includes brand catalysts and operational improvements designed to further our mission to be the category leader in the value oriented QSR+ segment. This latest iteration of our pivotal brand strategy includes a new concept tagline – Fresh Mexican Grill, a new holistic advertising campaign ‘Celebrating the Hardest Working Hands in Fast Food’, reimagined packaging, enhanced hospitality initiatives, newly designed menu boards, new kitchen equipment and updated crew uniforms. Early guest feedback on these enhancements has been positive.”
Review of Fiscal Second Quarter 2018 Financial Results
Total revenue increased 8.5% to $117.8 million (including $3.1 million of franchise advertising contributions and $0.2 million of other franchise revenue required as part of the new revenue recognition rules adopted in the first fiscal quarter whereby the offsetting impact is an increase to expenses such that there is no impact on operating income and net income) compared to $108.6 million in the fiscal second quarter 2017. Excluding these revenue recognition impacts total revenue increased 5.4%.
Comparable restaurant sales increased 3.3% system-wide, resulting in a 10.4% increase on a two-year basis. The Del Taco system has now generated comparable restaurant sales growth for 19 consecutive quarters. Company-operated comparable restaurant sales increased 2.5%, marking 24 consecutive quarters of comparable restaurant sales growth. Franchise comparable restaurant sales increased 4.2%.
Net income was $4.2 million, representing $0.11 per diluted share, compared to $5.3 million in the fiscal second quarter 2017, representing $0.13 per diluted share.
Adjusted net income* was $5.4 million, or $0.14 per diluted share, compared to $5.3 million in the fiscal second quarter 2017, or $0.13 per diluted share. Adjusted net income excludes the impairment of long-lived assets charge totaling approximately $1.7 million, or approximately $1.2 million after the related tax impact, representing $0.04 per diluted share, or $0.03 per diluted share after the related tax impact.
Restaurant contribution* was $21.7 million compared to $21.1 million in the fiscal second quarter 2017. As a percentage of Company restaurant sales, restaurant contribution margin decreased approximately 60 basis points year-over-year to 19.7%. The decrease was the result of an approximate 40 basis point increase in labor and related expenses and an approximate 50 basis point increase in occupancy and other operating expenses, which was all related to the timing of advertising expenses. These increases were partially offset by a 30 basis point decrease in food and paper costs.
Adjusted EBITDA* was $16.8 million compared to $17.0 million in the fiscal second quarter 2017.
During the fiscal second quarter 2018, we opened one company-operated restaurant and one franchised restaurant, and closed one company-operated restaurant and one franchised restaurant.
Thus far in the fiscal third quarter 2018, our franchise partners have opened one restaurant and there are currently 16 restaurants (eight franchised and eight company) under construction, all of which are expected to open this fiscal year. The remaining restaurants expected to open in fiscal year 2018 are expected to commence construction within the next two months.
Repurchase Program for Common Stock and Warrants
On July 23, 2018, the Board of Directors increased the repurchase program for Del Taco’s common stock and warrants to $75 million (raised from $50 million). The increased authorization will expire upon completion of the repurchase program unless terminated earlier by the Board of Directors.
During the fiscal second quarter 2018, we repurchased 407,821 shares of common stock at average price of $11.57 per share for a total of $4.7 million, and repurchased 11,132 warrants at an average price per warrant of $2.68.
There are currently 38,299,842 common shares and 5,978,991 warrants outstanding and approximately $41.2 million remains under the $75 million authorization.
Fiscal Year 2018 Guidance
We are reiterating the following guidance for fiscal year 2018, the 52-week period ending January 1, 2019:
- System-wide same store sales growth of approximately 2% to 4%;
- Total revenue between $506 million and $516 million, reflecting the new revenue recognition rules whereby franchise advertising contributions and other franchise revenue, which totaled $12.7 million and $0.8 million in fiscal year 2017, respectively, will now be reported on a gross basis. This guidance also includes an estimated $0.5 million unfavorable impact from the timing of initial franchise fees and renewal fees which must be deferred and recognized over the term of the related franchise agreement;
- Total company-operated restaurant sales between $473 million and $483 million;
- Restaurant contribution margin between 19.3% and 19.8%;
- General and administrative expenses between approximately 8.2% and 8.5% of total revenue, including the expense side of the other franchise revenue that will now be reported on a gross basis;
- Effective tax rate of approximately 26.5% to 27.5%;
- Adjusted diluted earnings per share of approximately $0.59 to $0.63;
- Adjusted EBITDA between $71.5 million and $74.0 million;
- 25 to 28 new system-wide restaurant openings; and
- Net capital expenditures between $35.0 million to $38.0 million.
We have not reconciled guidance for Adjusted diluted earnings per share and Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted since these items could vary significantly from period to period. Accordingly, a reconciliation to the corresponding GAAP financial measure is not available without unreasonable effort.
About Del Taco Restaurants, Inc.
Del Taco (NASDAQ: TACO) offers a unique variety of both Mexican and American favorites such as burritos and fries, prepared fresh in every restaurant’s working kitchen with the value and convenience of a drive-thru. Del Taco’s menu items taste better because they are made with quality ingredients like fresh grilled chicken and carne asada steak, hand-sliced avocado, hand-grated cheddar cheese, slow-cooked beans made from scratch, and creamy Queso Blanco. Del Taco’s new advertising campaign, “Celebrating the Hardest Working Hands in Fast Food,” further communicates the company’s commitment to providing guests with fresh, quality food prepared by hand every day. Founded in 1964, today Del Taco serves more than three million guests each week at its more than 560 restaurants across 14 states.
Chipotle Announces Second Quarter 2018 Results
Sales Comp Accelerated, Driving 8.3% Revenue Increase and Restaurant Margin Expansion to 19.7%
July 26, 2018–(PR Newswire)
Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its second quarter ended June 30, 2018.
Overview for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017:
- Revenue increased 8.3% to $1.3 billion
- Comparable restaurant sales increased 3.3%
- Restaurant level operating margin was 19.7%, an increase from 18.8%
- Net income was $46.9 million, including the after-tax impact of $33.4 million in expenses related to restaurant asset impairment, corporate restructuring, and certain legal costs, a 29.7% decrease from $66.7 million; excluding those items, adjusted net income was $80.2 million, an increase of 20.2%.1
- Diluted earnings per share was $1.68, net of a $1.19 after-tax impact from expenses related to restaurant asset impairment, corporate restructuring, and certain legal costs, a 27.6% decrease from $2.32. Adjusted diluted earnings per share excluding these charges was $2.87, an increase of 23.7%.1
- Opened 34 new restaurants and closed or relocated 8
Overview for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017:
- Revenue increased 7.9% to $2.4 billion
- Comparable restaurant sales increased 2.8% (net of 24 basis points related to Chiptopia revenue deferral from 2017)
- Restaurant level operating margin was 19.6%, an increase from 18.3%
- Net income was $106.3 million, including the after-tax impact of $33.4 million in expenses related to restaurant asset impairment, corporate restructuring, and certain legal costs, a 5.8% decrease from net income of $112.9 million; excluding those items, adjusted net income was $139.7 million, an increase of 23.8%.1
- Diluted earnings per share was $3.81, net of a $1.19 after-tax impact from expenses related to restaurant asset impairment, corporate restructuring, and certain legal costs, a 2.8% decrease from $3.92. Adjusted diluted earnings per share excluding these charges was $5.00, an increase of 27.6%.*
- Opened 69 new restaurants and closed or relocated 10
“I’m pleased to report a solid second quarter with sales and restaurant margins ahead of expectations,” said Brian Niccol, chief executive officer. “While we made progress during the quarter with particular strength in digital sales, I firmly believe we can accelerate that progress by executing our reorganization and our strategy to win today and cultivate tomorrow.”
* Adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures. Reconciliations to GAAP measures and further information are set forth in the table at the end of this press release.
Results for the three months ended June 30, 2018
Revenue for the quarter was $1.3 billion, an increase of 8.3% from the second quarter of 2017. The increase in revenue was driven by new restaurant openings and to a lesser extent by a 3.3% increase in comparable restaurant sales. Comparable restaurant sales improved primarily as a result of an increase in average check, including a 4.0% effective menu price increase and customers adding queso, partially offset by 1.8% fewer comparable restaurant transactions.
We opened 34 new restaurants during the quarter, and closed or relocated eight (including the closure of five Pizzeria Locale restaurants), bringing the total restaurant count to 2,467.
Food costs were 32.6% of revenue, a decrease of 150 basis points compared to the second quarter of 2017. The decrease was driven by the benefit of the menu price increases and relief in avocado prices, partially offset by elevated beef prices during the second quarter of 2018 compared to the second quarter of 2017.
Restaurant level operating margin was 19.7% in the quarter, an improvement from 18.8% in the second quarter of 2017. The improvement was driven primarily by comparable restaurant sales increases and lower marketing and promotional spend, partially offset by wage inflation at the crew level.
General and administrative expenses were 6.7% of revenue for the second quarter of 2018, an increase of 70 basis points over the second quarter of 2017. In dollar terms, general and administrative expenses increased compared to the second quarter of 2017 due to increased headcount and higher bonus expenses, combined with increased expense related to several company initiatives including digitizing our restaurant experience and operational leadership changes, and increased legal and corporate restructuring expenses. These increases were partially offset by a decrease in stock-based compensation expense due to revisions in our estimate of the number of certain stock awards we expect to vest in connection with our corporate restructuring.
Impairment, closure costs, and asset disposals increased $45.7 million compared to the second quarter of 2017 primarily due to the upcoming closures of underperforming restaurants and the associated write down of a large portion of the related long-lived asset values, as well as lease termination costs and impairment charges related to office closures associated with the office relocations and corporate restructuring that were announced in May 2018.
Net income for the second quarter of 2018 was $46.9 million, or $1.68 per diluted share, compared to net income of $66.7 million, or $2.32 per diluted share, in the second quarter of 2017. Excluding the impact of restaurant asset impairment, corporate restructuring, and certain legal costs, adjusted net income was $80.2 million and adjusted diluted earnings per share was $2.87.
Results for the six months ended June 30, 2018
Revenue for the first six months of 2018 was $2.4 billion, up 7.9% from the first six months of 2017. The increase in revenue was driven by new restaurant openings and a 2.8% increase in comparable restaurant sales. Comparable restaurant sales improved primarily as a result of an increase in average check, including a 4.5% benefit from menu price increases that have been implemented in all our restaurants, partially offset by 2.6% fewer comparable restaurant transactions.
We opened 69 new restaurants during the year and closed or relocated 10 (including the closure of five Pizzeria Locale restaurants), bringing the total restaurant count to 2,467.
Food costs were 32.5% of revenue, a decrease of 150 basis points as compared to the first six months of 2017. The decrease was driven by the benefit of the menu price increases and relief in avocado prices, partially offset by elevated beef prices during the first six months of 2018 compared to the first six months of 2017.
Restaurant level operating margin was 19.6% for the six months ended June 30, 2018, an improvement from 18.3% in the first six months of 2017. The improvement was driven by comparable restaurant sales increases, combined with lower marketing and promotional spend, partially offset by wage inflation at the crew level.
General and administrative expenses were 6.7% of revenue for the first six months of 2018, an increase of 50 basis points over the first six months of 2017. In dollar terms, general and administrative expenses increased compared to the first six months of 2017 due to increased headcount and higher bonus expenses, combined with increased expense related to several company initiatives including digitizing our restaurant experience and operational leadership changes, and increased legal and corporate restructuring expenses. These increases were partially offset by a decrease in stock-based compensation expense due to revisions in our estimate of the number of certain stock awards we expect to vest in connection with our corporate restructuring.
Impairment, closure costs, and asset disposals increased $46.9 million compared to the first six months of 2017 primarily due to the upcoming closures of underperforming restaurants and the associated write down of a large portion of the related long-lived asset values, as well as lease termination costs and impairment charges related to office closures associated with the corporate restructuring.
Our effective tax rate was 35.4% for the first six months of 2018, a decrease from 38.3% in the first six months of 2017, due to the enactment of the Tax Cuts and Jobs Act. This decrease was partially offset by excess tax deficits related to stock award exercises and vesting, the impact of non-deductible items that were added or expanded by the TCJA, and an increase in the effective state tax rate due to the impact of the state tax deduction at the lower federal rate.
Net income for the first six months of 2018 was $106.3 million, or $3.81 per diluted share, compared to net income of $112.9 million, or $3.92 per diluted share, for the six months ended June 30, 2017. Excluding the impact of restaurant asset impairment, corporate restructuring, and certain legal costs, adjusted net income was $139.7 million and adjusted diluted earnings per share was $5.00.
For 2018, management is expecting the following:
- Comparable restaurant sales increases in the low to mid-single digits, an increase from the prior low-single digit expectations
- New restaurants openings at the lower end of the previously announced guidance of 130 to 150
- In Q3, we expect our effective tax rate to be around 30.3%, and our Q4 tax rate to be as high as 43%. Both of these increases are due to a lower pretax income as a result of restructuring expenses and restaurant closure costs, as well as an expected write-off of deferred tax assets for stock compensation awards that likely will not vest
Chipotle Mexican Grill, Inc. (NYSE: CMG) is cultivating a better world by serving responsibly sourced, classically-cooked, real food with wholesome ingredients without added colors, flavors or other additives. Chipotle had more than 2,450 restaurants as of June 30, 2018 in the United States, Canada, the United Kingdom, France and Germany and is the only restaurant company of its size that owns and operates all its restaurants. With more than 70,000 employees passionate about providing a great guest experience, Chipotle is a longtime leader and innovator in the food industry. Chipotle is committed to making its food more accessible to everyone while continuing to be a brand with a demonstrated purpose as it leads the way in digital, technology and sustainable business practices. Steve Ells, founder and executive chairman, first opened Chipotle starting with a single restaurant in Denver, Colorado in 1993. For more information or to place an order online, visit WWW.CHIPOTLE.COM.
Starbucks Reports Record Q3 Fiscal 2018 Revenues and EPS
Consolidated Net Revenues Up 11% to a Record $6.3 Billion; Comparable Store Sales Up 1% Globally and in the U.S.
GAAP EPS of $0.61; Non-GAAP EPS of $0.62, Up 13% Year-Over-Year
Active Starbucks Rewards™ Membership in the U.S. Increases 14% Year-Over-Year to 15.1 Million
Cash Returned to Shareholders Exceeds $5 Billion Fiscal Year-To-Date
July 26, 2018–(Business Wire)
Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its 13-week fiscal third quarter ended July 1, 2018. GAAP results in fiscal 2018 and fiscal 2017 include items which are excluded from non-GAAP results. Please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release for more information.
Q3 Fiscal 2018 Highlights
- Global comparable store sales increased 1%, driven by a 3% increase in average ticket
- Americas and U.S. comparable store sales increased 1%
- CAP comparable store sales decreased 1%
- China comparable store sales decreased 2%
- Consolidated net revenues of $6.3 billion, up 11% over the prior year including:
- 3% net benefit from consolidation of the acquired East China business and other streamline-driven activities, including Teavana mall store closures, the Tazo divestiture, and the conversion of certain international retail operations from company-owned to licensed models
- 1% benefit from foreign currency translation
- GAAP operating margin, inclusive of restructuring and impairment charges, declined 190 basis points year-over-year to 16.5%
- Non-GAAP operating margin of 18.5% declined 230 basis points compared to the prior year
- GAAP Earnings Per Share of $0.61, up 30% over the prior year
- Non-GAAP EPS of $0.62, up 13% over the prior year
- GAAP and non-GAAP EPS include $0.02 of unfavorability associated with May 29th anti-bias training
- Starbucks Rewards™ loyalty program added 1.9 million active members in the U.S., up 14% year-over-year; total member spend now represents 40% of U.S. company-operated sales
- Mobile Order and Pay represented 13% of U.S. company-operated transactions
- The company opened 511 net new stores in Q3 and now operates 28,720 stores across 77 markets
- The company returned $1.3 billion to shareholders through a combination of dividends and share repurchases
“Starbucks record performance in Q3 reflects successful execution against our strategic growth priorities and our commitment to deliver predictable, sustainable growth at scale – and meaningful increases in long-term value – for our shareholders,” said Kevin Johnson, Starbucks ceo and president. “We remain confident in our global growth strategies, in the sustainability of our leadership position around all things coffee and tea and in our leadership teams around the world to navigate our next phase of growth.”
“Starbucks record Q3 revenues and profits once again reflect the underlying strength of the Starbucks business and brand all around the world,” said Scott Maw, cfo. “We continue to grow share in virtually every market and channel in which we operate at the same time that our streamline initiatives are enabling us to sharpen our focus – and leverage our resources – against our highest value, long-term growth opportunities.”
Consolidated net revenues grew 11% over Q3 FY17 to $6.3 billion in Q3 FY18, primarily driven by incremental revenues from the impact of our ownership change in East China, incremental revenues from 2,015 net new Starbucks store openings over the past 12 months, favorable foreign currency translation, and 1% growth in global comparable store sales.
Consolidated operating income declined 1% to $1,038.2 million in Q3 FY18, down from $1,044.2 million in Q3 FY17. Consolidated operating margin declined 190 basis points to 16.5%, primarily due to higher investments in our store partners (employees), product mix shift, largely food related, and the impact of our ownership change in East China, partially offset by lower restructuring and impairment costs.
Net revenues for the Americas segment grew 6% over Q3 FY17 to $4.2 billion in Q3 FY18, primarily driven by incremental revenues from 902 net new store openings over the past 12 months and 1% growth in comparable store sales, partially offset by the absence of revenue related to the sale of our Brazil retail operations to a licensed partner in Q2 FY18.
Operating income declined 7% to $908.7 million in Q3 FY18, down from $974.8 million in Q3 FY17. Operating margin of 21.5% declined 290 basis points, primarily due to higher investments in our store partners (employees), food-related mix shift, and the impact of the May 29th anti-bias training for U.S. partners.
Net revenues for the China/Asia Pacific segment grew 46% over Q3 FY17 to $1,229.0 million in Q3 FY18, primarily driven by incremental revenues from the impact of our ownership change in East China, incremental revenues from 746 net new store openings over the past 12 months, and favorable foreign currency translation, partially offset by the absence of revenue related to the sale of our Singapore retail operations to a licensed partner in Q4 FY17 and a 1% decrease in comparable store sales.
Q3 FY18 operating income of $234.1 million grew 5% over Q3 FY17 operating income of $223.8 million. Operating margin declined 760 basis points to 19.0%, primarily due to the impact of our ownership change in East China.
Net revenues for the EMEA segment grew 10% over Q3 FY17 to $275.4 million in Q3 FY18, primarily driven by incremental revenues from the opening of 375 net new licensed stores over the past 12 months and favorable foreign currency translation.
Operating income of $34.9 million in Q3 FY18 grew 256% versus operating income of $9.8 million in Q3 FY17. Operating margin expanded 880 basis points to 12.7%, primarily due to lapping the prior year partial impairment of goodwill related to our Switzerland retail business and favorable foreign currency impacts on cost of sales.
Net revenues for the Channel Development segment of $509.0 million in Q3 FY18 increased 6% versus the prior year quarter primarily driven by increased sales in packaged coffee, foodservice and international channels, and higher sales of premium single-serve products, partially offset by the absence of revenue from the sale of our Tazo brand in Q1 FY18.
Operating income of $212.8 million in Q3 FY18 grew 1% compared to Q3 FY17. Operating margin declined 210 basis points to 41.8%, primarily driven by the impact of streamline-driven activities and lower income from our North American Coffee Partnership joint venture.
All Other Segments primarily includes Seattle’s Best Coffee®, Starbucks Reserve™ Coffee and Roastery businesses, and Teavana-branded stores. The lower operating loss in Q3 FY18 as compared to the prior year was primarily due to fewer Teavana restructuring and other impairment costs.
Fiscal 2018 Targets
The company updates its expected FY18 global comparable store sales and EPS targets, but reiterates its unit development and revenue growth expectations:
- Continues to expect approximately 2,300 net new Starbucks stores globally
- Now expects full year global comparable store sales growth to be just below the 3-5% targeted range; Q4 expected to be at the lower end of the 3-5% range
- Continues to expect consolidated revenue growth in the high single digits when excluding approximately 2 points of net favorability from the East China acquisition and other streamline-driven activities
- Now expects GAAP EPS in the range of $3.26 to $3.28 and non-GAAP EPS in the range of $2.40 to $2.42
Please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release.
The company will provide select quarterly and segment information regarding its business outlook during its regularly scheduled quarterly earnings conference calls; this information will also be available following the call on the company’s website at http://investor.starbucks.com.
- In May, Starbucks announced it will form a global coffee alliance with Nestlé S.A. to accelerate and grow the global reach of Starbucks brands in Consumer Packaged Goods (CPG) and Foodservice. As part of the alliance, Nestlé will obtain the rights to market, sell, and distribute Starbucks®, Seattle’s Best Coffee®, Starbucks Reserve®, Teavana™, Starbucks VIA® and Torrefazione Italia® packaged coffee and tea in all global at-home and away-from-home channels. Nestlé will pay Starbucks $7.15 billion in closing consideration, and Starbucks – with a focus on long term shareholder value creation – will retain a significant stake as licensor and supplier of roast and ground and other products going forward. Additionally, the Starbucks brand portfolio will be represented on Nestlé’s single-serve capsule systems. The agreement is expected to close in Q4 FY18.
- In June, the company announced that Howard Schultz would step down as executive chairman and member of the Board of Directors and be honored with the title of chairman emeritus effective June 26, 2018. Concurrently, Myron E. “Mike” Ullman was appointed as the new chair of the Board and Mellody Hobson as vice chair of the Board upon Schultz’s retirement.
- Starbucks announced that Scott Maw, executive vice president and chief financial officer, will retire effective November 30, 2018. Starbucks has launched an external search for a new cfo. After his retirement, Maw will continue to support the transition in a senior consultant role through March 2019.
- On June 19, Starbucks announced a set of strategic priorities and corresponding operational initiatives to accelerate growth and create long-term shareholder value. Full details of the release and corresponding presentation may be found on the company’s website at http://investor.starbucks.com.
- Starbucks hosted its first-ever China Investor Day in Shanghai on May 16, where the company announced plans to build 600 net new stores annually over the next five years in Mainland China – a goal that will double the market’s store count from the end of FY17 to 6,000 across 230 cities by FY22.
- The company announced it will phase out plastic straws from more than 28,000 stores worldwide by 2020, resulting in the elimination of more than 1 billion straws per year. Customers who prefer or need a straw can request one made of alternative materials for use with any cold drink.
- Starbucks announced that it closed more than 8,000 company-owned stores and its corporate offices in the U.S. on May 29 to conduct racial-bias training for partners (employees). The training was provided to nearly 175,000 partners across the country and will become part of the onboarding process for new partners. Afterwards, the company made the education materials available to other companies, including its licensees.
- Starbucks and Chase announced the availability of the Starbucks Rewards™ Visa® Prepaid Card in June, the first prepaid or debit product where you can earn Stars outside of Starbucks.
- Along with its licensed partner Alsea, Starbucks opened its first store in Uruguay in April, marking the brand’s 77th market globally and 18th in the Latin America and Caribbean region.
- The company repurchased 17.1 million shares of common stock in Q3 FY18; approximately 107 million shares remain available for purchase under current authorizations.
- As previously announced, the Board of Directors declared a cash dividend of $0.36 per share, payable on August 24, 2018, to shareholders of record as of August 9, 2018.
Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting high-quality arabica coffee. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup. To share in the experience, please visit us in our stores or online at news.starbucks.com or www.starbucks.com.
Starbucks Contact, Investor Relations:
Tom Shaw, 206-318-7118
Starbucks Contact, Media:
Reggie Borges, 206-318-7100
BJ’s Restaurants, Inc. Reports Fiscal 2018 Second Quarter Results
Declares Quarterly Cash Dividend of $0.11 Per Share
July 26, 2018–(BJ’s Restaurant & Brewhouse)
BJ’s Restaurants, Inc. (NASDAQ:BJRI) today reported financial results for its fiscal 2018 second quarter ended Tuesday, July 3, 2018.
Second Quarter 2018 Highlights Compared to Second Quarter 2017
- Total revenues grew 8.2% to $287.6 million
- Total restaurant operating weeks increased approximately 3.5%
- Comparable restaurant sales increased 5.6%
- Net income increased 75.8% to $16.9 million from $9.6 million (second quarter 2018 net income includes a $1.1 million excess tax benefit from equity awards, partially offset by a $0.3 million pre-tax impact from the adoption of ASU 2016-10)
- Diluted net income per share increased 80.7% to $0.79 from $0.44 (second quarter 2018 diluted net income per share includes a $0.05 excess tax benefit from equity awards, partially offset by a $0.01 reduction in diluted net income per share from the adoption of ASU 2016-10)
“Our sales building and hospitality initiatives drove strong second quarter growth in guest traffic and comparable restaurant sales,” commented Greg Trojan, Chief Executive Officer. “BJ’s sales building initiatives, including our Daily Brewhouse Specials, Slow Roast menu items and our team’s success with growing off-premise sales, generated a 5.6% and 2.5% year-over-year increase in comparable restaurant sales and traffic, respectively. Our strong comparable restaurant sales, coupled with our focus on efficiencies and disciplined operating practices, resulted in a 19% restaurant level operating margin, marking a 120 basis point increase over the comparable quarter last year, and a 54% increase in operating income.
“During the quarter, 42 of our restaurants set daily sales records and 23 of our restaurants set weekly sales records, demonstrating robust and consistent growth across our entire restaurant base. These results are a testament to the strength of the BJ’s brand, the broad attraction to our unique concept, and the continued execution by our team members in delivering Gold Standard service and hospitality for our guests every day. As we move into the second half of 2018, we remain focused on driving sales and traffic and taking market share in the casual dining segment of the restaurant industry. We plan on testing new Brewhouse Specials and Slow Roast menu items, further optimizing our off-premise sales channel and leveraging the data from our upgraded Premier Rewards loyalty program. Further refining these initiatives will provide us a solid foundation to drive continued sales growth.”
In the second quarter of 2018, BJ’s opened new restaurants in Hagerstown, Maryland and Albany, New York. The Albany location marks the Company’s 200th restaurant and the third restaurant opened in 2018. “We expect to open one additional restaurant in each of the third and fourth quarters, thereby achieving our goal of opening five restaurants this year. With only 200 restaurants open today, we remain committed to our long term expansion plans and our development team is building a solid pipeline for fiscal 2019 and 2020 new restaurant openings,” Trojan added.
During the second quarter of 2018, the Company repaid $48.5 million of borrowings under its credit facility and repurchased and retired approximately 24,000 shares of its common stock at a cost of approximately $1.1 million. Since the Company’s first share repurchase authorization was approved in April 2014, BJ’s has repurchased and retired approximately 9.5 million shares at a cost of approximately $364.1 million and has reduced its outstanding share count by approximately 31%. The Company currently has approximately $35.9 million remaining under its authorized $400 million share repurchase program.
The Company’s Board of Directors declared a cash dividend of $0.11 per share of common stock payable August 27, 2018, to shareholders of record at the close of business on August 13, 2018. While the Company intends to pay quarterly cash dividends for the foreseeable future, dividends will be reviewed quarterly and declared by the Board of Directors at its discretion.
About BJ’s Restaurants, Inc.
BJ’s Restaurants, Inc. currently owns and operates 200 casual dining restaurants under the BJ’s Restaurant & Brewhouse®, BJ’s Restaurant & Brewery®, BJ’s Pizza & Grill® and BJ’s Grill® brand names. BJ’s Restaurants offer an innovative and broad menu featuring award-winning, signature deep-dish pizza complemented with generously portioned salads, appetizers, sandwiches, soups, pastas, entrees and desserts, including the Pizookie® dessert. Quality, flavor, value, moderate prices and sincere service remain distinct attributes of the BJ’s experience. All restaurants feature BJ’s critically acclaimed proprietary craft beers, which are produced at several of the Company’s Restaurant & Brewery locations, its two brewpubs in Texas and by independent third party craft brewers. The Company’s restaurants are located in the 27 states of Alabama, Arizona, Arkansas, California, Colorado, Florida, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia and Washington. Visit BJ’s Restaurants, Inc. on the Web at http://www.bjsrestaurants.com for locations and additional information.
For further information, please contact Greg Levin of BJ’s Restaurants, Inc. at (714) 500-2400 or JCIR at (212) 835-8500 or at email@example.com.
Dunkin’ Brands Reports Second Quarter 2018 Results
Dunkin’ Donuts U.S. comparable store sales increase of 1.4% – Baskin-Robbins U.S. comparable store sales decline of 0.4%
July 26, 2018–(Restaurant News Resource)
Second quarter highlights include:
- Dunkin’ Donuts U.S. comparable store sales increase of 1.4%
- Baskin-Robbins U.S. comparable store sales decline of 0.4%
- Added 96 net new Dunkin’ Donuts and Baskin-Robbins locations globally including 64 net new Dunkin’ Donuts in the U.S.
- Revenues increased 4.9%
- Diluted EPS increased by 30.9% to $0.72
- Diluted adjusted EPS increased by 30.5% to $0.77
Dunkin’ Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin’ Donuts (DD) and Baskin-Robbins (BR), today reported results for the second quarter ended June 30, 2018.
“Our second quarter 2018 Dunkin’ Donuts U.S. comparable store sales growth is an early sign of the progress we are making with our Blueprint for Growth,” said David Hoffmann, Chief Executive Officer and President of Dunkin’ Donuts U.S. “Our highest quarterly beverages sales on record underscored that we’re on track towards our goal to be the nation’s leading beverage-led, on-the-go brand. Along with our franchisees, we leveraged national marketing to launch the most comprehensive value program in the brand’s history driving breakfast sandwich sales, which more than offset the impact of menu simplification. We have strong alignment with our franchisees on the brand’s strategy and remain on track to open 50 NextGen new and remodeled restaurants this year with Dunkin’ Donuts U.S. again expected to be one of the fastest-growing QSR brands by unit count in the country for 2018.”
“We are delighted with our results for the quarter and are excited to provide additional clarity regarding our investments to support the Dunkin’ Donuts U.S. Blueprint for Growth,” said Kate Jaspon, Dunkin’ Brands Chief Financial Officer. “We continue to expect our total investment to be approximately $100 million, allocated between equipment to support the brand’s beverage-led, on-the-go strategy and technology infrastructure. We expect minimal impact to our 2018 financial growth targets and are maintaining our revenue growth guidance. We are also refining our operating income and earnings per share guidance to reflect slightly increased expenses related to the testing, training and roll-out of Blueprint initiatives. We believe that by making these investments, we, along with our franchisees, will be able to implement certain Blueprint initiatives more quickly.”
Global systemwide sales growth of 4.4% in the second quarter was primarily attributable to global store development and Dunkin’ Donuts U.S. comparable store sales growth (which includes stores open 78 weeks or more).
Dunkin’ Donuts U.S. comparable store sales grew 1.4% in the second quarter as an increase in average ticket was partially offset by a decrease in traffic. Growth was driven primarily by breakfast sandwich sales and frozen beverages.
Baskin-Robbins U.S. comparable store sales declined 0.4% during the second quarter as a decrease in traffic was partially offset by an increase in average ticket. Sales of beverages including shakes, smoothies, as well as the take-home category grew during the quarter.
In the second quarter, Dunkin’ Brands franchisees and licensees opened 96 net new restaurants globally. This included 64 net new Dunkin’ Donuts U.S. locations, 23 net new Baskin-Robbins International locations, and 14 net new Dunkin’ Donuts International locations, offset by net closures of 5 Baskin-Robbins U.S. locations. Additionally, Dunkin’ Donuts U.S. franchisees remodeled 40 restaurants and Baskin-Robbins U.S. franchisees remodeled 19 restaurants during the quarter.
Revenues for the second quarter increased $16.5 million, or 4.9%, compared to the prior year period due primarily to increased advertising fees and related income, as well as an increase in royalty income as a result of systemwide sales growth.
Operating income and adjusted operating income for the second quarter increased $7.0 million, or 6.6%, and $7.6 million, or 6.8%, respectively, from the prior year period primarily as a result of the increase in royalty income and a reduction of general and administrative expenses, offset by a decrease in net margin on ice cream due primarily to an increase in commodity costs.
Net income and adjusted net income for the second quarter increased by $9.4 million, or 18.4%, and $10.5 million, or 19.3%, respectively, compared to the prior year period primarily as a result of a decrease in income tax expense and the increases in operating income and adjusted operating income, respectively. The decrease in income tax expense was primarily driven by a lower tax rate due to the enactment of the Tax Cuts and Jobs Act in the fourth quarter of fiscal year 2017. The increases in net income and adjusted net income were offset by an increase in net interest expense driven by additional borrowings incurred in conjunction with the refinancing transaction completed during the fourth quarter of fiscal year 2017.
Diluted earnings per share and diluted adjusted earnings per share for the first quarter increased by 30.9% to $0.72 and 30.5% to $0.77, respectively, compared to the prior year period as a result of the increases in net income and adjusted net income, respectively, as well as a decrease in shares outstanding. The decrease in shares outstanding from the prior year period was due primarily to the repurchase of shares since the first quarter of fiscal year 2017, offset by the exercise of stock options. Excluding the impact of recognized excess tax benefits, diluted earnings per share and diluted adjusted earnings per share for the second quarter of fiscal years 2018 and 2017 would have been lower by approximately $0.02 and $0.01, respectively.
Dunkin’ Donuts U.S. second quarter revenues of $157.4 million represented an increase of 4.2% compared to the prior year period. The increase was primarily a result of an increase in royalty income driven by systemwide sales growth.
Dunkin’ Donuts U.S. segment profit in the second quarter increased to $119.6 million, an increase of $3.4 million over the prior year period, driven primarily by the increase in royalty income, offset by an increase in general and administrative expenses, due primarily to expenses incurred in the second quarter of fiscal year 2018 to support the Blueprint for Growth initiatives.
FISCAL YEAR 2018 TARGETS
As described below, the Company is updating and reiterating certain targets regarding its 2018 performance. The 2018 guidance now reflects the expected impact from the approximately $100 million investment in the Dunkin’ Donuts U.S. Blueprint for Growth. This investment is expected to be allocated across three areas: first, in equipment to support the brand’s beverage-led, on-the-go strategy; second, in technology infrastructure to support digital leadership; and, third, in general and administrative expense to support the training, testing and roll-out of Blueprint initiatives. The Company expects the majority of the cash associated with these investments to be deployed in 2018, with the remainder likely to be spent in 2019.
- The Company continues to expect approximately one percent comparable store sales growth for Dunkin’ Donuts U.S. and low-single digit comparable sales growth for Baskin-Robbins U.S.
- The Company continues to expect Dunkin’ Donuts U.S. franchisees to add greater than 275 net new restaurants. In addition, the Company continues to expect Dunkin’ Donuts U.S. franchisees to open approximately 50 NextGen restaurants, including both new and remodeled stores.
- The Company continues to expect high-single digit percent growth in Other Revenue driven by consumer packaged goods.
- The Company continues to expect low-to-mid single digit revenue growth.
- The Company continues to expect ice cream margin dollars to be flat compared to 2017 from a profit dollar standpoint.
- The Company now expects a low-single digit reduction to general and administrative expense (previously it expected a five percent reduction to general and administrative expense), which reflects investments to support the testing, training and roll-out of Dunkin’ Donuts U.S. Blueprint for Growth initiatives.
- The Company now expects mid-single digit operating and adjusted operating income growth (previously it expected mid-to-high single digit operating and adjusted operating income growth), which reflects the revised general and administrative expense guidance.
- The Company continues to expect full-year weighted-average shares outstanding of approximately 85 million and an effective tax rate of 25 percent.
- The Company now expects GAAP diluted earnings per share of $2.48 to $2.56 (previously it expected $2.49 to $2.58) and diluted adjusted earnings per share of $2.68 to $2.72 (previously it expected $2.69 to $2.74), which reflects the impact from the approximate $100 million investment in the Dunkin’ Donuts U.S. Blueprint for U.S. Growth.
- The Company now expects capital expenditures to be approximately $45 to $50 million (previously it expected capital expenditures to be approximately $25 million).
The foregoing non-GAAP forward-looking financial measures are reconciled from the respective measures determined under GAAP in the attached tables “Dunkin’ Brands Group, Inc. and Subsidiaries Non-GAAP Reconciliations.”
About Dunkin’ Brands Group, Inc.
With more than 20,600 points of distribution in more than 60 countries worldwide, Dunkin’ Brands Group, Inc. (Nasdaq: DNKN) is one of the world’s leading franchisors of quick service restaurants (QSR) serving hot and cold coffee and baked goods, as well as hard-serve ice cream. At the end of the second quarter 2018, Dunkin’ Brands’ 100 percent franchised business model included more than 12,600 Dunkin’ Donuts restaurants and more than 8,000 Baskin-Robbins restaurants. Dunkin’ Brands Group, Inc. is headquartered in Canton, Mass.
Grubhub Reports Record Second Quarter Results
Announces acquisition of LevelUp to accelerate technology integrations
July 25, 2018–(Restaurant News Resource)
Grubhub Inc. (NYSE: GRUB) today announced financial results for the second quarter ended June 30, 2018. For the second quarter, the Company posted revenues of $240 million, which is a 51% year-over-year increase from $159 million in the second quarter of 2017. Gross Food Sales grew 39% year-over-year to $1.2 billion, up from $880 million in the year ago period. Grubhub today also announced it entered into an agreement to acquire Boston-based LevelUp, the leader in mobile diner engagement and payment solutions for national and regional restaurant brands.
“We had a standout quarter, highlighted by a record number of new diners trying Grubhub for the first time. We generated robust order growth, while continuing our rapid delivery expansion and adding thousands of high quality new restaurant partners,” said Matt Maloney, Grubhub’s founder and chief executive officer. “We’re also thrilled to announce the LevelUp acquisition. LevelUp’s leading restaurant-facing technology and the team they have built in Boston will help Grubhub provide the most comprehensive solution for restaurants, powering everything from online demand generation to fulfillment for restaurants.”
Second Quarter 2018 Highlights
The following results reflect the financial performance and key operating metrics of our business for the three months ended June 30, 2018, as compared to the same period in 2017.
Second Quarter Financial Highlights
- Revenues: $239.7 million, a 51% year-over-year increase from $158.8 million in the second quarter of 2017.
- Net Income: $30.1 million, or $0.33 per diluted share, a 104% year-over-year increase from $14.8 million, or $0.17 per diluted share, in the second quarter of 2017.
- Non-GAAP Adjusted EBITDA: $67.4 million, a 61% year-over-year increase from $41.9 million in the second quarter of 2017.
- Non-GAAP Net Income: $46.3 million, or $0.50 per diluted share, a 99% year-over-year increase from $23.2 million, or $0.26 per diluted share, in the second quarter of 2017.
Second Quarter Key Business Metrics Highlights
- Active Diners were 15.6 million, a 70% year-over-year increase from 9.2 million Active Diners in the second quarter of 2017.
- Daily Average Grubs (DAGs) were 423,200, a 35% year-over-year increase from 313,900 DAGs in the second quarter of 2017.
- Gross Food Sales were $1.2 billion, a 39% year-over-year increase from $880 million in the second quarter of 2017.
LevelUp’s world-class technology and team will simplify Grubhub’s integrations with the nation’s top restaurant brands, provide more channels to attract and engage diners, and position us to dramatically accelerate product development for valuable restaurant-facing tools.
With the addition of LevelUp, Grubhub will offer national and independent restaurants the industry’s most comprehensive solution to drive online delivery and pickup orders, from demand generation through fulfillment. In addition to making it easier for restaurants like KFC, Taco Bell, Bareburger, and Roti to integrate with the Grubhub marketplace, LevelUp accelerates Grubhub’s existing point-of-sale (POS) integration capabilities and provides restaurants with powerful CRM and analytical tools to help them drive more diners to their platform and increase volume from existing diners.
“For the last seven years, the LevelUp team has worked to provide our restaurant partners with a complete solution to engage customers in this rapidly evolving digital landscape,” said Seth Priebatsch, LevelUp’s founder and chief executive officer. “By becoming a part of Grubhub, we take our biggest and most exciting step in achieving that mission. Together, we will provide restaurants with everything they need to grow profitably as more and more diners opt for the convenience, transparency and control of ordering online.”
Grubhub has entered into a definitive agreement to acquire LevelUp for $390 million in cash, subject to standard closing conditions, including the expiration of U.S. antitrust waiting periods. The transaction is expected to be funded through cash on hand and Grubhub’s existing credit facility.
Foley Hoag is serving as legal counsel to LevelUp in connection with the acquisition and Kirkland & Ellis LLP is serving as legal counsel to Grubhub.
Third Quarter and Full Year 2018 Guidance
Based on information available as of July 25, 2018, the Company is providing the following financial guidance for the third quarter and full year of 2018. This guidance excludes any impact from the potential acquisition of LevelUp, which has not yet closed and is subject to standard closing conditions:
Grubhub (NYSE: GRUB) is the nation’s leading online and mobile takeout food-ordering marketplace with the largest and most comprehensive network of restaurant partners, as well as the largest diner base. Dedicated to connecting diners with the food they love from their favorite local restaurants, Grubhub strives to elevate food ordering through innovative restaurant technology, easy-to-use platforms and an improved delivery experience. Grubhub is proud to work with more than 85,000 restaurant partners in over 1,600 U.S. cities and London. The Grubhub portfolio of brands includes Grubhub, Seamless, Eat24, AllMenus and MenuPages.
Garbanzo Mediterranean Fresh Owners Buy Stake in Pascal Rigo’s La Boulangerie Chain
Deal unites four industry leaders in ‘dream team’ with major ambitions
July 23, 2018–(RestaurantNewsRelease)
Nobody would ever accuse Garbanzo Mediterranean Fresh CEO James Park of aiming low.
Park today announced that he and Michael Staenberg, co-owners of Denver-based Garbanzo, have made a substantial investment and acquired an equity interest in the popular café bakery brand La Boulangerie de San Francisco, founded by acclaimed French baker Pascal Rigo. The eight-unit chain – known as much for its authentic French atmosphere as its mouthwatering, scratch-made pastries, breads and sandwiches – has been a neighborhood staple in the Bay Area since 1995.
Financial terms of the acquisition were not disclosed.
Originally known as the Pine Street bakery, and later as La Boulange, Rigo famously sold the company to Starbucks in July 2012. The coffee giant shut down the chain three years later, only to be reopened again by Rigo under its present name.
The deal brings together four talented and seasoned individuals, each with complementary skills and backgrounds:
- Michael Staenberg – St. Louis-based real estate pioneer, philanthropist and owner of three other thriving restaurant brands (Lion’s Choice, Granite City Food & Brewery and The Shack)
- James Park – Restaurant growth expert; CEO of Garbanzo
- Pascal Rigo – World-famous baker; founder of La Boulangerie
- Nicolas Bernadi – CEO of La Boulangerie
“Pascal is not only the most extraordinary French baker this side of the Atlantic, he is a tremendous restaurateur who has carved out a distinctive niche on the global culinary scene,” said James Park, CEO of Garbanzo. “Nicolas and I have been working on this deal for months, and I could not be more excited about the possibilities it presents for all of us. Pascal and Nicolas aren’t going anywhere … they will continue to be an integral part of our ‘dream team’ as we move forward with our plans for the future.”
Bernadi will continue in his current role at the helm of La Boulangerie.
The team will initially focus on expanding the Garbanzo and La Boulangerie brands into new and existing geographic markets. In addition, they will be developing and proving-out internally generated concepts to address gaps in the dining landscape while exploring attractive acquisition opportunities.
“Today’s announcement is just the first step in an incredible journey that we are embarking on together,” said Rigo. “And that is great news for fans of fresh, high-quality and approachable French and Mediterranean cuisine.”
Garbanzo is making fresh Mediterranean cuisine a mainstream favorite across the United States. Its authentic, nutrient-rich dishes derived from Old World recipes are served with a new twist, but without compromise. Every order is customized to the guest’s liking, from juicy, high-quality meats and salads made from scratch to gyros, wraps and pita baked from scratch all day. Garbanzo is dedicated to satisfying every palate – including vegetarian and gluten-free diners – and believes that “simple tastes better.”
Garbanzo is headquartered in Colorado with 28 locations nationwide, including its newest restaurant opening on the campus of Notre Dame University in August. For more information, visit eatgarbanzo.com.
Garbanzo: Love In Every Pita®. Feel Brighter On The Inside®.
Krispy Kreme Doughnut Corporation to Acquire Majority Stake in Insomnia Cookies
July 20, 2018–(Krispy Kreme)
Krispy Kreme Doughnut Corporation (“Krispy Kreme”), the most loved doughnut brand in the world, and Insomnia Cookies, the leading cookie delivery company in the United States, today announced an agreement through which Krispy Kreme will acquire a majority stake in Insomnia Cookies. Terms of the transaction were not disclosed.
Mike Tattersfield, CEO of Krispy Kreme Doughnuts, commented: “At Krispy Kreme, we have an 81-year heritage of creating the most awesome doughnut experience imaginable, and today we are delighted to add Insomnia Cookies, a rapidly growing business with an innovative delivery experience and exceptional product that is beloved by consumers. While our companies will continue to operate independently, these two great brands can learn a great deal from each other as we each continue to expand and grow.”
Seth Berkowitz, founder of Insomnia Cookies, added: “Mike and I share the same ambition for our brands: To be the best at what we do and delight consumers with the highest quality sweet treat experiences. My team and I are confident that this shared vision makes Krispy Kreme the ideal partner to support Insomnia through our next phase of growth. We are thrilled to be joining the Krispy Kreme family.”
Insomnia Cookies will continue to operate as an independent, standalone company following the close of the transaction in the fourth quarter 2018 and Seth Berkowitz will continue to lead the company.
About Krispy Kreme Doughnut Corporation
Krispy Kreme Doughnut Corporation is a global retailer of premium-quality sweet treats, including its signature Original Glazed doughnut. Headquartered in Winston-Salem, NC, and with offices in Charlotte, NC and London, UK. The company has offered the highest-quality doughnuts and great-tasting coffee since it was founded in 1937. Krispy Kreme Doughnuts is proud of its Fundraising program, which for decades has helped non-profit organizations raise millions of dollars in needed funds. Krispy Kreme doughnuts can be found in approximately 8000 grocery, convenience and mass merchant stores in the US. The company has nearly 1,400 retail shops in 32 countries.
About Insomnia Cookies
Insomnia Cookies is a rapidly expanding late-night bakery concept with offices in both New York and Philadelphia. Founded in a college dorm room in 2003 at the University of Pennsylvania, by then student, Seth Berkowitz, Insomnia Cookies has been feeding the insatiable hunger of its fans ever since. The company specializes in delivering warm, delicious cookies right to the doors of individuals and companies alike. Whether you’re feeding a craving or a crowd, Insomnia Cookies’ offerings of cookies, brownies, cookie cakes, ice-cream and even cold milk, has you covered. The company has 135 Cookie shops in the United States.
Krispy Kreme Doughnut Corporation
Cassie Williams, 336-733-3793
Manager of Integrated Communications
Tilted Kilt Pub and Eatery to Be Acquired
National Sports Pub Franchise to be Bought by ARC Group
July 17, 2018–(PRNewswire)
Tilted Kilt Pub & Eatery®, a sports Pub where “A Cold Beer Never Looked So Good®” is on the brink of being acquired. ARC Group, Inc. (OTC: ARCK), the owner, operator and franchisor of the award-winning Dick’s Wings & Grill® concept, announced its intention to purchase the sports pub franchise.
ARC Group was formed in April 2000 to develop the Dick’s Wings & Grill concept, and currently serves as owner, operator and franchisor of the Dick’s Wings brand of restaurants. The ARC Group is led by CEO Richard Akam.
ARC Group, Inc. and the owners of Tilted Kilt have begun to execute agreements for the sale of Tilted Kilt to SDA Holdings, LLC, a company owned by Fred W. Alexander, who is a member of the Board of Directors of ARC Group. ARC Group intends to enter into an agreement with SDA Holdings within the next couple of weeks to acquire Tilted Kilt from SDA Holdings.
“Clearly the Titled Kilt brand is well recognized and an original pace setter in the category. We are looking forward to amplifying our strengths throughout the franchise system and a return to delivering great customer experiences,” said Ketan Pandya, Vice President of Franchise Relations for ARC Group, Inc.
Former Tilted Kilt President Ron Lynch will continue on as a consultant to the company over the next year during the transitional period. Lynch has been President and CEO since 2005, when Tilted Kilt started with three non-franchised locations. Over the next 60 to 90 days, Lynch and ARC Group will lay out a refined strategy and action plan for the brand.
“ARC Group recognizes the unlocked potential of the Tilted Kilt brand and has already begun phase one of their turn-around plan,” said Lynch. “Teams within ARC Group are meeting with franchisees, vendors, partners, and industry insiders to amplify their unique differentiators, bring focus to operational challenges, and formulate a new-invigorated growth plans—we are confident their industry knowledge will help lead Tilted Kilt to success.”
Founded in the Rio Hotel in Las Vegas in 2003, Tilted Kilt Pub and Eatery roughly 50 locations in operation Worldwide and boasts a wide array of sports, traditional pub food, drinks and the famed Tilted Kilt girls, all under one roof. Combined with pool tables, large TVs, and additional amenities, Tilted Kilt is the best place to watch sports and hang out with friends. Humorous and slightly bawdy limericks are seen throughout the pub, creating an atmosphere that is fun and entertaining.
For more information about the Tilted Kilt Franchise, please visit http://tiltedkilt.com/franchising/.
About Tilted Kilt
Tilted Kilt Pub and Eatery, known as “The Best Looking Sports Pub You’ve Ever Seen,” has 47 units in operation throughout the U.S. and Canada, with additional 3 pubs in various stages of development. Tilted Kilt is uniquely different than other sports bars because of its fun pub experience. The Pubs feature dozens of large, HDTVs and big screens to deliver a premium sports viewing experience. Every Pub has 30+ draught and bottled beers along with excellent tasting, high quality menu items served to you by the World Famous Kilt Girls®. The Tilted Kilt Girls and Guys are inviting and represent the comfortable atmosphere while simultaneously demonstrating a high level of service in the industry. The brand’s slogan “A Cold Beer Never Looked So Good.”® personifies the Fun, Food, Spirits and Sports that the Tilted Kilt is well-known for bringing to pub guests in both the United States and Canada.
About ARC Group, Inc.
ARC Group, Inc., headquartered in Jacksonville, Florida, is the owner, operator and franchisor of the Dick’s Wings & Grill concept. Now in its 23rd year of operation, Dick’s Wings prides itself on its award-winning chicken wings, hog wings and duck wings spun in its signature sauces and seasonings. Dick’s Wings has 15 restaurants in Florida and five restaurants in Georgia. It also has two concession stands at TIAA Bank Field (formerly EverBank Field), home of the NFL’s Jacksonville Jaguars, as well as a concession stand at Jacksonville Veterans Memorial Arena, home of the National Arena League’s Jacksonville Sharks.
Fishman Public Relations
sbe Announces Culinary Partners José Andrés & Michael Schwartz for SLS Brickell
Newly Created Subsidiary, Disruptive Restaurant Group, Bring New Culinary Concepts Bazaar Mar & Fi’lia
July 17, 2018–(PRNewswire)
sbe, a leading global hospitality, lifestyle and development company, is proud to announce that SLS Culinary Director, Chef José Andrés, and Chef Michael Schwartz will be unveiling two new culinary concepts for SLS Brickell Hotel & Residences, a brand new property in partnership with Related Group. Alongside the property’s unveiling in October 2016, James Beard Award-winning Chef Michael Schwartz will launch his first Italian concept with Fi’lia. Shortly after, James Beard award-winning Chef José Andrés will present Bazaar Mar, his latest creative culinary concept, and second restaurant in Miami in partnership with sbe. Andrés will also oversee food and beverage for the property’s in-room dining, mezzanine and pool bar. Both restaurants will be managed and operated under the Disruptive Restaurant Group umbrella.
“sbe is thrilled to announce a partnership with these two acclaimed culinary artists for SLS Brickell,” said Sam Nazarian, Chairman and CEO of sbe. “Both José and Michael bring creativity, passion and world-renowned cuisine to our new property in Miami’s ever-growing business district. We are looking forward to making SLS Brickell a true culinary destination.”
Michael Schwartz’s Fi’lia will be open for breakfast, lunch and dinner and feature honest Italian food highlighting fresh ingredients from the hearth and the simplicity of handmade artisanal breads and pasta. A meal begins with a crusty loaf, presented with olive oil and oregano snipped at the table. Rustic pizzas from the wood oven showcase beautiful produce in season in special combinations. Caesar salad is tossed tableside in a shower of shaved parmigiano from a roaming cart, with the smell of toasted garlic croutons reminding you of how satisfying and memorable the classics can be. Cocktails are refreshingly uncomplicated – less about complex recipes and technique, and more about how unpretentiously perfect a spritz is on a July or December afternoon. The cocktails will balance a focused wine list that appeals to the knowledgeable diner of Brickell, celebrating Italian regional varietals and American wines with an old world sensibility.
Bazaar Mar will mark the expansion of the culinary partnership between Chef José Andrés and sbe, and will also serve as Andrés’ second culinary concept in Miami and sixth project with sbe, which includes The Bazaar by José Andrés in Beverly Hills, given four stars by The LA Times, Bazaar South Beach, a AAA Four Diamond restaurant, and Bazaar Meat at the SLS Las Vegas Hotel & Casino, named one of the 101 Best Restaurants in America by The Daily Meal. Poised to dazzle – like the mind of José, and the sea itself – the menu will celebrate the bounty of the oceans, with a seasonal emphasis on Miami and the Caribbean. Highlights will include everything from “sea snacks” like ceviches, seaweeds, and tiraditos to an extensive raw bar to spiny lobster and Florida’s own stone crabs. Whole fish will be prepared in a number of ways— including grilled with a whisper of smokiness from the premium Josper grill, a centerpiece of the restaurant. True to José’s native country, the menu includes dishes inspired by Spain, as well as Bazaar classics. Along with hand-crafted cocktails, the restaurant’s beverage list will include carefully curated Spanish and international wines to complement the seafood and other dining options.
“SLS Brickell will feature concepts helmed by two James Beard Award Winning chefs,” said John Kolaski, President of Disruptive Restaurant Group. “We’re excited to continue our partnerships with both Chef José and Chef Michael and we know that SLS Brickell will be a truly special culinary destination.”
sbe is a leading lifestyle hospitality company that develops, manages and operates award-winning hotels, restaurants and night clubs. Through exclusive partnerships with cultural visionaries, sbe is dedicated to delivering the best in service, design, culinary programming, and entertainment. Already a proven leader in the hospitality and real estate industries, sbe has more than 100 properties currently operating or in development, and has expanded several of its flagship brands including SLS Hotels, Katsuya, The Bazaar by Jose Andres, Hyde Lounge and The Redbury, nationally and internationally. The company will debut a new slates of hotel & residence properties in 2016, including the recently announced Hyde Hotel & Residences and SLS Lux Hotel & Residences. Founded in 2002 by Chairman and CEO Sam Nazarian, sbe is a privately held company. More information about sbe can be obtained at sbe.com
About SLS Brickell
SLS Brickell, the first SLS Hotel & Residences, will debut in Miami’s international business district in 2016. It will feature 124 SLS hotel rooms and suites, 450 SLS branded condo residences, and a collection of sbe’s retail, spa and food and beverage concepts by the acclaimed collaboration of sbe Founder, Chairman and CEO Sam Nazarian, The Related Group’s Founder and Chairman Jorge Perez, and, along with SLS’s creative partners Philippe Starck and Chef José Andrés.
About Disruptive Restaurant Group
Disruptive Restaurant Group is the leading restaurant company devoted to the development of visionary concepts and award-winning culinary experiences. A subsidiary of leading lifestyle hospitality company, sbe, Disruptive Restaurant Group incubates and operates globally renowned culinary brands. The company’s critically-acclaimed restaurants include Katsuya, Cleo, The Bazaar by Jose Andres, Hyde Kitchen + Cocktails, and Umami. For more details, please visit sbe.com/restaurants.
Tropical Smoothie Cafe Reports Growth for the First Half of 2018
July 12, 2018–(RestaurantNewsResource)
Tropical Smoothie Cafe announced significant achievements and growth in the first half of 2018, opening 47 new cafes and signing 113 franchise agreements to date. This continued momentum in franchise development represents the brand’s expansion into top priority growth markets such as Atlanta, Houston and Dallas-Fort Worth, and keeps the company on track to reach its goal of opening 120 new cafes by the end of this year. In addition to propelling development, Tropical Smoothie Cafe has also experienced a 6.6 percent increase in year-to-date same-store sales.
Additionally, June 15th marked the celebration of Tropical Smoothie Cafe’s annual National Flip Flop Day®. This one-day customer appreciation event is also designed to bring awareness to the brand’s fundraising efforts for its national charitable partner, Camp Sunshine. In just one day, the company raised a record-breaking $184,150 and gave away over 310,000 of the brands signature Sunshine Smoothies on National Flip Flop Day. Over the past 11 years, Tropical Smoothie Cafe has raised more than $6.3 million to support Camp Sunshine’s mission to provide an authentic camp experience for children with life threatening illnesses and their entire families.
“We’re thrilled with the impressive strides we’ve made as a brand in the first half of 2018. From new cafe openings, strong same-store sales, to record-breaking donation efforts for Camp Sunshine, along with our continued focus on innovation, we are determined to make this year the biggest and best to date,” said Charles Watson, chief development officer and interim CEO of Tropical Smoothie Cafe. “With over 670 locations open nationwide and over 100 franchise agreements signed so far this year, nearly 55 percent more deals than this time last year, we’re positioned for continued success in 2018 and on pace to reach our goal of 1,000 locations by the end of 2020.”
Tropical Smoothie Cafe has also positioned itself as a leader in innovation and forward thinking with unique limited-time offerings, such as the Citrus Cactus Smoothie, which debuted in April. Additionally, the brand further enhanced its offerings by adding pressed sandwiches to the menu, including the Chicken Caprese and Cuban pressed sandwiches.
Tropical Smoothie Cafe is looking to add qualified franchisees to its growing brand. Candidates should have business experience; $125,000 in liquid assets and a minimum net worth of $350,000; and an initial investment of between $222,095 and $569,335. The better-for-you food franchise currently boasts an average unit volume (AUV) of more than $681,000 – the highest in the company’s 21-year-history – with the top 50 percent reporting an AUV of more than $873,000.