Sonic Reports Solid Same-Store Sales Momentum in the Fourth Fiscal Quarter of 2018
The company estimates that system-wide same-store sales for its fourth fiscal quarter increased approximately 2.6% as compared to the prior-year quarter. Estimated same-store sales performance for the quarter reflects an increase of approximately 2.5% at company drive-ins and an increase of approximately 2.6% at franchise drive-ins.
September 11, 2018–(Restaurant News Resource)
Sonic Corp. (NASDAQ:SONC), the nation’s largest chain of drive-in restaurants, today announced preliminary results for its fourth fiscal quarter ended August 31, 2018.
The company estimates that system-wide same-store sales for its fourth fiscal quarter increased approximately 2.6% as compared to the prior-year quarter. Estimated same-store sales performance for the quarter reflects an increase of approximately 2.5% at company drive-ins and an increase of approximately 2.6% at franchise drive-ins. Additionally, net income per diluted share is expected to be $0.50 to $0.51 and adjusted net income per diluted share is estimated to be $0.51 to $0.52 for the fourth fiscal quarter.
“Our recent same-store sales performance reflects a stronger trend, driven by Sonic’s enhanced marketing reach, refreshed advertising creative, strong new product contribution and relevant everyday value,” said Cliff Hudson, Sonic Corp. CEO. “Our strategy this summer—focused on winning incremental visits from our customers—resulted in an increase in traffic of approximately 2.5% as compared to last year. In addition, during the quarter, we rolled out mobile order ahead functionality to the entire system and passed the one million mark for order ahead users. We look forward to launching a national order ahead advertising campaign this fall to continue building on our traffic momentum. We are pleased with the acceleration we are achieving in key metrics, and remain confident that we are taking the right steps to deliver long-term growth and value creation.”
In fiscal year 2019, the company expects to continue increasing same-store sales, traffic and free cash flow as it progresses against its target of returning a cumulative $500 to $600 million in capital to shareholders from fiscal 2018 through fiscal 2021. During fiscal year 2018, the company repurchased 5.2 million shares of its common stock for $139.2 million, representing 12% of shares outstanding, and made aggregate dividend payments of $24 million.
Preliminary results remain subject to the completion of normal quarter-end accounting procedures and adjustments and are subject to change. Final results for the fourth fiscal quarter of 2018 as well as the company’s outlook for fiscal year 2019 will be released on October 16, 2018.
Mike Isabella’s Company Files for Chapter 11 Bankruptcy
The business has closed multiple restaurants and faced multiple lawsuits this year.
September 6, 2018–(Washingtonian)
After months of restaurant closures and lawsuits, Mike Isabella‘s company filed for Chapter 11 bankruptcy this morning.
“This is not a decision that we made lightly, but after months of challenges, we needed to put our business on a path to move forward. That begins by stabilizing our finances,” he says in the statement to investors. It continues to read, in part: “I know it has been a challenging 6-9 months for our businesses. With this filing, we are able to now make progress to become a more financially stable organization and begin to take the steps for our successful future.”
Isabella tells Washingtonian that he’s working with all purveyors, lenders, and partners to make sure everyone is paid back. “Hopefully by spring everything should be back to normal again,” he says.
The company started showing substantial cracks this year, following a lawsuit from former manager Chloe Caras accusing Isabella and his business partners of creating a toxic “bro culture” rampant with sexual harassment. In the months since, he’s closed three restaurants—Graffiato in DC and Richmond plus Requin Brasserie in the Mosaic District—and is being sued by multiple landlords. Most recently, Isabella’s Tysons Galleria food hall Isabella Eatery shuttered, just under nine months after its splashy debut.
The bankruptcy petition includes Isabella’s parent company and most of his restaurants, but Kapnos Kouzina in Bethesda and Requin at the Wharf are excluded.
The bankruptcy petition notes that Isabella Eatery’s revenues plummeted from around $1 million per month—enough to break even with 340 employees—to $300,000 following the “negative press” that came with the sexual harassment lawsuit. Meanwhile, revenues at Graffiato DC sank from $50,000 to $5,000 per week. Graffiato Richmond and Requin Brasserie also suffered similar drops in revenue, leading to landlord and purveyor debt.
Many of the purveyors do business with all of Isabella’s restaurants. When some of them closed and weren’t able to pay their bills, the vendors tightened credit on the remaining “successful” restaurants “to the point where those restaurants are now suffering on the expense side as well,” the filing says.
Investors, some of whom are involved in multiple restaurants, are also tightening the faucets. “Where I could often count on these investors historically to assist with funds when needed, that source of stop gap or bridge loan revenue has also dried up for those locations that remain otherwise fiscally sound,” Isabella says in the petition.
While Isabella’s restaurant group once employed around 800 people, it’s since shrunk to a team of 268 people. (An additional 81 work for restaurants the group manages, but are not factored into the bankruptcy.) In recent months, employee checks have bounced. But the company says it’s seeking to ensure there isn’t further interruption in payments through the bankruptcy proceedings.
At its height, Isabella’s business included more than a dozen restaurants. In early 2018, 20 new restaurants and restaurant management agreements were in the works, including eight negotiated deals that were being circulated for signatures. The deals spanned Las Vegas, Houston, and the Middle East. One by one, Isabella says in the filing, every single one of these offers were withdrawn and discussions terminated.
Beyond the fallout from the lawsuit, Isabella previously told Washingtonian that his company’s rapid growth contributed to its problems.
“When you go from a couple restaurants to doubling your company in size in a matter of nine months, it’s not easy,” Isabella said. “There’s going to be cracks and stuff like that, and it happened.”
Ruby’s Diner, Inc. Enters into Plan Support Agreement to be Effectuated via In-Court Reorganization; Independent Franchises Not Included in Proceedings
September 5, 2018–(PR Newswire)
Ruby’s Diner, Inc. (“Ruby’s” or “Company”), the operator and franchisor of multiple Ruby’s Diner restaurants across the nation, announced today that it has entered into a plan support agreement (“Agreement”) with Steven L. Craig (“Craig”). As the purveyor of America’s best burgers, fries and shakes, the Agreement, once implemented, will significantly reduce the Company’s debt and strengthen its balance sheet allowing it to leverage a new strategic business plan leading to increased store sales and franchise growth. Craig is a successful businessman who owns multiple profitable Ruby’s franchises and is very familiar with the Ruby’s brand and operations.
“Ruby’s is excited about the next chapter in its evolution. The Agreement and proposed equity infusion are strong endorsements of the Ruby’s brand,” said Doug Cavanaugh, Chief Executive Officer of Ruby’s. “Our restaurants are open and customers can continue to rely on Ruby’s for great food and excellent customer service. We will continue to sell and honor all customer gift cards and our Ruby’s Rewards program remains in place.”
In order to swiftly and efficiently restructure its financial obligations and to implement the Agreement, the Company filed a voluntary petition under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Central District of California. Importantly, only certain wholly-owned restaurants are included in the proceedings: Ruby’s Huntington Beach; Ruby’s Laguna Hills; Ruby’s Oceanside; and Ruby’s Palm Springs. Franchises and the remaining 28 Ruby’s restaurants are not included in the proceedings. The Company intends to move through this process quickly, emerging in 120-180 days. This process should have little or no impact on employees, restaurants or franchisees.
The debtor-in-possession financing commitment from Craig together with the Company’s cash flow from operations should provide Ruby’s ample liquidity to meet all operating expenses and maintain normal operations. Assuming that the structure outlined in the Agreement is implemented, Ruby’s will emerge from Chapter 11 with Craig owning 60% of the reorganized entity.
“In recent years, as Ruby’s has evolved with a changing industry, the Company suffered some financial setbacks from which we have been working to recover. For the most part, we have been successful. We believe the Agreement, once implemented, will significantly improve our capital structure and provide Ruby’s the best opportunity for long-term success,” added Cavanaugh. “Specifically, all employees, franchisees, guests and vendors will be paid on a prompt and timely basis going forward and our restaurants will remain open.”
Court filings as well as other information related to the restructuring are available at www.donlinrecano.com/rubys or by calling the restructuring information hotline at 1-800-780-7386 or international toll at 1-212-771-1128, or by submitting an inquiry via e-mail to email@example.com.
The Company is advised by William Lobel, a partner in the law firm of Pachulski, Stang, Ziehl & Jones LLP and has engaged Michael J. Issa of Glass Ratner as its financial advisor.
About Ruby’s Diner
Celebrating over 35 years of success in 2017, Ruby’s Diner first opened on the Balboa Pier in Newport Beach, California in 1982. Today Ruby’s Restaurant Group is a privately held company that operates and franchises multiple Ruby’s Diner concepts across the nation, with over 32 U.S. stores across California, Nevada, Arizona, Pennsylvania, New Jersey, and Texas, including mall, casino and airport locations, Ruby’s Diner serves up America’s favorite burgers, hand-made milkshakes, and delicious fries in addition to a wide selection of breakfast entrees. Shooby Dooby down to Ruby’s online at Rubys.com and stay connected for company news and updates on Facebook, Instagram, and Twitter.
Jennifer E. Mercer
Donlin Recano Strategic Communications for Ruby’s Diner/Restaurant Group
The Coca-Cola Company to Acquire Costa
Acquisition to Give Coca-Cola a Strong, Global Coffee Platform with a Footprint in More than 30 Countries and Potential for Future Growth
Fast-Growing Coffee Category Offers Opportunities for Expansion of Costa Brand in Multiple Channels and Formats
August 31, 2018–(Business Wire)
The Coca-Cola Company today announced that it has reached a definitive agreement to acquire Costa Limited, which was founded in London in 1971 and has grown to become a major coffee brand across the world.
The acquisition of Costa from parent company Whitbread PLC is valued at $5.1 billion and will give Coca-Cola a strong coffee platform across parts of Europe, Asia Pacific, the Middle East and Africa, with the opportunity for additional expansion. Costa operations include a leading brand, nearly 4,000 retail outlets with highly trained baristas, a coffee vending operation, for-home coffee formats and Costa’s state-of-the-art roastery.
For Coca-Cola, the expected acquisition adds a scalable coffee platform with critical know-how and expertise in a fast-growing, on-trend category. Costa ranks as the leading coffee company in the United Kingdom and has a growing footprint in China, among other markets. Costa has a solid presence with Costa Express, which offers barista-quality coffee in a variety of on-the-go locations, including gas stations, movie theaters and travel hubs. Costa, in various formats, has the potential for further expansion with customers across the Coca-Cola system.
The acquisition will expand the existing Coca-Cola coffee lineup by adding another leading brand and platform. The portfolio already includes the market-leading Georgia brand in Japan, plus coffee products in many other countries.
Costa also provides Coca-Cola with strong expertise across the coffee supply chain, including sourcing, vending and distribution. This will be a complement to existing capabilities within the Coca-Cola system.
“Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide,” said Coca-Cola President and CEO James Quincey. “Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives us access to this market with a strong coffee platform.”
Coffee is a significant and growing segment of the global beverage business. Worldwide, coffee remains a largely fragmented market, and no single company operates across all formats on a global basis.
“The Costa team and I are extremely excited to be joining The Coca-Cola Company,” said Costa Managing Director Dominic Paul. “Costa is a fantastic business with committed and passionate associates, a great track record and enormous global potential. Being part of the Coca-Cola system will enable us to grow the business farther and faster. I would like to say a huge thank you to our customers and to everyone in the Costa team who have helped us build the business to this position, and I look forward to the next exciting chapter in Costa’s vision of Inspiring the World to Love Great Coffee.”
The purchase price is £3.9 billion. This translates to approximately $5.1 billion. Upon the closing, The Coca-Cola Company will acquire all issued and outstanding shares of Costa Limited, a wholly owned subsidiary of Whitbread. This subsidiary contains all of the existing operating businesses of Costa.
Whitbread will be seeking shareholder approval for the transaction, which is expected to take place by mid-October. The deal is subject to customary closing conditions, including antitrust approvals in the European Union and China. It is expected to close in the first half of 2019.
Coca-Cola expects the transaction to be slightly accretive in the first full year, not taking into account any impact from purchase accounting. For the fiscal year 2018 (ending March 1, 2018), Costa generated revenue and EBITDA of £1.3 billion and £238 million GBP, respectively. This equates to roughly $1.7 billion in revenue and $312 million in EBITDA.
Because Coca-Cola expects the transaction to close in the first half of 2019, there is no change to 2018 guidance. The company’s long-term targets also remain unchanged. Coca-Cola will provide additional information as part of comprehensive guidance provided during the fourth quarter 2018 earnings call.
Rothschild acted as exclusive financial adviser to The Coca-Cola Company. Clifford Chance acted as legal counsel to The Coca-Cola Company, and Skadden, Arps, Slate, Meagher & Flom acted as tax counsel to The Coca-Cola Company.
Investor conference call details
Coca-Cola is hosting a conference call with investors and analysts to discuss this announcement today, Aug. 31, 2018, at 8:30 a.m. ET. Supplementary materials to the call will be available in advance of the call on the company’s website, http://www.coca-colacompany.com, in the “Investors” section. The company invites participants to listen to a live webcast of the conference call on the company’s website, http://www.coca-colacompany.com, also located in the “Investors” section. An audio replay in downloadable digital format and a transcript of the call will be available on the website within 24 hours following the call.
About The Coca-Cola Company
The Coca-Cola Company (NYSE: KO) is a total beverage company, offering over 500 brands in more than 200 countries and territories. In addition to the company’s Coca-Cola brands, our portfolio includes some of the world’s most valuable beverage brands, such as AdeS soy-based beverages, Ayataka green tea, Dasani waters, Del Valle juices and nectars, Fanta, Georgia coffee, Gold Peak teas and coffees, Honest Tea, innocent smoothies and juices, Minute Maid juices, Powerade sports drinks, Simply juices, smartwater, Sprite, vitaminwater and ZICO coconut water. We’re constantly transforming our portfolio, from reducing sugar in our drinks to bringing innovative new products to market. We’re also working to reduce our environmental impact by replenishing water and promoting recycling. With our bottling partners, we employ more than 700,000 people, helping bring economic opportunity to local communities worldwide. Learn more at Coca-Cola Journey at www.coca-colacompany.com and follow us on Twitter, Instagram, Facebook and LinkedIn.
The fairlife® brand is owned by fairlife LLC, our joint venture with Select Milk Producers Inc. Products from fairlife are distributed by our company and certain of our bottling partners.
This press release may contain statements, estimates or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” “plan,” “seek” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from The Coca-Cola Company’s historical experience and our present expectations or projections. These risks include, but are not limited to, obesity and other health-related concerns; water scarcity and poor quality; evolving consumer preferences; increased competition; product safety and quality concerns; perceived negative health consequences of certain ingredients, such as non-nutritive sweeteners and biotechnology-derived substances, and of other substances present in our beverage products or packaging materials; an inability to be successful in our innovation activities; increased demand for food products and decreased agricultural productivity; an inability to protect our information systems against service interruption, misappropriation of data or breaches of security; changes in the retail landscape or the loss of key retail or foodservice customers; an inability to expand operations in emerging and developing markets; fluctuations in foreign currency exchange rates; interest rate increases; an inability to maintain good relationships with our bottling partners; a deterioration in our bottling partners’ financial condition; increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters; increased or new indirect taxes in the United States and throughout the world; failure to realize the economic benefits from or an inability to successfully manage the possible negative consequences of our productivity initiatives; inability to attract or retain a highly skilled and diverse workforce; increased cost, disruption of supply or shortage of energy or fuels; increased cost, disruption of supply or shortage of ingredients, other raw materials, packaging materials, aluminum cans and other containers; changes in laws and regulations relating to beverage containers and packaging; significant additional labeling or warning requirements or limitations on the marketing or sale of our products; unfavorable general economic conditions in the United States; unfavorable economic and political conditions in international markets; litigation or legal proceedings; failure to adequately protect, or disputes relating to, trademarks, formulae and other intellectual property rights; adverse weather conditions; climate change; damage to our brand image or corporate reputation from negative publicity, even if unwarranted, related to product safety or quality, human and workplace rights, obesity or other issues; changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations; changes in accounting standards; an inability to achieve our overall long-term growth objectives; deterioration of global credit market conditions; default by or failure of one or more of our counterparty financial institutions; an inability to renew collective bargaining agreements on satisfactory terms, or we or our bottling partners experience strikes, work stoppages or labor unrest; future impairment charges; multi-employer pension plan withdrawal liabilities in the future; an inability to successfully integrate and manage our company-owned or -controlled bottling operations or other acquired businesses or brands; an inability to successfully manage our refranchising activities; failure to realize a significant portion of the anticipated benefits of our strategic relationship with Monster; global or regional catastrophic events; risks and uncertainties relating to the transaction, including the risk that the businesses will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, which could result in additional demands on our resources, systems, procedures and controls, disruption of our ongoing business and diversion of management’s attention from other business concerns; the possibility that certain assumptions with respect to Costa or the transaction could prove to be inaccurate; the failure to receive, delays in the receipt of, or unacceptable or burdensome conditions imposed in connection with, all required regulatory approvals and the satisfaction of the closing conditions to the transaction; the potential failure to retain key employees as a result of the proposed transaction or during integration of the businesses and disruptions resulting from the proposed transaction, making it more difficult to maintain business relationships; the response of customers, policyholders, brokers, service providers, business partners and regulators to the announcement of the transaction and other risks discussed in our company’s filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2017 and our subsequently filed Quarterly Reports on Form 10-Q, which filings are available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Coca-Cola Company can give no assurance that the expectations expressed or implied in the forward-looking statements contained herein will be attained and undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Non-GAAP Financial Measures
This press release contains disclosure of the EBITDA, or underlying earnings before interest, tax, depreciation and amortization, excluding income from joint ventures, and revenue of Costa for the fiscal year 2018 (ending March 1, 2018), which may be deemed to be non-GAAP financial measures within the meaning of Regulation G promulgated by the SEC. Costa uses a range of measures to monitor its financial performance, which include both statutory measures in accordance with International Financial Reporting Standards (“IFRS”) and alternative performance measures which are consistent with the way that business performance is measured internally and which are believed to provide both management and investors with useful additional information about the financial performance of Costa’s business. Underlying measures of profitability represent the equivalent IFRS measures adjusted for specific items that Costa considers relevant for comparison of the financial performance of Costa’s business either from one period to another or with other similar businesses. Costa’s calculation of EBITDA for the 52 weeks ended March 1, 2018, is as follows:
The above unaudited historical financial information relating to Costa has been extracted without material adjustment from the underlying consolidation schedules used in preparing Whitbread PLC’s consolidated financial statements for the financial year ended March 1, 2018.
EBITDA is not an earnings measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP; accordingly, EBITDA may not be comparable to similar measures presented by other companies. EBITDA should be considered in addition to, and not as a substitute for, or superior to, operating income, cash flows, revenue, or other measures of financial performance prepared in accordance with GAAP. EBITDA is not a completely representative measure of either the historical performance or, necessarily, the future potential of Costa.
The Coca-Cola Company
Investors and Analysts:
Tim Leveridge, +1-404-676-7563
Scott Leith, +1-404-676-8768
Nestlé and Starbucks close deal for the perpetual global license of Starbucks Consumer Packaged Goods and Foodservice products
August 28, 2018–(Nestlé)
Nestlé and Starbucks Corporation today announced the closing of the deal granting Nestlé the perpetual rights to market Starbucks Consumer Packaged Goods and Foodservice products globally, outside of the company’s coffee shops.
Through the alliance, the two companies will work closely together on the existing Starbucks range of roast and ground coffee, whole beans as well as instant and portioned coffee. The alliance will also capitalize on the experience and capabilities of both companies to work on innovation with the goal of enhancing its product offerings for coffee lovers globally.
“This partnership demonstrates our growth agenda in action, giving Nestlé an unparalleled position in the coffee business with a full suite of innovative brands. With Starbucks, Nescafé and Nespresso we bring together the world’s most iconic coffee brands,” said Mark Schneider, Nestlé CEO. “The outstanding collaboration between the two teams resulted in a swift completion of this agreement, which will pave the way to capture further growth opportunities,” he added.
The agreement significantly strengthens Nestlé’s coffee portfolio in the North American premium roast and ground and portioned coffee business. It also unlocks global expansion in grocery and foodservice for the Starbucks brand, utilizing the global reach of Nestlé.
“This global coffee alliance with Nestlé is a significant strategic milestone for the growth of Starbucks,” said Kevin Johnson, president and ceo of Starbucks. “Bringing together the world’s leading coffee retailer, the world’s largest food and beverage company, and the world’s largest and fast-growing installed base of at-home and single-serve coffee machines helps us amplify the Starbucks brand around the world while delivering long-term value creation for our shareholders.”
Approximately 500 Starbucks employees in the United States and Europe will join the Nestlé family, with the majority based in Seattle and London. The international expansion of the business will be led from Nestlé’s global headquarters in Vevey, Switzerland.
The agreement covers Starbucks packaged coffee and tea brands, such as Starbucks®, Seattle’s Best Coffee®, TeavanaTM/MC, Starbucks VIA® Instant, Torrefazione Italia® coffee and Starbucks-branded K-Cup® pods. It excludes Ready-to- Drink products and all sales of any products within Starbucks® coffee shops.
Investors: Luca Borlini Tel.: +41 21 924 38 20
Media: Christoph Meier Tel.: +41 21 924 2200
Media US: Josh Morton Tel.: +1 571 457 5262
Press: Sanja Gould
Tel.: +1 206 318-7100
ARC Group, Inc. Enters Into Agreement to Acquire the Fat Patty’s Franchise
Annualized revenue run rate of ARC Group and Fat Patty’s projected in excess of $15 million with over $1 million of net income
August 27, 2018–(Globe Newswire)
ARC Group, Inc. (OTC: ARCK), the owner, operator and franchisor of the award-winning Dick’s Wings & Grill® concept, announced that it has entered into an agreement to acquire the Fat Patty’s® franchise.
Under the terms of the agreement, ARC Group will acquire all of the assets of Fat Patty’s for a purchase price of $12.3 million. The transaction is expected to close on August 31, 2018.
Fat Patty’s has four locations in operation in West Virginia and Kentucky. It offers a number of specialty burgers and sandwiches, wings, appetizers, salads, wraps, and steak and chicken dinners in a family friendly, casual dining environment. Each restaurant has a full bar and several large, flat-screen televisions. According to unaudited financial information provided to ARC Group by Fat Patty’s, the Fat Patty’s franchise generated more than $11 million in revenue and $700,000 in net income during 2017.
“We are very excited to acquire Fat Patty’s, a very successful franchise, which we believe will be a terrific addition to our portfolio of leading restaurant brands,” stated Seenu G. Kasturi, President and Chief Financial Officer of ARC Group. “Importantly, we believe that we can significantly expand the Fat Patty’s franchise over time, while improving the profitability of its existing restaurants.”
Mr. Kasturi continued, “As a result of this acquisition, we anticipate ARC Group’s combined annualized revenue run rate will be in excess of $15 million, and with our planned Tilted Kilt® acquisition, we project ARC Group’s combined annualized revenue run rate will approach nearly $30 million. Overall, we have built a highly scalable and profitable organization, with aggressive growth plans – both organic and through accretive acquisitions.”
ARC Group, which generated approximately $4,400,000 of revenue and $340,000 of net income in 2017, recently announced a plan to add the Tilted Kilt Pub and Eatery® franchise to its restaurant portfolio as well. The Tilted Kilt® has 47 locations in operation across the United States and Canada and offers 30+ draught and bottled beers along with excellent tasting, high quality menu items served by the World Famous Kilt Girls®. ARC Group is in the process of finalizing a financing plan that will enable it to complete the acquisition of Tilted Kilt within the next few months. The Tilted Kilt franchise generated almost $14 million in revenue during 2017.
Dick’s Wings restaurants are family fun fooderys® where both families and sports fans can go to enjoy a unique restaurant experience from first bite to last call®. Dick’s Wings offers a variety of boldly-flavored menu items highlighted by its award-winning, Buffalo, New York-style chicken wings and hog wings and its Dick’s Blingz® boneless chicken wings, for which it boasts 365 mouth-watering flavors. It also offers customers a variety of fresh sandwiches, burgers, wraps, salads and signature waffle fries. Guests enjoy these menu items in an elevated sports-themed environment that includes flat screen TVs located throughout each restaurant and children’s areas filled with video games and other forms of children’s entertainment.
Dick’s Wings is actively offering franchise opportunities in Florida, Georgia, Alabama, Louisiana, North Carolina and South Carolina. For more information about Dick’s Wings exciting menu offering and locations, and for additional franchising information, please visit www.dickswingsandgrill.com.
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 and the ECHL’s Jacksonville Icemen.
Pro Forma Financial Information
The pro forma financial information included in this press release was prepared by management for illustrative purposes only using unaudited financial information for Fat Patty’s that was provided to ARC Group by Fat Patty’s. The pro forma financial information is not necessarily indicative of the financial position or results of operations that would have been realized had ARC Group completed the acquisition of Fat Patty’s on January 1, 2018, nor is it meant to be indicative of any anticipated financial position or future results of operations that ARC Group or Fat Patty’s will experience in the event the acquisition is completed in the future. In addition, the pro forma financial information does not include any pro forma adjustments to reflect any operational efficiencies, cost savings or economies of scale that may be achievable, or the impact of any non-recurring charges and transaction-related costs that result directly from the proposed acquisition. Future results of operations are also subject to risks and uncertainties that could cause such results to differ materially from those reflected in the pro forma financial information. Readers are cautioned not to place undue reliance on the pro forma financial information presented in this press release. See “Safe Harbor Provision” below regarding forward-looking statements presented in this press release.
Safe Harbor Provision
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, that are intended to be covered by the safe harbor created thereby. All statements other than statements of historical fact contained herein, including, without limitation, statements regarding the Company’s future financial position, business strategy, plans and objectives, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” or “believes” or the negative thereof or any variation thereon or similar terminology or expressions. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from results proposed in such statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can provide no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, those factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and its other filings and submissions with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required by law, the Company assumes no obligation to update or revise any forward-looking statements.
Crescendo Communications, LLC
Red Robin Gourmet Burgers Reports Results for the Fiscal Second Quarter Ended July 15, 2018
Total revenues were $315.4 million, a decrease of 0.6%
August 22, 2018–(Restaurant News Resource)
Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB) yesterday reported financial results for the quarter ended July 15, 2018.
Second Quarter 2018 Financial Highlights Compared to Second Quarter 2017
- Total revenues were $315.4 million, a decrease of 0.6%;
- Off-premise sales increased 260 basis points to 9.6% of total food and beverage sales;
- Comparable restaurant revenue decreased 2.6% (using constant currency rates);
- Comparable restaurant guest counts decreased 0.7%;
- Restaurant labor costs as a percentage of restaurant revenue improved 40 basis points to 34.3%;
- GAAP (loss)/earnings per diluted share were $(0.14) compared to $0.53; and
- Adjusted earnings per diluted share were $0.46 compared to $0.61 (see Schedule I).
“As stated in our pre-release, we were disappointed with our second quarter topline sales and declines in dine-in traffic,” said Denny Marie Post, Red Robin Gourmet Burgers, Inc. chief executive officer. “We did not execute as well as we know we are capable of, particularly at critical peak demand hours when we must be prepared to serve dine-in Guests and our rapidly growing off premise demand. We are moving urgently to improve service execution with renewed and narrowed focus on fundamentals while we continue to differentiate Red Robin as affordable everyday with more burger options and stronger value tactics. We are also adding resources to drive sales of our unique and well-received Burger Bar catering program. We expect all of these elements to be in place early in Q4.”
Total revenues, which primarily include Company-owned restaurant revenue and franchise royalties, decreased 0.6% to $315.4 million in the second quarter of 2018 from $317.3 million in the second quarter of 2017. Restaurant revenue decreased $2.0 million due to a $7.9 million, or 2.6%, decrease in comparable restaurant revenue and a $1.0 million decrease from closed restaurants, partially offset by a $6.6 million increase in revenue from new restaurant openings and a $0.3 million favorable foreign currency exchange impact.
System-wide restaurant revenue (which includes franchised units) for the second quarter of 2018 totaled $374.7 million, compared to $375.9 million for the second quarter of 2017.
Comparable restaurant revenue(1) decreased 2.6% in the second quarter of 2018 compared to the same period a year ago, driven by a 1.9% decrease in average guest check and a 0.7% decrease in guest counts. The decrease in average guest check comprised a 2.4% decrease in menu mix, offset by a 0.5% increase in pricing. The Company’s comparable revenue growth is calculated by comparing the same calendar weeks which, for the second quarter of 2017, exclude the first week of the second quarter of 2017 and include the first week of the third quarter of 2017.
Net loss was $1.9 million for the second quarter of 2018 compared to $6.9 million net income for the same period a year ago. Adjusted net income was $6.0 million for the second quarter of 2018 (see Schedule I).
Restaurant-level operating profit margin (a non-GAAP financial measure) was 19.3% in the second quarter of 2018 compared to 20.8% in the same period a year ago. The 150 basis point decrease in the second quarter of 2018 resulted from a 40 basis point increase in cost of sales, a 50 basis point increase in occupancy costs, and a 90 basis point increase in other restaurant operating expenses, offset by a 40 basis point decrease in labor costs. Schedule II of this earnings release defines restaurant-level operating profit, discusses why it is a useful metric for investors, and reconciles this metric to income from operations and net income, in each case under GAAP.
(1) Comparable restaurants are those Company-owned restaurants that have operated five full quarters during the period presented, and such restaurants are only included in the comparable metrics if they are comparable for the entirety of both periods presented.
Depreciation and amortization costs increased to $22.3 million in the second quarter of 2018 from $21.2 million in the second quarter of 2017. The increased depreciation was primarily related to new restaurant technology implemented beginning in third quarter 2017 and new restaurants opened since the second quarter of 2017.
General and administrative costs were $20.4 million, or 6.5% of total revenues, in the second quarter of 2018, compared to $21.9 million, or 6.9% of total revenues in the same period a year ago. The decrease was primarily due to decreases in salaries and team member benefits related to the reorganization in the first quarter 2018 and lower corporate marketing costs.
Selling expenses were $15.2 million, or 4.8% of total revenues, in the second quarter of 2018, compared to $14.4 million, or 4.5% of total revenues, during the same period in the prior year. The increase was primarily due to an increase in national media spend.
Pre-opening costs were $0.6 million in the second quarter of 2018, compared to $1.4 million in the same period a year ago. The decrease was primarily due to the number of restaurant openings.
Other charges in the second quarter of 2018 included asset impairment of $9.6 million, disposal of spiral menus of $0.5 million, and $0.5 million reorganization costs.
The Company’s effective tax rate in the second quarter of 2018 was 71.6% benefit, compared to an effective tax rate of 0.3% benefit in the second quarter of 2017. The change in the effective tax rate is primarily due to the decrease in income, as well as the decrease in the federal statutory rate from 35% to 21% that occurred in the first quarter of 2018.
Loss per diluted share for the second quarter of 2018 was $0.14 compared to diluted earnings per share of $0.53 in second quarter of 2017. Excluding charges of $0.54 for asset impairment, $0.03 for spiral menu disposal, and $0.03 per diluted share for reorganization costs, adjusted earnings per diluted share for the second quarter ended July 15, 2018 were $0.46. See Schedule I for a reconciliation of adjusted net income and adjusted earnings per share (each, a non-GAAP financial measure) to net income and earnings per share.
During the second quarter of 2018, the Company opened two Red Robin restaurants and our franchisees opened one Red Robin restaurant. The Company plans to open two Red Robin restaurants and our franchisees plan to open two Red Robin restaurants during the remainder of 2018.
The following table details restaurant unit data for Company-owned and franchised locations for the periods indicated:
Balance Sheet and Liquidity
As of July 15, 2018, the Company had cash and cash equivalents of $21.9 million and total debt of $221.4 million, excluding $10.6 million of capital lease liabilities. The Company funded construction of new restaurants and other capital expenditures with cash flow from operations and made net repayments of $10.0 million on its credit facility during the second quarter of 2018. As of July 15, 2018, the Company had outstanding borrowings under its credit facility of $220.5 million, in addition to amounts issued under letters of credit of $7.5 million, which reduce the amount available under its credit facility but are not recorded as debt.
The Company’s lease adjusted leverage ratio was 3.94x as of July 15, 2018. The lease adjusted leverage ratio is defined in Section 1.1 of the Company’s credit facility, which is filed as Exhibit 10.32 in the Annual Report on Form 10-K filed on February 21, 2017.
The Company’s board of directors recently authorized an increase to the Company’s share repurchase program of approximately $21 million to a total of $75 million of the Company’s common stock. The share repurchase authorization will terminate upon completing repurchases of $75 million of common stock unless otherwise terminated by the board. Pursuant to the repurchase program, purchases may be made from time to time at the Company’s discretion and the Company is not obligated to acquire any particular amount of common stock.
Outlook for 2018
- Total revenues is projected to range from $1.350 billion to $1.365 billion for full-year 2018.
- Comparable restaurant revenue is projected to decrease 1.0% to 2.0% for full-year 2018. The Company expects comparable restaurant revenue to be in the lower end of this range in the third quarter of 2018.
- Earnings per diluted share is projected to range from $1.80 to $2.20 for full-year 2018.
The Company provides guidance as it relates to selected information related to the Company’s financial and operating performance, and such measures may differ from year to year.
About Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB)
Red Robin Gourmet Burgers, Inc. (www.redrobin.com), a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc., and under the trade name Red Robin Gourmet Burgers and Brews, is the Gourmet Burger Authority™, famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries® in a fun environment welcoming to guests of all ages. Whether a family dining with kids, adults grabbing a drink at the bar, or teens enjoying a meal, Red Robin offers an unparalleled experience for its guests. In addition to its many burger offerings, Red Robin serves a wide variety of salads, soups, appetizers, entrees, desserts, and signature beverages. Red Robin offers a variety of options behind the bar, including its extensive selection of local and regional beers, and innovative adult beer shakes and cocktails, earning the restaurant a VIBE Vista Award for Best Beer Program in a Multi-Unit Chain Restaurant. There are more than 570 Red Robin restaurants across the United States and Canada, including locations operating under franchise agreements.
Zoe’s Kitchen, Inc. to Be Acquired by CAVA Group, Inc.
$12.75 per share purchase price represents approximately 33% premium to Zoe’s Kitchen NYSE 30-day volume weighted average price
Joins together two brands with distinct service models and a shared passion for healthy, no-compromise Mediterranean cuisine
expand investments in people, culinary, and tech innovation
August 17, 2018–(Business Wire)
Zoe’s Kitchen, Inc., (“Zoës Kitchen” or the “Company”) (NYSE:ZOES), a fast-casual restaurant group with 261 domestic restaurant locations, today announced that it has entered into a definitive agreement to be acquired in a transaction by privately held Cava Group, Inc., (“CAVA”) a fast-growing Mediterranean culinary brand with 66 restaurants. The combined companies will have 327 restaurants in 24 states throughout the U.S.
Under the terms of the agreement, Zoës Kitchen shareholders will receive $12.75 in cash for each share of common stock they hold. This represents a premium of approximately 33% to Zoës Kitchen’s closing share price on August 16, 2018 and a premium of approximately 33% to Zoës Kitchen 30-day volume weighted average price ended on August 16, 2018, and an enterprise value of approximately $300 million.
The acquisition of Zoës Kitchen will be financed through a significant equity investment in CAVA led by Act III Holdings, the investment vehicle created by Ron Shaich, founder, chairman, and former CEO of Panera Bread, and funds advised by The Invus Group, with participation from existing investors SWaN & Legend Venture Partners and Revolution Growth.
After closing, Brett Schulman, current Chief Executive Officer of CAVA, will serve as Chief Executive Officer of the combined company and will work closely with the existing leadership teams at Zoës Kitchen and CAVA to oversee their growth and evolution. Ron Shaich will serve as Chairman of the combined company.
COMMENTS BY LEADERSHIP
Kevin Miles, Zoës Kitchen Chief Executive Officer said: “Zoës Board of Directors and Management are pleased to announce today’s transaction. Our mission was to deliver the highest value obtainable for our shareholders and pursuant to the transaction announced today our shareholders will be receiving a substantial premium to the Company’s unaffected stock price. I am proud of the significant work the team has executed over recent years to grow the Zoës Kitchen footprint, build brand affinity and secure a leadership position in the Mediterranean and better-for-you category. These efforts made it an attractive candidate for a transaction of this kind. I’d like to thank each and every team member who will continue to make Zoës a differentiated dining experience every day.”
Brett Schulman, CAVA Chief Executive Officer said: “Today’s announcement is an exciting milestone for CAVA, and we’re thrilled to welcome Zoës Kitchen to our family. Together, these two brands are united by a shared heritage and passion for exceptional Mediterranean cuisine. Now with the addition of Zoës Kitchen, we will be able to broaden our geographic footprint and meet the needs of even more guests — whether in Bethesda or Birmingham, Plano or Pasadena — who crave delicious, healthy food without compromise. As part of the CAVA family, Zoës Kitchen will benefit from CAVA’s track record of bold culinary innovation and leveraging data and technology to drive growth and convenience.”
Ron Shaich, Act III Holdings Chief Executive, CAVA board member, and CAVA investor said: “As a close observer of the fast-casual restaurant industry, I am thrilled at the prospect of what CAVA and Zoës Kitchen can accomplish together. Together these businesses will create the leading company in one of the most important categories in fast casual today — Mediterranean — with the capabilities to drive extraordinary customer satisfaction and powerful growth.”
Consummation of the merger is subject to certain closing conditions, including the adoption of the merger agreement by the holders of a majority of the Company’s outstanding common stock, and the expiration or early termination of all applicable waiting periods under the HSR Act. CAVA has agreed to pay to the Company a $17 million termination fee if the merger agreement is terminated under certain circumstances and the merger does not occur. The parties expect the merger to close in the fourth quarter of 2018.
Under the terms of the merger agreement, the Company is permitted to actively solicit, for a 35-day period, alternative acquisition proposals from potential buyer and business combination candidates. There can be no assurance that any superior proposals will be received during this solicitation process or that any alternative transaction providing for a superior proposal will be consummated. Except as may be required by law, the Company does not intend to disclose any developments with respect to such a solicitation process unless and until the Company’s board of directors determines that it has received a superior proposal. The Company would be required to pay to CAVA an $8.5 million termination fee if the Company terminates the merger agreement to accept a superior proposal under certain circumstances.
The Company’s Board of Directors has determined that the merger agreement with CAVA is fair to and in the best interests of the Company and the holders of the Company’s common stock.
Zoës Kitchen also announced that it will not hold its previously scheduled second quarter 2018 earnings conference call and web simulcast on the morning of Friday, August 17 and will not issue a press release with second quarter 2018 financial results. The Company expects to file its quarterly report with second quarter 2018 financial results on or before August 20, 2018.
Piper Jaffray served as financial advisor to Zoës Kitchen, and Greenberg Traurig, LLP acted as legal advisor to Zoës Kitchen on the transaction.
Morgan Stanley & Co. LLC acted as financial advisor to Act III Holdings (Ron Shaich) and The Invus Group. Citigroup Global Markets Inc. acted as financial advisor to CAVA. Skadden, Arps, Slate, Meagher & Flom acted as legal advisors to CAVA. Sullivan & Cromwell and Simpson Thacher & Bartlett served as legal advisors to Act III Holdings (Ron Shaich) and The Invus Group, respectively.
About Zoës Kitchen
Founded in 1995, Zoës Kitchen is a fast-casual restaurant group serving a distinct menu of fresh, wholesome, made-from-scratch, Mediterranean-inspired dishes delivered with warm hospitality. With no microwaves, or fryers, grilling is the predominate method of cooking along with an abundance of fresh fruits and vegetables, fresh herbs, olive oil and lean proteins. With 261 locations in 20 states across the United States, Zoës Kitchen delivers goodness to its guests by sharing simple, tasty and fresh Mediterranean meals that inspire guests to lead a balanced lifestyle and feel their best from the inside out. For more information, please visit www.zoeskitchen.com, Facebook, Instagram, Twitter or follow #LiveMed.
CAVA was born out of a desire to fuel full lives through a bold and innovative food culture rooted in the heritage of the culinary brand’s founders Ted Xenohristos, Ike Grigoropoulos and Executive Chef Dimitri Moshovitis. The three first-generation Greek Americans are childhood friends who wanted to bring the authentic Mediterranean flavors and experiences of their Greek upbringing to a wider audience in a modern, accessible format. The trio then partnered with CAVA CEO Brett Schulman to grow the company. Together, CAVA has evolved into an organization with more than 60 chef-casual restaurants across 10 states and a successful line of chef-crafted dips and spreads sold in more than 250 Whole Foods Market locations and other speciality grocery stores around the country. By the end of 2018, CAVA will have 75 locations nationwide. For a full list of open and upcoming locations, visit: cava.com/locations. For more information, please visit www.cava.com and follow CAVA on social media.
About ACT III Holdings
Act III Holdings is a Boston-based investment fund formed by Ron Shaich, founder and chairman of Panera Bread. Act III is actively making evergreen investments in restaurant and consumer-facing enterprises that are building better competitive alternatives and have the potential to dominate significant market niches. Act III portfolio companies benefit from the experience of Act III’s partners in building companies of value and with values. Existing Act III investments include Cava, Clover Food Lab, Open World, Tatte Bakery and Life Alive Organic Cafe.
About The Invus Group
Invus is a private investment firm based in New York. Invus benefits from an evergreen investment structure managing family capital with a long-term strategic perspective. Invus and its affiliates have been investing in companies that seek to transform their industries since 1985. For more information, please visit at http://www.invus.com.
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, statements regarding the Company’s proposed merger transaction with CAVA, the financing of the proposed merger transaction, all statements regarding the Company’s expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, and statements containing the words such as “anticipate,” “approximate,” “believe,” “plan,” “estimate,” “expect,” “project,” “could,” “would,” “should,” “will,” “intend,” “may,” “potential,” “upside,” and other similar expressions. All statements in this press release that are not historical facts, are forward-looking statements that reflect the best judgment of the Company based upon currently available information.
Such forward-looking statements are inherently uncertain, and shareholders and other potential investors must recognize that actual results may differ materially from the Company’s expectations as a result of a variety of factors, including, without limitation, those discussed below. Such forward-looking statements are based upon management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control, that may cause its actual results, performance or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. These statements involve risks, uncertainties and other factors discussed below and detailed from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”).
Risks and uncertainties related to the proposed merger include, but are not limited to, the risk that the Company’s stockholders do not approve the merger, potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger, uncertainties as to the timing of the merger, adverse effects on the Company’s stock price resulting from the announcement of the merger or the failure of the merger to be completed, competitive responses to the announcement of the merger, the risk that regulatory, licensure or other approvals required for the consummation of the merger are not obtained or are obtained subject to terms and conditions that are not anticipated, litigation relating to the merger, the inability to retain key personnel, and any changes in general economic and/or industry-specific conditions.
In addition to the factors set forth above, other factors that may affect the Company’s plans, results or stock price are set forth in its most recent Annual Report on Form 10-K and in its subsequently filed reports on Forms 10-Q and 8-K.
Many of these factors are beyond the Company’s control. The Company cautions investors that any forward-looking statements made by it are not guarantees of future performance. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.
Additional Information and Where to Find It
The Company will furnish to the SEC a report on Form 8-K regarding the proposed transaction described in this announcement, which will include the merger agreement. All parties desiring details regarding the merger are urged to review these documents, which will be available at the SEC’s website (http://www.sec.gov).
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This communication may be deemed to be solicitation material in respect of the proposed merger. In connection with the merger, the Company will prepare and mail a proxy statement to its shareholders. These documents will be filed with or furnished to the SEC. Investors and shareholders are urged to read carefully and in their entirety these materials and other materials filed with or furnished to the SEC when they become available, as they will contain important information about the Company, the merger and related matters. In addition to receiving the proxy statement by mail, shareholders also will be able to obtain these documents, as well as other filings containing information about the Company, the merger and related matters, without charge, from the SEC’s website (http://www.sec.gov). In addition, these documents can be obtained, without charge, by sending an e-mail to firstname.lastname@example.org, along with complete contact details and a mailing address.
Participants in Solicitation
The Company and certain of its directors, executive officers and other members of management and employees may, under SEC rules, be deemed to be “participants” in the solicitation of proxies from shareholders with respect to the merger. Information regarding the persons or entities who may be considered “participants” in the solicitation of proxies will be set forth in the proxy statement relating to the merger when it is filed with the SEC. Information regarding the directors and executive officers of the Company is set forth in the proxy statement for the Company’s 2018 Annual Meeting of Stockholders, which was filed with the SEC on April 24, 2018. Additional information regarding the interests of such potential participants will be included in the proxy statement and the other relevant documents to be filed with the SEC.
Brunswick (for CAVA)
ICR (for Zoës Kitchen)
214-436-8765 x 284
The Wendy’s Company Sells Ownership Interest in Inspire Brands for $450 Million
Sale Proceeds Expected to Provide Company Flexibility to Invest in Future Growth
Board of Directors Approves New $100 Million Share Repurchase Authorization
August 16, 2018–(PR Newswire)
The Wendy’s Company (NASDAQ : WEN ) announced today that it has accepted an offer from Inspire Brands (Owner of Arby’s®, Buffalo Wild Wings®, and R Taco®) to sell its 12.3% ownership interest in the company back to Inspire Brands for $450 million. The agreement was approved by The Wendy’s Company Board of Directors and represents a 38% premium on the Wendy’s Company’s previous valuation of the investment.
“The sale of our stake in Inspire Brands for $450 million is a great return on this investment for our shareholders,” said Nelson Peltz, Chairman of the Board of Directors. “Over the past seven years, Wendy’s and its shareholders have benefitted from more than $100 million in distributions and the monetization of this investment carries a 38 percent premium over its most recent valuation.”
“We have benefited from and enjoyed our partnership with Inspire, and we wish Paul Brown and the team continued success in the future,” said Todd Penegor, Wendy’s President and Chief Executive Officer. “The opportunity to monetize our investment in Inspire Brands will allow us to invest in future growth for the Wendy’s brand and Company, which is our top priority. The flexibility provided by the sale proceeds and the additional share repurchase authorization through 2019 will also allow us to continue to create value for our shareholders.”
Use of Cash
The Company views this transaction as one that will provide the Company future flexibility to invest in the growth of the Wendy’s® brand and Company and increase its share repurchase program. The Board of Directors has authorized a new share repurchase program for up to $100 million of the Company’s common stock through December 27, 2019. This is in addition to the Company’s current $175 million share repurchase authorization, expiring March 3, 2019, which had $93.1 million remaining as of August 1, 2018. Further details will be provided as the Company develops additional plans to utilize the proceeds from this transaction.
The Wendy’s Company sold its 12.3% ownership interest in Inspire Brands for $450 million. The Inspire investment had a carrying value of zero. As a result, the Company is expecting approximately $335 million of cash proceeds net of tax. The transaction closed today, August 16, 2018.
Forward Looking Statements
This news release contains certain statements that are not historical facts, including statements regarding the expected use of proceeds from the sale of our investment in Inspire Brands. Those statements, as well as statements preceded by, followed by, or that include the words “will,” “intends,” “expected” or “would be,” constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). The forward-looking statements are based on the Company’s expectations at the time, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. These factors include, but are not limited to, the impact of general market, industry, credit and economic conditions, as well as other factors identified in the “Special Note Regarding Forward-Looking Statements and Projections” and “Risk Factors” sections of our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. For all forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act.
Wendy’s® was founded in 1969 by Dave Thomas in Columbus, Ohio. Dave built his business on the premise, “Quality is our Recipe®,” which remains the guidepost of the Wendy’s system. Wendy’s is best known for its made-to-order square hamburgers, using fresh, never frozen beef*, freshly-prepared salads with hand-chopped lettuce, and other signature items like chili, baked potatoes and the Frosty® dessert. The Wendy’s Company (NASDAQ : WEN ) is committed to doing the right thing and making a positive difference in the lives of others. This is most visible through the Company’s support of the Dave Thomas Foundation for Adoption® and its signature Wendy’s Wonderful Kids® program, which seeks to find every child in the North American foster care system a loving, forever home. Today, Wendy’s and its franchisees employ hundreds of thousands of people across more than 6,600 restaurants worldwide with a vision of becoming the world’s most thriving and beloved restaurant brand. For details on franchising, connect with us at www.wendys.com/franchising. Visit www.wendys.com and www.squaredealblog.com for more information and connect with us on Twitter and Instagram using @wendys, and on Facebook www.facebook.com/wendys.
*Fresh beef available in the contiguous U.S., Alaska, and Canada.
The ONE Group Hospitality, Inc. Reports Second Quarter 2018 Results
Domestic Comparable Sales for STK Restaurants Grew 7.5%
Three Investor Events Scheduled for September
August 14, 2018–(Business Wire)
The ONE Group Hospitality, Inc. (“The ONE Group” or the “Company”) (NASDAQ: STKS), today reported unaudited financial results for the second quarter ended June 30, 2018. The Company also announced its participation in three investor events during September.
Highlights for the Second Quarter ended June 30, 2018:
- Total GAAP revenue was $20.3 million compared to $19.9 million in the same period last year;
- Domestic comparable sales* at owned and managed STK restaurants rose 7.5%;
- GAAP net income from continuing operations before income taxes was $483,000 compared to GAAP net loss of $2.0 million for the same period last year;
- GAAP net income attributable to The ONE Group Hospitality, Inc. was $181,000 or $0.01 per share compared to GAAP net loss of $2.3 million or $0.09 loss per share for the same period last year;
- Adjusted EBITDA** increased 70.3% to $2.5 million compared to $1.5 million the same period last year; and,
- Total owned restaurant expenses decreased 360 basis points to 86.6% from 90.2% as a percentage of owned restaurant revenues.
Emanuel “Manny” Hilario, President and Chief Executive Officer, said, “We extended our record of strong performance to the second quarter and raised two key 2018 targets based upon our results to date. Our focus on sales growth and restaurant profitability during the second quarter is reflected in domestic comparable sales increasing 7.5% and profitability improving 360 basis points at owned restaurants when compared to the prior year. We also made significant progress reducing corporate G&A expenses and increasing our Adjusted EBITDA contribution both in absolute dollars and as a percentage of total revenue. On a trailing twelve-month basis, Adjusted EBITDA is $8.2 million. After the quarter ended, we opened two locations which are both off to encouraging starts: our second licensed location in Dubai and our owned restaurant in San Diego, CA. We remain on track to open a total of five STKs in 2018.”
*Comparable sales or same store sales (“SSS”) represents total food and beverage sales at owned and managed units opened for at least a full 18-month period. This metric includes total revenue from our owned and managed STK locations. Revenues from locations where we do not directly control the event sales force (Royalton Hotel, NY; The W Hotel, Westwood, CA; and our locations in Europe) are excluded from this metric.
Total food and beverage sales at owned and managed units, a non-GAAP measure, represents our total revenue from our owned operations as well as the revenue reported to us with respect to sales at our managed locations, where we earn management and incentive fees at these locations. For a reconciliation of our GAAP revenue to total food and beverage sales at our owned and managed units and a discussion of why we consider it useful, see the financial information accompanying this release.
** Adjusted EBITDA, a non-GAAP measure, represents net income / loss before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, deferred rent, pre-opening expenses, non-recurring gains and losses, stock-based compensation, losses from discontinued operations and certain transactional costs. Not all of the aforementioned items defining Adjusted EBITDA occur in each reporting period but have been included in our definitions of terms based on our historical activity. For a reconciliation of Adjusted EBITDA to the most directly comparable financial measure presented in accordance with GAAP and a discussion of why we consider it useful, see the financial information accompanying this release.
Unaudited Second Quarter 2018 Financial Results
Total GAAP Revenues were $20.3 million in the second quarter of 2018 compared to $19.9 million in the same period last year. This increase was primarily driven by comparable sales growth. Domestic comparable store sales at owned and managed STK restaurants increased 7.5%. This increase follows similarly strong mid to high single digit comparable sales increases reported for the first quarter of 2018 and are indicative of the continued strong performance of the STK brand.
Management, license and incentive fee revenue decreased to $2.7 million in the second quarter of 2018 compared to $2.8 million in the second quarter of 2017. The decrease in management, license and incentive fee revenue was due to the timing and estimation of incentive fee revenue in the prior year. This was partially offset by the launch of the licensed STK in Dubai in December 2017.
GAAP net income attributable to The ONE Group Hospitality, Inc. in the second quarter of 2018 was $181,000 or $0.01 per share compared to GAAP net loss of $2.3 million or $0.09 loss per share in the second quarter of 2017.
Adjusted EBITDA rose 70.3% to $2.5 million, an increase of $1.0 million, from $1.5 million in the second quarter of 2017.
Opened – 2018
STK San Diego and STK Dubai- Downtown
Projected Additions – 2018
STK Mexico City, STK Doha, and STK Nashville
We are providing the following targets for 2018:
- Total GAAP revenues between $80 million and $85 million;
- Total food and beverage sales at all our owned and managed units of between $170 million and $180 million;
- Comparable store sales growth of about 3% to 4% (previously 2% to 3%);
- Total food and beverage costs of approximately 25% to 26%;
- Adjusted EBITDA between $10 million and $10.5 million (previously $9 million and $10 million), representing approximately 40% growth (previously 30% to 40% growth) compared to the prior year; and,
- Total capital expenditures, net of allowances received from landlords, of approximately $3 million, which is significantly less than prior years and reflective of our capital-light strategy.
Long-Term Growth Targets
We are reiterating the following long-term growth targets:
- Three to five licensed restaurant units and one to two food and beverage hospitality deals annually;
- Comparable store sales growth of 2% to 3%;
- Consistent Adjusted EBITDA growth of at least 20%; and,
- Continued focus on our asset light model and disciplined G&A management, while benefitting from economies of scale and operating efficiencies.
We have not reconciled guidance for 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, reconciliations to the corresponding GAAP financial measure are not available without unreasonable effort.
Conference Call and Webcast
Emanuel “Manny” Hilario, President and Chief Executive Officer, and Linda Siluk, Interim Chief Financial Officer, will host a conference call and webcast to discuss second quarter 2018 financial results, updated 2018 targets, and long-term growth targets today at 5:00 PM Eastern Time.
The conference call can be accessed live over the phone by dialing 1-201-493-6780. The replay will be available after the call and can be accessed by dialing 1-412-317-6671; the passcode is 13682350. The replay will be available until August 28, 2018.
The webcast can also be accessed from the Investor Relations tab of the Company’s website at www.togrp.com under “News / Events”.
September Investor Events
We will participate in the following September investor events.
On Wednesday, September 5, The ONE Group will hold investor meetings at the Liolios 7th Annual Gateway Conference in San Francisco, CA.
On Thursday, September 6, The ONE Group will hold investor meetings at the Dougherty & Co. Institutional Investor Conference in Minneapolis, MN.
On Thursday, September 13, The ONE Group will hold investor meetings at Lake Street’s 2nd Annual Best Ideas Growth (BIG) Conference in New York City.
Institutional investors interested in participating in any of these investor events should contact their representative at the respective firm.
About The ONE Group
The ONE Group (NASDAQ: STKS) is a global hospitality company that develops and operates upscale, high-energy restaurants and lounges and provides hospitality management services for hotels, casinos and other high-end venues both nationally and internationally. The ONE Group’s primary restaurant brand is STK, a modern twist on the American steakhouse concept with locations in major metropolitan cities throughout the U.S., Europe, and the Middle East. ONE Hospitality, The ONE Group’s food and beverage hospitality services business, provides the development, management and operations for premier restaurants and turn-key food and beverage services within high-end hotels and casinos. Additional information about The ONE Group can be found at www.togrp.com.
Cautionary Statement on Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. For example, the statements related to the exploration of strategic alternatives and the potential results therefrom and the statements related to our strategic review of our operations targeting sources for 2018 and beyond are forward-looking. Forward-looking statements may be identified by the use of words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”, “outlook”, and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements, including but not limited to, (1) our ability to open new restaurants and food and beverage locations in current and additional markets, grow and manage growth profitably, maintain relationships with suppliers and obtain adequate supply of products and retain our key employees; (2) factors beyond our control that affect the number and timing of new restaurant openings, including weather conditions and factors under the control of landlords, contractors and regulatory and/or licensing authorities; (3) in the case of our strategic review of operations, our ability to successfully improve performance and cost, realize the benefits of our marketing efforts, and achieve improved results as we focus on developing new management and license deals; (4) changes in applicable laws or regulations; (5) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and (6) other risks and uncertainties indicated from time to time in our filings with the SEC, including our Annual Report on Form 10-K filed for the year ended December 31, 2017.
Investors are referred to the most recent reports filed with the SEC by The ONE Group Hospitality, Inc. Investors are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise.
Noon Mediterranean Files for Bankruptcy
The fast-casual restaurant concept has closed seven units and laid off 89 employees.
August 14, 2018–(Restaurant Business Online)
Noon Mediterranean, the fast-casual chain formerly known as Verts Mediterranean Grill, has filed for bankruptcy protection.
Under its reorganization, the restaurant chain recently shuttered seven units and has laid off 89 employees, including 10 in the corporate office, according to Noon’s initial bankruptcy petition. It listed its estimated liabilities at $10 million to $50 million, split among 50 to 99 creditors, according to the Chapter 11 filing in United States Bankruptcy Court in Delaware earlier this month. Noon Mediterranean claims assets of $1 million to $10 million in the filing.
Officials from Noon Mediterranean did not respond to requests for comment from Restaurant Business.
According to court documents, Noon is now in search of an investor for a “strategic transaction” to keep the chain afloat as it unloads the leases at under-performing locations. It plans to sell unneeded equipment and other effects at auction.
The chain is struggling under the weight of poor sales coupled with a number of outstanding loans, according to the documents.
Before the filing, the chain had 19 units, largely on the East Coast and in Texas.
The once-thriving concept secured a $20 million private investment last year and saw a 28.3% increase in sales from 2015 to 2016, according to Technomic data. By the following year, year-over-year sales had declined 8.8%.
In November 2017, the company rebranded from Verts (a reference to kebabs) to Noon (to focus on lunchtime). The chain got its start in 2011 in Austin, Texas, under the name VertsKebap. Noon later relocated its headquarters to New York City.
Famous Dave’s of America, Inc. Reports Results for Second Quarter of Fiscal 2018
August 14, 2018–(Globe Newswire)
Famous Dave’s of America, Inc. (NASDAQ: DAVE) today reported financial results for the second fiscal quarter ended July 1, 2018 compared to the second fiscal quarter ended July 2, 2017.
Highlights for the second quarter of 2018 include the following:
- Net income from continuing operations of $1.4 million, or $0.16 per share, compared to net loss from continuing operations of $1.6 million, or ($0.24) per share in the prior year.
- Consolidated Adjusted EBITDA, a non-GAAP measure, increased 5.5% to $2.7 million.
- General and administrative expenses decreased to $2.1 million from $3.5 million in the second quarter 2017.
- Repaid $5.8 million of long-term debt and financing lease obligations.
- Company-owned comparable restaurant sales increased 1.2%, with traffic up 1.3%.
- Franchise-operated comparable restaurant sales declined 1.9%.
Highlights subsequent to the close of the second quarter of 2018 include the following:
- UAE-based Tablez amended the existing area development agreement to develop four new units over the next two years.
- Repaid an additional $740,000 in long-term debt.
- Executed agreements with Travis Clark to launch the Clark Crew BBQ restaurant concept.
- Reacquired the Janesville, Wisconsin restaurant from a franchisee, which we will refresh.
Key Operating Metrics
Second Quarter 2018 Review
Total revenue for the second quarter of 2018 was $14.5 million, down 23.7% from the second quarter of 2017. The decrease in Company-owned net restaurant sales revenue was primarily a result of the closure of nine Company-owned restaurants. The impact of these closures was partially offset by a 1.2% increase in same-store sales. The declines in franchise royalty and fee revenue were driven by a decline in franchise-operated same store sales of 1.9% and royalty abatements agreed upon to facilitate the transfer of certain of our franchise-operated restaurants to new operators, who have committed to investing necessary resources to refresh these transferred stores. Additionally, the adoption of ASC 606 – Revenue From Contracts with Customers resulted in approximately $585,000 of additional revenue during the second quarter of 2018.
Restaurant-level operating margin, as a percentage of restaurant sales, net, for Company-owned restaurants was 6.0%, flat to the second quarter of fiscal 2017.
General and administrative expenses decreased to $2.1 million from $3.5 million in the second quarter of fiscal 2017. The year over year decline was primarily a result of the alignment of our general and administrative expense structure to be commensurate with that of a more dedicated franchisor, lowering overhead strategically as we reduced our Company-owned restaurant count from 32 restaurants as of July 2, 2017 to 15 restaurants as of July 1, 2018.
We recognized net income from continuing operations of approximately $1.4 million, or $0.16 per share, in the second quarter of fiscal 2018 compared to a loss from continuing operations of $1.6 million, or ($0.24) per share, in the second quarter of fiscal 2017. We recognized a net income from discontinued operations of $379,000, or $0.05 per share, in the second quarter of fiscal 2017.
Adjusted net income from continuing operations, a non-GAAP measure, was approximately $1.7 million, or $0.19 per share, compared to approximately $796,000, or $0.11 per share, in the second quarter of fiscal 2017. A reconciliation between adjusted net loss and its most directly comparable GAAP measure is included in the accompanying financial tables.
Jeff Crivello, CEO, commented, “We look forward to implementing throughout the system many of the improvements from the successful refresh of our Coon Rapids restaurant. We increased Company-owned same store sales by 1.2%, despite losing 1.0% in sales due to weather-related closures in April in the Minneapolis market. Although catering sales continued to be a challenge, we launched several initiatives during the quarter aimed at growing this line of business. We look forward to opening the first Clark Crew BBQ in Oklahoma City, and finalizing the design of our new drive through concept.”
About Famous Dave’s
Famous Dave’s develops, owns, operates and franchises barbeque restaurants. Its menu features award-winning barbequed and grilled meats, a selection of salads, sandwiches, side items, and made-from-scratch desserts. As of August 13, 2018, the Company owns 16 locations and franchises an additional 134 restaurants in 33 states, the Commonwealth of Puerto Rico, Canada, and United Arab Emirates.
Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company uses non-GAAP measures including those indicated below. These non-GAAP measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s consolidated financial statements and are subject to inherent limitations. By providing non-GAAP measures, together with a reconciliation to the most comparable GAAP measure, the Company believes that it is enhancing investors’ understanding of the Company’s business and results of operations. These measures are not intended to be considered in isolation of, as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures presented may be different from the measures used by other companies. The Company urges investors to review the reconciliation of its non-GAAP measures to the most directly comparable GAAP measure, included in the accompanying financial tables.
Adjusted net (loss) income from continuing operations is net (loss) income from continuing operations, plus asset impairment, estimated lease termination and other closing costs, settlement agreements, net (loss) gain on disposal of equipment, stock-based compensation, severance, and the related tax impact. This number is divided by the weighted-average number of basic shares of common stock outstanding during each period presented to arrive at adjusted net (loss) income from continuing operations, per share. Adjusted EBITDA is net (loss) income, including discontinued operations, plus asset impairment, estimated lease termination and other closing costs, settlement agreements, depreciation and amortization, interest expense, net, net (loss) gain on disposal of equipment, stock-based compensation, severance and provision (benefit) for income taxes.
Statements in this press release that are not strictly historical, including but not limited to statements regarding the timing of the Company’s restaurant openings and the timing or success of refranchising plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, which may cause the Company’s actual results to differ materially from expected results. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be attained. Factors that could cause actual results to differ materially from Famous Dave’s expectation include financial performance, restaurant industry conditions, execution of restaurant development and construction programs, franchisee performance, changes in local or national economic conditions, availability of financing, governmental approvals and other risks detailed from time to time in the Company’s SEC reports.
Jeff Crivello – Chief Executive Officer
Ruth’s Hospitality Group, Inc. Reports Second Quarter 2018 Financial Results
Total Revenues Increased 9.6%
Earnings Per Share Up 28.1%
August 10, 2018–(Business Wire)
Ruth’s Hospitality Group, Inc. (the “Company”) (NASDAQ:RUTH) today reported unaudited financial results for its second quarter ended July 1, 2018.
Highlights for the second quarter of 2018 were as follows:
- Restaurant sales in the second quarter of 2018 increased 10.0% to $103.5 million compared to $94.1 million in the second quarter of 2017.
- The Company reported net income of $9.6 million, or $0.32 per diluted share, in the second quarter of 2018, compared to net income of $7.8 million, or $0.25 per diluted share, in the second quarter of 2017.
- Income from continuing operations in the second quarter of 2018 was $9.6 million, or $0.32 per diluted share, compared to income from continuing operations of $7.8 million, or $0.25 per diluted share, in the second quarter of 2017.
- Net income in the second quarter of 2018 included a $0.3 million income tax benefit related to the impact of discrete income tax items.
- Net income in the second quarter of 2018 also included $0.4 million in deal-related expenses associated with the acquisition of the six restaurants of our Hawaiian franchisee.
- Excluding these adjustments, as well as the results from discontinued operations, non-GAAP diluted earnings per common share were $0.32 in the second quarter of 2018, compared to $0.25 in the second quarter of 2017. The Company believes that non-GAAP diluted earnings per common share provides a useful alternative measure of financial performance. Investors are advised to see the attached Reconciliation of non-GAAP Financial Measure table for additional information.
Michael P. O’Donnell, Chairman and Chief Executive Officer of Ruth’s Hospitality Group, Inc., noted, “I am pleased with our second quarter results, which reflect the strength and consistency of our business. Financial results included revenue growth of 9.6%, comparable restaurant sales growth of 1.3%, and restaurant level margin expansion. Our Hawaiian restaurants are steadily achieving sales and profits ahead of our expectations, and we are in the final stages of a successful integration.”
O’Donnell continued, “I am incredibly proud of the team we have assembled here at Ruth’s Hospitality Group and of our many accomplishments over the last 10 years. The Company is well-positioned for continued success, due in large part to initiatives designed and implemented by Cheryl Henry, our new Chief Executive Officer. I remain extremely confident in the future of the Company, and look forward to supporting Cheryl in my new role as Executive Chairman.”
Review of Second Quarter 2018 Operating Results
Total revenues in the second quarter of 2018 were $109.6 million, an increase of 9.6% compared to $100.0 million in the second quarter of 2017.
- Calendar comparable restaurant sales at Company-owned restaurants increased 1.3%, which consisted of a traffic decrease of 0.1%, as measured by entrees, and an average check increase of 1.4%.
- The calendar shift of Easter from the second quarter of 2017 into the first quarter of 2018 negatively impacted second quarter 2018 comparable restaurant traffic and sales by approximately 70 basis points.
- Fiscal average unit weekly sales were $103.4 thousand in the second quarter of 2018, compared to $103.5 thousand in the second quarter of 2017.
- 77 Company-owned Ruth’s Chris Steak House restaurants were open at the end of the second quarter of 2018, compared to 70 Ruth’s Chris Steak House restaurants at the end of the second quarter of 2017. Total operating weeks for the second quarter of 2018 increased to 1,001 from 910 in the second quarter of 2017.
Franchise income in the second quarter of 2018 was $4.5 million, an increase of 4.7% compared to $4.3 million in the second quarter of 2017. The increase in franchise income was driven by a 1.3% increase in comparable franchise restaurant sales as well as the impact of the new revenue recognition standard, partially offset by the acquisition of the Hawaii restaurant locations.
75 franchisee-owned restaurants were open at the end of the second quarter of 2018 compared to 81 at the end of the second quarter of 2017.
- Food and beverage costs, as a percentage of restaurant sales, decreased 180 basis points to 28.1%, primarily driven by a 10% decrease in total beef costs, as well as by an increase in average check of 1.4%.
- Restaurant operating expenses, as a percentage of restaurant sales, increased 50 basis points to 48.3%. The increase in restaurant operating expenses as a percentage of restaurant sales was primarily due to an increase in occupancy related expenses.
- General and administrative expenses, as a percentage of total revenues, increased 40 basis points to 8.5%. The increase as a percentage of total revenues was primarily driven by additional costs related to the integration of the recently acquired Hawaiian restaurants.
- Marketing and advertising costs, as a percentage of total revenues, increased 80 basis points. The increase in marketing and advertising costs in the second quarter of fiscal year 2018 was primarily attributable to a planned increase in advertising spending, in addition to the reclassification of certain administrative support costs that have been historically charged to general and administrative costs.
- Pre-opening costs in the second quarter of 2018 were $0.3 million compared to $0.2 million in the second quarter of 2017, driven by the timing of new restaurant openings.
- Income tax expenses declined from $3.6 million in the second quarter of 2017 to $1.8 million largely as a result of the enactment of the Tax Cuts and Jobs Act.
The Company expects to open two new restaurants during the balance of 2018. The first in Jersey City, NJ in the third quarter and another in Paramus, NJ in the fourth quarter. Additionally, a restaurant operating under a management agreement in Reno, NV is expected to open early in the first quarter of 2019.
Franchise partners opened one new restaurant and expect to open another new restaurant in 2018. The first in Fort Wayne, IN opened during the second quarter on May 7th, and another in Markham, Ontario is expected to open in the fourth quarter.
Share Repurchase and Debt
The Company repurchased 224,605 shares during the second quarter of 2018, for approximately $5.9 million or $26.46 per share. At the end of the quarter, the Company had approximately $44.7 million remaining under its share repurchase authorization.
At the end of the second quarter of 2018, the Company had $50 million in debt outstanding under that facility, with an additional $35.8 million of availability.
Quarterly Cash Dividend
Subsequent to the end of the quarter, the Company’s Board of Directors approved the payment of a quarterly cash dividend to shareholders of $0.11 per share. The dividend will be paid on September 6, 2018 to shareholders of record as of the close of business on August 23, 2018, and represents a 22% increase from the quarterly cash dividend paid in August of 2017.
Based on current information, Ruth’s Hospitality Group, Inc. is revising its full year 2018 outlook based on a 52 week year ending December 30, 2018, as follows:
- Food and beverage costs of 28.0% to 30.0% of restaurant sales
- Restaurant operating expenses of 47.0% to 49.0% of restaurant sales
- Marketing and advertising costs of 3.8% to 4.0% of total revenue
- General and administrative expenses of $33 million to $35 million, exclusive of the integration costs related to the acquisition of the Hawaiian restaurants
- Effective tax rate of 17% to 19%, excluding discreet income tax items
- Capital expenditures of $30 million to $32 million
- Fully diluted shares outstanding of 30.5 million to 31.0 million (exclusive of any future share repurchases under the Company’s share repurchase program)
The foregoing statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer you to our recent filings with the Securities and Exchange Commission for more detailed discussions of the risks that could impact our financial outlook and our future operating results and financial condition.
The Company will host a conference call to discuss second quarter 2018 financial results today at 8:30 AM Eastern Time. Hosting the call will be Michael P. O’Donnell, Chairman and Chief Executive Officer, Arne G. Haak, Executive Vice President and Chief Financial Officer and Cheryl Henry, President and Chief Operating Officer.
The conference call can be accessed live over the phone by dialing 323-794-2093. A replay will be available one hour after the call and can be accessed by dialing 412-317-6671; the password is 8635792. The replay will be available until Friday, August 17, 2018. The call will also be webcast live from the Company’s website at www.rhgi.com under the investor relations section.
About Ruth’s Hospitality Group, Inc.
Ruth’s Hospitality Group, Inc., headquartered in Winter Park, Florida, is the largest fine dining steakhouse company in the U.S. as measured by the total number of Company-owned and franchisee-owned restaurants, with over 150 Ruth’s Chris Steak House locations worldwide specializing in USDA Prime grade steaks served in Ruth’s Chris’ signature fashion – “sizzling.”
For information about our restaurants, to make reservations, or to purchase gift cards, please visit www.RuthsChris.com. For more information about Ruth’s Hospitality Group, Inc., please visit www.rhgi.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains “forward-looking statements” that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties. Forward-looking statements frequently are identified by the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “targeting,” “will be,” “will continue,” “will likely result,” or other similar words and phrases. Similarly, statements herein that describe the Company’s objectives, plans or goals, including with respect to new restaurant openings, strategy, financial outlook, capital expenditures, our effective tax rate and the expected impact and timing of integration of the Hawaii franchisee also are forward-looking statements. Actual results could differ materially from those projected, implied or anticipated by the Company’s forward-looking statements. Some of the factors that could cause actual results to differ include: reductions in the availability of, or increases in the cost of, USDA Prime grade beef, fish and other food items; changes in economic conditions and general trends; the loss of key management personnel; the effect of market volatility on the Company’s stock price; health concerns about beef or other food products; the effect of competition in the restaurant industry; changes in consumer preferences or discretionary spending; labor shortages or increases in labor costs; the impact of federal, state or local government regulations relating to Company employees, the sale or preparation of food, the sale of alcoholic beverages and the opening of new restaurants; harmful actions taken by the Company’s franchisees; a material failure, interruption or security breach of the Company’s information technology network; repeal or reduction of the federal FICA tip credit; the impact of recent tax legislation and accounting policy changes; unexpected expenses incurred as a result of the sale of the Mitchell’s Restaurants; the Company’s ability to protect its name and logo and other proprietary information; an impairment in the financial statement carrying value of the Company’s goodwill, other intangible assets or property; the impact of litigation; the restrictions imposed by the Company’s Credit Agreement; changes in, or the discontinuation of, the Company’s quarterly cash dividend payments or share repurchase program; unanticipated costs associated with the Hawaii franchisee acquisition; and the Company’s inability to successfully integrate the Hawaii franchisee restaurants into its operations. For a discussion of these and other risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which is available on the SEC’s website at www.sec.gov. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this press release to reflect events or circumstances after the date hereof. You should not assume that material events subsequent to the date of this press release have not occurred.
Unless the context otherwise indicates, all references in this report to the “Company,” “Ruth’s,” “we,” “us”, “our” or similar words are to Ruth’s Hospitality Group, Inc. and its subsidiaries. Ruth’s Hospitality Group, Inc. is a Delaware corporation formerly known as Ruth’s Chris Steak House, Inc., and was founded in 1965.
For Ruth’s Hospitality Group, Inc.
Fitzhugh Taylor, 203-682-8261
Chuy’s Holdings, Inc. Announces Second Quarter 2018 Financial Results
Chuy’s Holdings, Inc. (NASDAQ:CHUY) announced financial results for the second quarter ended July 1, 2018./span>
August 10, 2018–(Restaurant News Resource)
Highlights for the second quarter ended July 1, 2018 were as follows:
- Revenue increased 12.6% to $106.3 million from $94.5 million in the second quarter of 2017.
- On both a fiscal and calendar basis, comparable restaurant sales increased 1.0%.
- Net income was $6.5 million, or $0.38 per diluted share, compared to $5.3 million, or $0.31 per diluted share, in the second quarter of 2017.
- Restaurant-level operating profit(1) was $18.6 million compared to $18.1 million in the second quarter of 2017.
- Three restaurants opened during the second quarter of 2018.
Steve Hislop, President and Chief Executive Officer of Chuy’s Holdings, Inc. stated “Our second quarter results included a double-digit increase in revenue and a return to positive comparable restaurant sales growth. We also continued our focus on a number of key initiatives during the quarter. Specifically, we are excited about the initiation of our alliance with Kelly Scott Madison, a media marketing agency, which we believe will help us market our unique combination of food quality, value and atmosphere to a wider audience. We continue to add tools to help us operate more efficiently and offset ongoing labor pressures. Lastly, we are currently testing online ordering, which will provide added convenience for our guests. We believe these initiatives can improve our business in the short run while also facilitating longer-term success.”
Hislop added, “We also added three new restaurants during the second quarter and subsequently have opened an additional restaurant during the third quarter. We are pleased with the performance of our six new openings to date, and have narrowed our range of expected openings for 2018 to nine to ten.”
Second Quarter 2018 Financial Results
Revenue increased $11.9 million, or 12.6%, to $106.3 million in the second quarter of 2018 compared to the second quarter of 2017. The increase was driven by $11.8 million in incremental revenue from an additional 147 operating weeks provided by 14 new restaurants which opened during and subsequent to the second quarter of 2017 and increased revenue at our comparable restaurants. These increases were partially offset by a decrease in our non-comparable restaurants that are not included in the incremental revenue discussed above. Revenue for non-comparable restaurants is historically lower as the restaurants transition out of the ‘honeymoon’ period that follows a restaurant’s initial opening.
Due to the inclusion of a 53rd week in fiscal 2017, there is a one-week calendar shift in the comparison of the second fiscal quarter of 2018 to the second fiscal quarter of 2017. After adjusting for the timing of the 53rd week in fiscal 2017 and measuring performance on a comparable calendar basis, comparable restaurant sales increased 1.0% for the thirteen weeks ended July 1, 2018 compared to the thirteen weeks ended July 2, 2017. The increase in comparable restaurant sales was primarily driven by a 2.1% increase in average check, partially offset by a 1.1% decrease in average weekly customers. The comparable restaurant base consisted of 77 restaurants at the end of the second quarter of 2018.
On a fiscal basis, which does not adjust for the one-week calendar shift, as previously noted, sales for the same restaurants in the comparable restaurant base in the thirteen weeks ended July 1, 2018 increased 1.0% compared to the thirteen weeks ended June 25, 2017.
Total restaurant operating costs as a percentage of revenue increased to 82.5% in the second quarter of 2018 from 80.8% in the second quarter of 2017. The increase in restaurant operating costs as a percentage of revenue was primarily driven by higher labor costs due to new store labor inefficiencies and hourly labor rate inflation; an increase in marketing expenses as a result of new national-level marketing initiatives; and an increase in occupancy costs as a result of higher rental expense on certain newly opened restaurants and increases in rent on extended lease terms at some existing restaurants. These increases were partially offset by lower cost of sales as a result of favorable produce pricing and lower training expense for our new managers.
Total general and administrative expenses increased $0.5 million, or 11.3%, to $5.2 million for the first quarter of 2018 as compared to the same period in 2017. This increase was primarily driven by higher management salaries and benefits due to additional headcount needed to support our growth and performance bonuses.
Net income was $6.5 million, or $0.38 per diluted share, compared to $5.3 million, or $0.31 per diluted share, in the second quarter of 2017.
During the second quarter, three new restaurants were opened in Lakewood, Colorado, Greenwood Village, Colorado and New Tampa, Florida. Subsequent to the end of the second quarter, one additional restaurant was opened in Kendall, Florida.
Share Repurchase Program
As of July 1, 2018, the Company had $28.4 million remaining under the current $30.0 million repurchase authorization that expires on December 31, 2019.
The Company has updated its expectation of the 2018 net income per diluted share to $1.09 to $1.13 from a previous range of $1.12 to $1.16. This compares to 2017 adjusted net income(1) per diluted share of $0.96, or $0.89 after excluding approximately $0.07 per diluted share as a result of the extra week in 2017. The net income guidance for fiscal year 2018 is based, in part, on the following annual assumptions:
- Comparable restaurant sales growth of approximately 1.0% (on a 52-week fiscal basis);
- Restaurant pre-opening expenses of $4.4 million to $4.8 million versus a previous range of $3.7 million to $5.5 million;
- General and administrative expense of $21.3 million to $21.8 million;
- An effective tax rate of 10% to 11% versus a previous range of 13% to 14%;
- The opening of 9 to 10 new restaurants versus a previous range of 8 to 12 new restaurants;
- Annual weighted average diluted shares outstanding of 17.1 million to 17.2 million shares; and
- Net capital expenditures (net of tenant improvement allowances) of $34.0 million to $37.0 million versus a previous range of $30.0 million to $40.0 million.
Founded in Austin, Texas in 1982, Chuy’s owns and operates 97 full-service restaurants across 19 states serving a distinct menu of authentic, made from scratch Tex-Mex inspired dishes.
Chuy’s Holdings, Inc.
Unaudited Condensed Consolidated Income Statements
(In thousands, except share and per share data)
J. Alexander’s Holdings, Inc. Reports Results for Second Quarter Ended July 1, 2018
Same Store Sales Rise in Both Restaurant Concepts
August 9, 2018–(Restaurant News Resource)
J. Alexander’s Holdings, Inc. (NYSE: JAX) (the Company), owner and operator of a collection of restaurants which includes J. Alexander’s, Redlands Grill, Stoney River Steakhouse and Grill and selected other restaurants, yesterday reported financial results for the second quarter ended July 1, 2018.
Second Quarter 2018 Highlights Compared to the Second Quarter of 2017
- Net sales were $60,420,000, an increase of 3.8% from $58,216,000 achieved in the second quarter of 2017.
- For the J. Alexander’s/Grill restaurants, average weekly same store sales per restaurant (1) were $116,200, an increase of 1.9% from $114,000 reported in the second quarter of 2017. For the Stoney River Steakhouse and Grill restaurants, average weekly same store sales were $78,900, up 6.2% from $74,300 recorded in the second quarter of 2017.
- Pre-opening expense totaled $504,000 for the quarter ended July 1, 2018 compared to $10,000 during the second quarter of 2017, with the increase attributable to the timing of new restaurant openings.
- Income from continuing operations before income taxes was $2,203,000 for the second quarter of 2018 compared to income from continuing operations before income taxes of $42,000 for the corresponding quarter of 2017. The sharp increase in results for the most recent quarter was primarily due to a favorable swing in the quarterly valuation of the Black Knight Advisory Services, LLC (Black Knight) profits interest grant. For the second quarter of 2018, the Company realized income of $53,000 compared to a profits interest expense of $1,714,000 in the same quarter a year ago. The Black Knight profits interest grant was issued in October 2015 and requires a quarterly valuation. The non-cash expense (income) associated with this grant is being recognized over a three?year vesting period which runs through October 6, 2018. It is calculated each quarter based upon the most recent valuation performed using the Black-Scholes valuation model, with any cumulative change associated with the most recent valuation impacting the most recent quarter. Primarily due to the $11.15 per share closing price of the Company’s stock at the end of the most recent quarter, the grant’s valuation decreased from $6,684,000 at April 1, 2018 to $6,018,000 at July 1, 2018. The Company also incurred consulting fees of $205,000 under its management agreement with Black Knight for the most recent quarter compared to $174,000 in the second quarter of 2017.
- Net income for the second quarter of 2018 was $2,105,000, up from net income of $186,000 recorded for the comparable quarter of 2017.
- Basic and diluted earnings per share were $0.14 for the second quarter of 2018 compared to $0.01 for the second quarter of 2017.
- Adjusted EBITDA(2) rose 9.9% from $5,465,000 in the second quarter of 2017 to $6,007,000 in the second quarter of 2018.
- Restaurant Operating Profit Margin (3) as a percent of net sales was 12.5% in the most recent quarter compared to 12.1% for the second quarter of 2017.
- Cost of sales as a percentage of net sales in the second quarter of 2018 was 32.2% compared to 33.0% in the corresponding quarter of 2017.
For the second quarter of 2018, the Company’s restaurant labor and related costs as a percentage of net sales were 31.1% compared to 30.8% of net sales in the second quarter of 2017. Other restaurant operating expenses were 19.8% of net sales in both the second quarter of 2018 and second quarter of 2017.
The Company’s operating income for the second quarter of 2018 was $2,334,000 compared to operating income of $215,000 for the second quarter of 2017.
The average weekly guest counts within the same store base of the Company’s J. Alexander’s/Grills collection were down 0.6% in the second quarter of 2018 compared to the second quarter of the prior year. Guest counts within the same store base at the Company’s Stoney River Steakhouse and Grill restaurants were up 6.2% for the second quarter of 2018 over the second quarter of 2017. With respect to average guest checks, which include alcoholic beverage sales, the average guest check within the J. Alexander’s/Grills same store base of restaurants during the second quarter of 2018 was $31.60, up 2.6% from $30.80 during the second quarter of 2017. The average guest check within the same store base of Stoney River Steakhouse and Grill restaurants reached $42.27 during the second quarter of 2018, up 0.1% from $42.23 recorded in the corresponding quarter of 2017.
On a consolidated basis, average weekly guest counts within the Company’s J. Alexander’s/Grills locations in the second quarter of 2018 were down 2.0% from the second quarter of 2017, while average weekly guest counts within the Company’s Stoney River Steakhouse and Grill locations increased 7.8% for the second quarter of 2018 compared to the second quarter of 2017. Average guest checks for the combined J. Alexander’s/Grills concepts rose 2.7% from $30.85 in the second quarter of 2017 to $31.69 for the second quarter of 2018. Average guest checks for the Stoney River Steakhouse and Grill restaurants decreased 0.6% from $42.17 in the second quarter of 2017 to $41.90 in the second quarter of 2018.
The effect of menu pricing for the second quarter of 2018 was estimated to be a 1.8% increase for the J. Alexander’s/Grills restaurants and a 1.9% increase for the Stoney River Steakhouse and Grill restaurants compared to the corresponding quarter of 2017. Deflation in food costs for the second quarter of 2018 was estimated to total 0.9% for the J. Alexander’s/Grills restaurants, with beef costs decreasing by an estimated 4.6% compared to the second quarter of 2017. For the Stoney River Steakhouse and Grill restaurants, deflation for the second quarter of 2018 was estimated to total 3.0%, with beef costs down by approximately 7.2% from the comparable quarter of 2017.
Chief Executive Officer’s Comments
“The second quarter of 2018 again reflected increases in average weekly same store sales for both of our restaurant groups,” Lonnie J. Stout II, President and Chief Executive Officer, said. “It was a solid quarter that included improvement not only at the top line, but also in several key operating areas. We were pleased with our overall performance.”
During the second quarter, Stout said the Company continued to execute strategies allowing it to build guest loyalty in both of its restaurant collections.
“We were encouraged that guest counts at our J. Alexander’s/Grill restaurants showed improvement over the first quarter’s performance. We realize, however, that further improvement is needed in the final half of 2018 and we remain tightly focused on making certain each guest visit is an outstanding experience.” Stout noted that the modest decrease in guest counts within the Company’s J. Alexander’s/Grills group during the second quarter of 2018 was significantly influenced by three specific locations. “From time to time, we will encounter situations that impact our traditional guest traffic patterns and require us to work that much harder to recapture or replace the business. Examples include the relocation of a major corporate presence within a specific market or, for limited periods of time, competitive intrusion of a new restaurant opened within a specific market. As we analyze our same store guest traffic, excluding three specific restaurants that have been subject to events similar to these examples, our performance for the second quarter of 2018 would have reflected a slight increase instead of the 0.6% decrease previously noted.”
Stout said the recent addition of lunch and brunch at several Stoney River locations in the last quarter has positively impacted guest traffic and sales of the restaurant group, but that the primary factor influencing the increase in average weekly same store sales per restaurant was organic growth in guest counts. “This collection has continued to show stronger than anticipated momentum, including our newer restaurants.”
The Company’s cost of sales decreased in the most recent quarter due principally to falling beef prices. Restaurant operating margins also showed improvement, rising 0.4% for the quarter ended July 1, 2018 over the same quarter a year earlier.
“We remain cautiously optimistic that the beef market will continue to perform within acceptable parameters,” Stout continued. “On balance, we continue to be encouraged by the performance of our newer restaurants in both operating groups, and look forward to announcing plans for additional locations as soon as leases are executed,” he added.
Highlights for the First Six Months of 2018
For the six months ended July 1, 2018, the Company posted net sales of $122,329,000, up 3.6% from $118,038,000 recorded in the first half of 2017. Within the J. Alexander’s/Grill restaurants, average weekly same store sales per restaurant were $118,100 for the six months ended July 1, 2018, an increase of 1.0% from $116,900 achieved in the same two quarters of 2017. For the Stoney River Steakhouse and Grill restaurants, average weekly same store sales per restaurant advanced 6.1% from $76,600 in the first six months of 2017 to $81,300 in the first half of 2018.
Income from continuing operations before income taxes for the six months ended July 1, 2018 was $4,045,000, up 9.8% from $3,683,000 reported for the same two quarters a year ago.
During the first half of 2018, the Black Knight profits interest grant resulted in non-cash profits interest expense of $1,854,000, an increase of 10.6% from profits interest expense of $1,676,000 reported in the same six months of 2017. For the first six months of 2018, the Company had consulting fees of $449,000 from its management agreement with Black Knight compared to $439,000 of expense in the first half of 2017.
The Company posted net income of $3,698,000 in the first six months of 2018, up 28.9% from $2,870,000 for the same two quarters of 2017. Adjusted EBITDA for the first two quarters of 2018 totaled $14,158,000, up 8.4% from $13,066,000 recorded in the first six months of 2017. Basic earnings per share and diluted earnings per share totaled $0.25 in the first half of 2018. In the comparable two quarters of 2017, basic earnings per share totaled $0.20 while diluted earnings per share totaled $0.19. See attached “Adjusted EBITDA Reconciliation” for our definition of Adjusted EBITDA and a reconciliation to net income.
Guest counts within the same store base of restaurants decreased by 1.4% within the J. Alexander’s/Grill restaurants for the first half of 2018, and increased 7.2% within the Stoney River Steakhouse and Grill restaurants during the same two quarters. The average guest check within the same store base at the combined J. Alexander’s/Grill restaurants increased 2.5% from $30.95 for the first six months of 2017 to $31.73 for the first half of 2018, while the Stoney River average guest check decreased by 0.8% from $42.94 in the first two quarters of 2017 to $42.58 for the first half of 2018. The effect of menu price changes for the first half of 2018 was estimated to be a 1.8% increase at the J. Alexander’s/Grill locations and a 1.7% increase at the Stoney River Steakhouse and Grill restaurants compared to the first six months of 2017.
Cost of sales as a percentage of net sales for the first two quarters of 2018 was 31.6% compared to 31.9% for the first six months of 2017. The estimated effect of inflation in food costs for the first half of 2018 was 1.0% for the J. Alexander’s/Grill restaurants, with beef costs declining by approximately 1.1% compared to the same six months a year earlier. For the Stoney River Steakhouse and Grill restaurants, deflation was an estimated 0.3%, including an estimated decrease of 2.7% in beef costs compared to the first half of 2017.
During the second quarter of 2018, the Company opened a new J. Alexander’s restaurant in King of Prussia, PA, marking the Company’s entry into Pennsylvania. The Company continued construction on a new Stoney River Steakhouse and Grill in Troy, MI. This new restaurant is expected to open in the fourth quarter of 2018. The Company anticipates opening three to four new restaurants in 2019, and will announce details once leases related to such sites have been executed.
Guidance For 2018 Unchanged
Our performance outlook is based on current information as of August 8, 2018. The Company does not expect to update its 2018 guidance before next quarter’s earnings release. However, the information on which the outlook is based is subject to change, and the Company may update its full business outlook or any portion thereof at any time for any reason. Based upon current information, the guidance for the 2018 fiscal year is the same as reported on May 3, 2018.
About J. Alexander’s Holdings, Inc.
J. Alexander’s Holdings, Inc. is a collection of restaurants that focus on providing high quality food, outstanding professional service and an attractive ambiance. The Company presently operates 45 restaurants in 16 states. The Company has its headquarters in Nashville, TN.
Jack in the Box Inc. Reports Third Quarter FY2018 Earnings
Updates Guidance for FY 2018; Provides Long-Term Goals; Declares Quarterly Cash Dividend
August 9, 2018–(Restaurant News Resource)
Jack in the Box Inc. (NASDAQ: JACK) yesterday reported financial results for the third quarter ended July 8, 2018.
The company completed the sale of Qdoba Restaurant Corporation on March 21, 2018. Qdoba results are included in discontinued operations for all periods presented.
Earnings from continuing operations were $48.1 million, or $1.70 per diluted share, for the third quarter of fiscal 2018 compared with $31.3 million, or $1.05 per diluted share, for the third quarter of fiscal 2017.
Operating Earnings Per Share(1), a non-GAAP measure, were $1.00 in the third quarter of fiscal 2018 compared with $0.79 in the prior year quarter. A reconciliation of non-GAAP Operating Earnings Per Share to GAAP results is provided below, with additional information included in the attachment to this release. Figures may not add due to rounding.
(1) Operating Earnings Per Share represents diluted earnings per share from continuing operations on a GAAP basis excluding gains on the sale of company-operated restaurants, restructuring charges, the non-cash impact of the Tax Cuts and Jobs Act, and the excess tax benefits from share-based compensation arrangements which are now recorded as a component of income tax expense versus equity previously. See “Reconciliation of Non-GAAP Measurements to GAAP Results.”
Adjusted EBITDA(2), a non-GAAP measure, was $64.4 million in the third quarter of fiscal 2018 compared with $62.4 million for the prior year quarter.
Lenny Comma, chairman and chief executive officer, said, “Our third quarter operating results were in line with our expectations, with system same-store sales returning to positive territory. We are pleased that this momentum has continued into the fourth quarter without resorting to deep discounting that we believe is not in the best interests of the long-term health of the brand.
“With the refranchising of 42 Jack in the Box® restaurants in the third quarter and 7 thus far in the fourth quarter, our franchise mix now stands at approximately 94 percent. We expect to sell one additional restaurant in the fourth quarter which will complete our refranchising initiative.
“We remain firmly committed to returning cash to shareholders with the purchase of $100 million of stock in the quarter and $200 million thus far this year. Following the completion of our longer-term financing plans, we plan to increase our leverage up to 5.0 times EBITDA and expect to return more than $1 billion over the next four years to our shareholders in the form of share repurchases and dividends.
“We look forward to sharing additional details about our long-term goals on our earnings call tomorrow morning. Our plans are focused on meeting evolving consumer needs, with emphasis on improving operations consistency and targeted investments designed to maximize our returns. To improve our brand relevance, by the end of fiscal 2021 we expect at least 80 percent of the system to have significant upgrades to the drive-thru experience or to be remodeled. Our key fiscal 2022 targets include system-wide sales of $4 billion, adjusted EBITDA of approximately $300 million, and free cash flow of approximately $175 million.”
(2) Adjusted EBITDA represents net earnings on a GAAP basis excluding earnings from discontinued operations, income taxes, interest expense, net, gains on the sale of company-operated restaurants, impairment and other charges, net, depreciation and amortization, and the amortization of franchise tenant improvement allowances. See “Reconciliation of Non-GAAP Measurements to GAAP Results.”
Jack in the Box system same-store sales increased 0.5 percent for the quarter and lagged the QSR sandwich segment by 2.1 percentage points for the comparable period, according to The NPD Group’s SalesTrack® Weekly for the 12-week time period ended July 8, 2018. Included in this segment are 16 of the top QSR sandwich and burger chains in the country. Company same-store sales increased 0.6 percent in the third quarter driven by average check growth of 2.6 percent, partially offset by a 2.0 percent decrease in transactions.
Restaurant-Level EBITDA(3), a non-GAAP measure, increased by 430 basis points to 27.5 percent of company restaurant sales in the third quarter of 2018 from 23.2 percent a year ago. The increase was due primarily to the benefit of refranchising, which was partially offset by wage inflation, and higher maintenance and repairs expenses. Food and packaging costs, as a percentage of company restaurant sales, decreased in the quarter due primarily to menu price increases and favorable product mix. Commodity costs were approximately flat in the quarter as compared with the prior year. Restaurant Operating Margin(3), a non-GAAP measure, increased to 23.9 percent of company restaurant sales in the third quarter of fiscal 2018 from 19.3 percent in the prior year quarter.
Franchise EBITDA(3), a non-GAAP measure,as a percentage of total franchise revenues decreased to 60.2 percent in the third quarter from 61.0 percent in the prior year quarter. The decrease was due primarily to incremental costs incurred in 2018 related to the implementation of a mystery guest program. Franchise Margin(3), a non-GAAP measure, decreased to 51.8 percent of total franchise revenues in the third quarter of fiscal 2018 compared with 52.7 percent in the third quarter of fiscal 2017.
SG&A expenses for the third quarter decreased by $8.0 million and were 10.7 percent of revenues compared with 11.4 percent in the prior year quarter. Advertising costs, which are included in SG&A, were $5.9 million in the third quarter compared with $8.2 million in the prior year quarter. The $2.3 million decrease in advertising costs was due to a $3.8 million decrease resulting from refranchising, which was partially offset by an incremental $1.5 million of spending in the quarter. The $5.7 million decrease in G&A excluding advertising was primarily driven by $3.6 million in transition services income resulting from the sale of Qdoba, which was reflected as a reduction to SG&A. The decrease was further attributable to $2.4 million of costs incurred in the prior year quarter while 31 franchised Jack in the Box restaurants taken back were closed, a $0.6 million decrease in share-based compensation, and a $0.4 million decrease in pension and postretirement benefits. These decreases were partially offset by mark-to-market adjustments on investments supporting the company’s non-qualified retirement plans resulting in a $1.1 million year-over-year increase in SG&A. As a percentage of system-wide sales, G&A excluding advertising was 1.8 percent in the third quarter of 2018 compared with 2.5 percent in the 2017 quarter.
(3) Restaurant Operating Margin, Restaurant-Level EBITDA, Franchise Margin, and Franchise EBITDA are non-GAAP measures. These non-GAAP measures are reconciled to earnings from operations, the most comparable GAAP measure, in the attachment to this release. See “Reconciliation of Non-GAAP Measurements to GAAP Results.
In fiscal 2018, the company began presenting depreciation and amortization as a separate line item in its condensed consolidated statements of earnings to better align with similar presentation made by many of its peers and to provide additional disclosure that is meaningful for investors. The prior year condensed consolidated statement of earnings was adjusted to conform with this new presentation. Depreciation and amortization was previously presented within company restaurant costs, franchise occupancy expenses, selling, general and administrative expenses, and impairment and other charges, net, in the company’s condensed consolidated statements of earnings.
Restructuring charges of $1.9 million, or approximately $0.05 per diluted share, were recorded during the third quarter of fiscal 2018 compared with $1.8 million, or $0.04 per diluted share, in the prior year quarter. Restructuring charges are included in “Impairment and other charges, net” in the accompanying condensed consolidated statements of earnings. Including these charges, impairment and other charges, net, decreased in the third quarter to $3.3 million from $4.9 million in the year ago quarter.
Interest expense, net, increased by $1.5 million in the third quarter due primarily to a higher effective interest rate for 2018.
The Tax Cuts and Jobs Act (the “Tax Act”), enacted into law on December 22, 2017, reduced the federal statutory rate from 35 percent to 21 percent as of January 1, 2018. As a company with a fiscal year-end of September 30, the tax rate reduction will be phased in, resulting in a blended statutory federal tax rate of 24.5 percent for the fiscal year ending September 30, 2018. In addition, the Tax Act resulted in a non-cash increase to the provision for income taxes of $0.9 million, or $0.03 per diluted share, for the third quarter of fiscal 2018, and $32.1 million, or $1.10 per diluted share, for the 40 weeks ended July 8, 2018, related primarily to the revaluation of deferred tax assets and liabilities at the new lower rates. This revaluation was based upon estimates and interpretations of the Tax Act which may be refined as further guidance is issued.
In the first quarter of fiscal 2018, the company adopted Accounting Standards Update No. 2016-09, Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). As required by the updated accounting standard, excess tax benefits or deficiencies are now recorded to the provision for income taxes in the condensed consolidated statement of earnings, on a prospective basis, instead of additional paid-in capital in the condensed consolidated balance sheet. The adoption resulted in a reduction to the provision for income taxes of $1.3 million, or $0.04 per diluted share, for the third quarter of fiscal 2018, and $2.1 million, or $0.07 per diluted share, for the 40 weeks ended July 8, 2018, but had no additional impact on cash paid for income taxes. Excess tax benefits will vary in future periods, as such amounts are dependent on the number of shares released related to employee stock compensation arrangements and fluctuations in the company’s stock price.
Qdoba Discontinued Operations
In the first quarter of fiscal 2018, the company entered into a definitive agreement to sell Qdoba, a wholly owned subsidiary of the company, to certain funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, “Apollo”). The transaction closed on March 21, 2018, and operating results for Qdoba are included in discontinued operations for all periods presented. However, the company did not allocate any general and administrative shared services expenses to discontinued operations prior to the sale.
The company repurchased approximately 1.2 million shares of its common stock in the third quarter of 2018 at an average price of $82.78 per share for an aggregate cost of $100.0 million. The company currently has approximately $181.0 million remaining under a stock-buyback program authorized by its Board of Directors that expires in November 2019.
The company also announced today that on August 3, 2018, its Board of Directors declared a cash dividend of $0.40 per share on the company’s common stock. The dividend is payable on September 5, 2018, to shareholders of record at the close of business on August 20, 2018.
This release includes forward-looking guidance for certain non-GAAP financial measures, including Restaurant-Level EBITDA, Adjusted EBITDA and free cash flow, which the company defines as cash flow from operations (including tenant improvement allowances) less capital expenditures. The company believes free cash flow is an important liquidity measure for investors because it communicates how much cash flow is available for working capital needs or to be used for repurchasing shares, paying dividends, repaying or refinancing debt, or other uses of cash. The company is unable without unreasonable effort to provide reconciliations of these forward-looking non-GAAP measures.
Fourth Quarter and Fiscal Year 2018 Guidance
The following guidance and underlying assumptions reflect the company’s current expectations for the fourth quarter and fiscal year ending September 30, 2018. Fiscal 2018 and fiscal 2017 are 52-week years, with 16 weeks in the first quarter, and 12 weeks in each of the second, third and fourth quarters.
Fourth quarter fiscal year 2018 guidance
- System same-store sales increase of approximately 1.0 to 2.0 percent versus a 1.0 percent decrease in the year-ago quarter.
Fiscal year 2018 guidance
- System same-store sales of approximately flat to up 0.5 percent.
- Commodity cost inflation of approximately 3.0 percent.
- Restaurant-Level EBITDA of approximately 26.0 to 27.0 percent of company restaurant sales.
- SG&A as a percentage of revenues of approximately 12.0 percent, which includes incremental advertising spending on behalf of the system.
- G&A as a percentage of system-wide sales of approximately 2.2 percent.
- Approximately 15 to 20 new restaurants opening system-wide, the majority of which will be franchise locations.
- Capital expenditures of approximately $30 to $35 million.
- Tenant improvement allowances of approximately $15 to $20 million.
- Tax rate of approximately 28.0 to 29.0 percent, excluding the non-cash impact of the Tax Act and the tax impact of excess tax benefits from share-based compensation arrangements which are now recorded as a component of income tax expense versus equity previously.
- Adjusted EBITDA of approximately $260 to $270 million.
Long-Term Guidance (fiscal 2019 through fiscal 2022)
The guidance below does not reflect the impact of new accounting standards, including the revenue recognition accounting standard that will be adopted in fiscal 2019 or the new lease accounting standard that will be adopted in fiscal 2020. The new revenue recognition standard will result in the inclusion of advertising fund revenues and expenses as well as certain other fees in the income statement, as well as the amortization of franchise fees over the terms of the franchise agreements.
- System-wide sales of approximately $4 billion in fiscal 2022, driven by low single-digit increases in both annual same-store sales and system-wide unit growth.
- Restaurant-Level EBITDA of approximately 25.0 to 27.0 percent of company restaurant sales, depending on same-store sales, and labor and commodity inflation.
- G&A as a percentage of system-wide sales declining steadily to approximately 1.9 percent beginning in fiscal 2021.
- Adjusted EBITDA growing to approximately $300 million in fiscal 2022.
- Following implementation of a new capital structure in the first half of fiscal 2019, the company expects to increase its leverage ratio to approximately 5.0 times EBITDA.
- Tax rate of approximately 26.0 percent, subject to fluctuations arising from the impact of excess tax benefits from share-based compensation arrangements.
- Recurring capital expenditures of approximately $20 to 25 million per year, including technology and equipment investments. In addition, capital expenditures of approximately $10 to $15 million per year in fiscal 2019 through fiscal 2021 for drive-thru enhancements and remodels at company restaurants.
- Tenant improvement allowances of approximately $25 to $35 million per year in fiscal 2019 through fiscal 2021.
- The company expects at least 80 percent of the system to have significant upgrades to the drive-thru experience or to be remodeled by the end of fiscal 2021.
- Free cash flow growing to approximately $175 million in 2022.
- The company expects to return more than $1 billion to shareholders over the next four years, in the form of share repurchases and dividends.
About Jack in the Box Inc.
Jack in the Box Inc. (NASDAQ: JACK), based in San Diego, is a restaurant company that operates and franchises Jack in the Box® restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam.
Good Times Restaurants Reports Q3 Results
Total Revenues Increase 20%
Consolidated Net Income Increases to $304,000
Initial Fiscal 2019 Guidance Provided
August 9, 2018–(Business Wire)
Good Times Restaurants Inc. (Nasdaq: GTIM), operator of Good Times Burgers & Frozen Custard, a regional quick service restaurant chain focused on fresh, high quality, all natural products and Bad Daddy’s Burger Bar, a full service, upscale concept, today announced its preliminary unaudited financial results for the third fiscal quarter ended June 26, 2018.
Key highlights of the Company’s financial results include:
- Same store sales for company-owned Good Times restaurants increased 3.8% for the quarter on top of last year’s increase of 3.7%. Year to date, same store sales increased 4.9% versus last year’s increase of 1.2%
- Bad Daddy’s same store sales increased 0.5% during the quarter over the prior year’s increase of 0.1%. Year to date, same store sales increased 0.5% versus last year’s increase of 1.7%. Same store sales exclude the weeks during which the original Bad Daddy’s in Charlotte, NC was closed for remodeling. Total revenues increased 20% to $26,175,000 for the quarter
- The Company opened two new Bad Daddy’s restaurants during the quarter for a total of five new restaurants opened through the third quarter of 2018. Subsequent to the end of the quarter, the Company opened an additional two restaurants and expects to open two more before the end of the fiscal year for a total of nine new restaurants in fiscal 2018
- Sales for the Bad Daddy’s restaurants for the quarter increased 37% versus last year to $17,765,000
- Restaurant Level Operating Profit (a non-GAAP measure) increased 26.8% to $4,779,000 (18.4% as a percent of sales) from $3,770,000 (17.5% as a percent of sales)*
- Adjusted EBITDA (a non-GAAP measure) for the quarter increased 36.6% to $1,907,000 from $1,396,000 last year*
- The Company ended the quarter with $3.2 million in cash and $5.1 million of long-term debt
Boyd Hoback, President & CEO, said, “We are very pleased with our continued growth in same store sales at both brands as well as our improved operating margins. Our class of 2018 Bad Daddy’s openings have been very strong on average and we anticipate they will be settling into a sales trend post-honeymoon at or above our system average. We are now operating in seven different metropolitan areas and are on track to enter three to four additional new areas in fiscal 2019, as we continue our expansion focused primarily on the Southeast.”
Regarding initial fiscal 2019 guidance, Ryan Zink, Chief Financial Officer, commented, “The strength of our new Bad Daddy’s restaurants opened during the 2018 fiscal year has generated cash for development which has limited our need to incur any significant incremental debt, and that has created a strong foundation on which to continue development in 2019. With this growth, we expect Adjusted EBITDA of between $7.6 and $8.1 million for the 2019 fiscal year, with an estimated run rate at the end of the fiscal year that approaches $10 million, consistent with our prior commentary projecting continued 40% annual growth in our Adjusted EBITDA.”
Fiscal 2018 Outlook:
The Company provided the following guidance for fiscal 2018:
- Total revenues of approximately $99 million to $100 million with a year-end revenue run rate of approximately $110 million
- Total revenue estimates assume same store sales of approximately +1% for Good Times and flat to slightly positive for Bad Daddy’s in Q4
- General and administrative expenses of approximately $7.9 million, including approximately $500,000 of non-cash equity compensation expense
- The opening of a total of 4 new Bad Daddy’s restaurants (including 1 joint venture unit) in Q4, for a total of 9 new restaurants during the full fiscal year
- Total Adjusted EBITDA* of approximately $5.4 million to $5.6 million
- Restaurant pre-opening expenses of approximately $2.7 million
- Capital expenditures (net of tenant improvement allowances and sale-leaseback proceeds) of approximately $8.5 to $9.0 million including approximately $0.6 million related to fiscal 2019 development
- Fiscal year-end long term debt of approximately $9.0 to $9.5 million
Fiscal 2019 Outlook:
The Company provided the following initial guidance for fiscal 2019:
- Total revenues of approximately $120 million to $123 million with a year-end revenue run rate of approximately $130 million
- Total revenue estimates assume same store sales of approximately +2% for Good Times, excluding Q2 where we project flat comparable sales, and assumes +1% for Bad Daddy’s
- General and administrative expenses of approximately $8.7 to $9.0 million, including approximately $600,000 of non-cash equity compensation expense
- The opening of a total of 7 – 9 new company-owned Bad Daddy’s restaurants
- Total Adjusted EBITDA* of approximately $7.6 million to $8.1 million
- Restaurant pre-opening expenses of approximately $2.5 million to $3.0 million
- Capital expenditures (net of tenant improvement allowances) of approximately $11.0 – $11.5 million
- Fiscal year-end long term debt of approximately $13.0 – $13.5 million
*For a reconciliation of restaurant level operating profit and Adjusted EBITDA to the most directly comparable financial measures presented in accordance with GAAP and a discussion of why the Company considers them useful, see the financial information schedules accompanying this release.
Management will host a conference call to discuss its third quarter 2018 financial results on Thursday, August 9, 2018 at 3:00 p.m. MT/5:00 p.m. ET. Hosting the call will be Boyd Hoback, President and Chief Executive Officer, and Ryan Zink, Chief Financial Officer.
The conference call can be accessed live over the phone by dialing (888) 339-0806 and requesting the Good Times Restaurants (GTIM) call. The conference call will also be webcast live from the Company’s corporate website www.goodtimesburgers.com under the Investor section. An archive of the webcast will be available at the same location on the corporate website shortly after the call has concluded.
About Good Times Restaurants Inc.:
Good Times Restaurants Inc. (GTIM) operates Good Times Burgers & Frozen Custard, a regional chain of quick service restaurants located primarily in Colorado, through its wholly-owned subsidiary, Good Times Drive Thru Inc. Good Times provides a menu of high quality all-natural hamburgers, 100% all-natural chicken tenderloins, fresh frozen custard, natural cut fries, fresh lemonades and other unique offerings. Good Times currently operates and franchises a total of 36 restaurants.
GTIM also owns, operates, franchises and licenses 31 Bad Daddy’s Burger Bar restaurants through its wholly-owned subsidiaries. Bad Daddy’s Burger Bar is a full service, upscale, “small box” restaurant concept featuring a chef driven menu of gourmet signature burgers, chopped salads, appetizers and sandwiches with a full bar and a focus on a selection of craft microbrew beers in a high-energy atmosphere that appeals to a broad consumer base.
Good Times Forward Looking Statements:
This press release contains forward-looking statements within the meaning of federal securities laws. The words “intend,” “may,” “believe,” “will,” “should,” “anticipate,” “expect,” “seek” and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, which may cause the Company’s actual results to differ materially from results expressed or implied by the forward-looking statements. These risks include such factors as the uncertain nature of current restaurant development plans and the ability to implement those plans and integrate new restaurants, delays in developing and opening new restaurants because of weather, local permitting or other reasons, increased competition, cost increases or shortages in raw food products, and other matters discussed under the “Risk Factors” section of Good Times’ Annual Report on Form 10-K for the fiscal year ended September 26, 2017 filed with the SEC. Although Good Times may from time to time voluntarily update its forward-looking statements, it disclaims any commitment to do so except as required by securities laws.
Diversified Restaurant Holdings Reports Second Quarter 2018 Results
Same-store sales declined 6.4%
August 8, 2018–(Restaurant News Resource)
Diversified Restaurant Holdings, Inc. (Nasdaq: SAUC), one of the largest franchisees for Buffalo Wild Wingswith 65 stores across five states, today announced results for its second quarter ended July 1, 2018.
Second Quarter Information (from continuing operations)
- Revenue totaled $37.0 million
- Same-store sales declined 6.4%
- Net loss was $1.1 million or $0.04 per diluted share
- Restaurant-level EBITDA(1) was $5.5 million, or 15.0% of sales
- Adjusted EBITDA(1) was $3.7 million
- Total debt of $108.2 million was down $5.8 million for the year-to-date period
“Our second quarter results reflect the ongoing headwinds that the Buffalo Wild Wings system is facing in the short-term while our franchisor, under new ownership, works to realign media and promotional strategies and reinvigorate the brand,” commented David G. Burke, President and CEO. “Despite the current challenges, we remain optimistic about a turnaround in sales trends as a result of the improved corporate marketing strategy planned for the upcoming football season along with the many other positive developments that are being tested and implemented, from advertising to information technology to menu innovation. We also expect to realize cost benefits as we participate in the leverage from our franchisor’s larger scale and buying power. We expect that the impact from these efforts will begin to be realized in our results later in the year as changes are implemented and gain traction.”
Mr. Burke added, “Given the current operating environment and our anticipated cash outlays for debt repayment and capital improvements, we felt it was prudent to complete an equity offering. The approximately $4.7 million in net proceeds that was recently raised provides confidence that our current cash balance, in addition to our cash flow from operations, will be sufficient to fund our operations, meet our commitments on our existing debt and ensure ongoing debt covenant compliance.”
The decrease in sales in the second quarter was the result of reduced traffic and the impact of the revenue deferral related to the Blazin’ Rewards loyalty program, partially offset by a new restaurant opening late in second quarter of 2017 and a favorable calendar shift with Easter falling in the 2018 first quarter versus the second quarter in 2017.
General and administrative expenses as a percentage of sales increased to 5.8% in the second quarter from 5.2% due to lower sales volumes. Food, beverage and packaging costs as a percentage of revenue decreased 140 basis points to 28.5%, primarily due to lower traditional chicken wing costs. Average cost per pound for traditional bone-in chicken wings, DRH’s most significant input cost, decreased to $1.66 in the 2018 second quarter compared with $2.03 in the prior-year period.
Balance Sheet Highlights – Continuing Operations
Cash and cash equivalents were $2.5 million at July 1, 2018 compared with $4.4 million at 2017 year-end. Capital expenditures were $0.9 million during the first six months of 2018 and were for minor facility upgrades and general maintenance-type investments, as well as improvements to prepare an open space for sub-lease adjacent to one of our restaurants in the first quarter. DRH does not expect to build any new restaurants nor is it expected to complete any major remodels in 2018. As a result, the Company anticipates its capital expenditures will approximate $1.5 million in fiscal 2018.
Total debt was $108.2 million at the end of the quarter, down $5.8 million since 2017 year-end.
On July 24, 2018, the Company completed an underwritten registered public offering of 6 million shares of common stock at a public offering price of $1.00 per share, including 700,000 shares offered by a certain selling stockholder, for total Company gross proceeds of $5.3 million. DRH also granted the underwriter an option for a period of 30 days to purchase up to an additional 450,000 shares of its common stock to cover over-allotments, if any. DRH intends to use the net proceeds from the offering for working capital and general corporate purposes, which may include repayment of debt.
About Diversified Restaurant Holdings, Inc.
Diversified Restaurant Holdings, Inc. is one of the largest franchisees for Buffalo Wild Wings with 65 franchised restaurants in key markets in Florida, Illinois, Indiana, Michigan and Missouri. DRH’s strategy is to generate cash, reduce debt and leverage its strong franchise operating capabilities for future growth.
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Potbelly Corporation Reports Results for Second Fiscal Quarter 2018
August 7, 2018–(Potbelly Sandwich Shop)
Potbelly Corporation (NASDAQ: PBPB) today reported financial results for the second fiscal quarter ended July 1, 2018.
Key highlights for the thirteen weeks ended July 1, 2018 compared to the thirteen weeks ended June 25, 2017 include:
- Total revenues increased 2.0% to $110.3 million from $108.1 million.
- Company-operated comparable store sales decreased 0.2%.
- Five new shops opened, including three company-operated shops and two franchised shops.
- GAAP net loss attributable to Potbelly Corporation was $0.4 million, inclusive of a $2.1 million impairment charge compared to loss of $0.1 million, inclusive of a $3.3 million impairment charge. GAAP diluted loss per share remained at $0.01.
- Adjusted net income1 attributable to Potbelly Corporation increased 20.1% to $3.3 million from adjusted net income of $2.7 million. Adjusted diluted EPS1 increased 18.2% to $0.13 from $0.11.
- EBITDA1 decreased 10.8% to $5.8 million from $6.5 million.
- Adjusted EBITDA1 decreased 2.6% to $11.5 million from $11.8 million.
Key highlights for the twenty-six weeks ended July 1, 2018 compared to the twenty-six weeks ended June 25, 2017 include:
- Total revenues increased 1.6% to $213.3 million from $209.8 million.
- Company-operated comparable store sales decreased 1.8%.
- Nine new shops opened, including five company-operated shops and four franchised shops.
- GAAP net loss attributable to Potbelly Corporation was $2.6 million, inclusive of a $4.1 million impairment charge compared to net income of $0.5 million, inclusive of a $4.2 million impairment charge. GAAP diluted loss per share was $0.10 compared to GAAP diluted EPS of $0.02.
- Adjusted net income1 attributable to Potbelly Corporation decreased 2.1% to $3.9 million from adjusted net income of $4.0 million. Adjusted diluted EPS1 decreased 6.3% to $0.15 from $0.16.
- EBITDA1 decreased 35.8% to $9.0 million from $14.0 million.
- Adjusted EBITDA1 decreased 9.3% to $19.1 million from $21.0 million.
Alan Johnson, Chief Executive Officer and President of Potbelly Corporation, commented, “We are pleased with our performance in the second quarter, where we delivered revenue of $110 million and adjusted EPS of $0.13. We are encouraged by the improvement in our company-operated same store sales, which was nearly flat at -0.2%, and was driven by stronger traffic and higher check. The positive trajectory of our comp trends confirms to me that we are effectively executing on our traffic building initiatives.”
Johnson, continued, “While we are encouraged by our performance through the first half of the year, we recognize that 2018 is a transition year for Potbelly and there is still much work to be done. However, we have assembled the right leadership team and are executing on the right strategies to effect a successful turnaround of the Company.”
For the full fiscal year of 2018, management currently expects:
- 22-26 total shop openings, including 10-12 company operated shop openings;
- Flat company-operated comparable store sales growth;
- An effective tax rate that is in a range of 24%-26%, excluding the impact of ASU 2016-09; and
- Adjusted diluted earnings per share to range from $0.37-$0.39.
Projected adjusted diluted earnings per share set forth above is a measure not recognized under GAAP. Please see “Non-GAAP Financial Measures” below.
A conference call and audio webcast has been scheduled for 5:00 p.m. Eastern Time today to discuss these results. Details of the conference call are as follows:
Date: Tuesday, August 7, 2018
Time: 5:00 p.m. Eastern Time
Dial-In #: 877-407-0784 U.S. & Canada
Confirmation code: 13681292
Alternatively, the conference call will be webcast at www.potbelly.com on the “Investor Relations” webpage. For those unable to participate, an audio replay will be available from 8:00 p.m. Eastern Time on Tuesday, August 7, 2018 through midnight Tuesday, August 14, 2018. To access the replay, please call 844-512-2921 (U.S. & Canada) or 412-317-6671 (International) and enter confirmation code 13681292. A web-based archive of the conference call will also be available at the above website.
Potbelly Corporation is a neighborhood sandwich concept offering toasty warm sandwiches, signature salads and other fresh menu items served by engaging people in an environment that reflects the Potbelly brand. Our Vision is for our customers to feel that we are their “Neighborhood Sandwich Shop” and to tell others about their great experience. Our Mission is to make people really happy and to improve every day. Our Passion is to be “The Best Place for Lunch.” The Company owns and operates over 400 shops in the United States and our franchisees operate over 50 shops domestically, in the Middle East, Canada and India. For more information, please visit our website at www.potbelly.com.
The following definitions apply to these terms as used throughout this press release:
- Revenues – represents net company-operated sandwich shop sales and our franchise operations. Net company-operated shop sales consist of food and beverage sales, net of promotional allowances and employee meals. Franchise royalties and fees consist of an initial franchise fee, a franchise development agreement fee and royalty income from the franchisee.
- Company-operated comparable store sales – represents the change in year-over-year sales for the comparable company-operated store base open for 15 months or longer.
- EBITDA – represents income before depreciation and amortization expense, interest expense and the provision for income taxes.
- Adjusted EBITDA – represents income before depreciation and amortization expense, interest expense and the provision for income taxes, adjusted to eliminate the impact of other items, including certain non-cash as well as other items that we do not consider representative of our ongoing operating performance.
- Adjusted net income – represents net income, excluding impairment, gain or loss on the disposal of property and equipment and store closure expense, as well as other items that we do not consider representative of our ongoing operating performance.
- Shop-level profit – represents income from operations less franchise royalties and fees, general and administrative expenses, depreciation expense, pre-opening costs and impairment and loss on the disposal of property and equipment.
- Shop-level profit margin – represents shop-level profit expressed as a percentage of net company-operated sandwich shop sales.
- Adjusted diluted earnings per share – represents net income, excluding impairment, gain or loss on the disposal of property and equipment and store closure expense on a fully diluted per share basis as well as other items that we do not consider representative of our ongoing operating performance.
1Non-GAAP Financial Measures
We prepare our financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”). Within this press release, we make reference to EBITDA, adjusted EBITDA, adjusted net income, shop-level profit and shop-level profit margin, which are non-GAAP financial measures. The Company includes these non-GAAP financial measures because management believes they are useful to investors in that they provide for greater transparency with respect to supplemental information used by management in its financial and operational decision making.
Management uses adjusted EBITDA and adjusted net income to evaluate the Company’s performance and in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. Adjusted EBITDA and adjusted net income exclude the impact of certain non-cash charges and other special items that affect the comparability of results in past quarters. Management uses shop-level profit and shop-level profit margin as key metrics to evaluate the profitability of incremental sales at our shops, to evaluate our shop performance across periods and to evaluate our shop financial performance against our competitors.
Accordingly, the Company believes the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing the Company’s operating performance and underlying prospects. This analysis should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. This analysis, as well as the other information in this press release, should be read in conjunction with the Company’s financial statements and footnotes contained in the documents that the Company files with the U.S. Securities and Exchange Commission. The non-GAAP financial measures used by the Company in this press release may be different from the methods used by other companies. For more information on the non-GAAP financial measures, please refer to the table, “Reconciliation of NonGAAP Financial Measures to GAAP Financial Measures.”
This press release includes certain non-GAAP forward-looking information (including, but not limited to under the heading “2018 Outlook”), namely adjusted net income and adjusted diluted earnings per share. The Company believes that a quantitative reconciliation of such forward-looking information to the most comparable financial measure calculated and presented in accordance with GAAP cannot be made available without unreasonable efforts. A reconciliation of these non-GAAP financial measures would require the Company to predict the timing and likelihood of outcomes that determine future impairments and the tax benefit of any such future impairments. Neither of these measures, nor their probable significance, can be reliably quantified due to the inability to forecast future impairments.
In addition to historical information, this press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. Forward-looking statements, written, oral or otherwise made, represent the Company’s expectation or belief concerning future events. Without limiting the foregoing, the words “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “strives,” “goal,” “estimates,” “forecasts,” “projects” or “anticipates” or the negative of these terms and similar expressions are intended to identify forward-looking statements. Forward-looking statements may include, among others, statements relating to: our future financial position and results of operations, business strategy, budgets, projected costs and plans and objectives of management for future operations. By nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statement, due to reasons including, but not limited to, our ability to manage our growth and successfully implement our business strategy; price and availability of commodities; changes in labor costs; consumer confidence and spending patterns; consumer reaction to industry-related public health issues and perceptions of food safety; and weather conditions. In addition, there may be other factors of which we are presently unaware or that we currently deem immaterial that could cause our actual results to be materially different from the results referenced in the forward-looking statements. All forward-looking statements contained in this press release are qualified in their entirety by this cautionary statement. Although we believe that our plans, intentions and expectations are reasonable, we may not achieve our plans, intentions or expectations. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. See “Risk Factors” and “Cautionary Statement on Forward-Looking Statements” included in our most recent annual report on Form 10-K and other risk factors described from time to time in subsequent quarterly reports on Form 10-Q, all of which are available on our website at www.potbelly.com. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Contact: Investor Relations
Carrols Restaurant Group, Inc. Reports Financial Results for the Second Quarter 2018
Raises Full Year 2018 Outlook
August 7, 2018–(Restaurant News Resource)
Carrols Restaurant Group, Inc. (Nasdaq:TAST) today announced financial results for the second quarter ended July 1, 2018 and raised its full year 2018 outlook.
Highlights for second quarter of 2018 versus second quarter of 2017 include:
- Restaurant sales increased 8.4% to $303.0 million from $279.5 million in the second quarter of 2017;
- Comparable restaurant sales increased a solid 5.0% compared to a 4.6% increase in the prior year quarter;
- Adjusted EBITDA(1) increased 19.4% to $32.8 million from $27.5 million in the prior year quarter;
- Net income was $7.8 million, or $0.17 per diluted share, compared to $6.0 million, or $0.13 per diluted share, in the prior year quarter; and
- Adjusted net income(1) increased 51% to $10.0 million, or $0.22 per diluted share, from $6.6 million, or $0.14 per diluted share, in the prior year quarter.
- Adjusted EBITDA, Restaurant-level EBITDA and Adjusted net income are non-GAAP financial measures. Refer to the definitions and reconciliation of these measures to net income or to income from operations in the tables at the end of this release.
At the end of the second quarter of 2018, Carrols owned and operated 807 BURGER KING® restaurants.
Daniel T. Accordino, the Company’s Chief Executive Officer said, “We delivered a solid quarter reflecting 8.4% top line growth, a 5.0% increase in comparable restaurant sales, and we generated significant increases in Restaurant-level EBITDA and Adjusted EBITDA, which rose 16.7% and 19.4%, respectively. Sales were strong across all day parts and reflected continued success of the 2 for $6 mix and match promotion, and the popularity of the KING™ Sandwich line including the new Sourdough sandwiches. These offerings provided an effective balance to our value promotions and other limited time offers as part of the brand’s successful barbell menu strategy.”
Accordino added, “Our acquisition pipeline is active and we are currently working on several transactions. We recently exercised our right of first refusal for the purchase of 31 BURGER KING® restaurants in Virginia and two restaurants in Michigan. We expect that these transactions, along with a couple of other small acquisitions, will close before the end of the third quarter of 2018.”
Accordino concluded, “Given our performance year-to-date and expectations for the remainder of the year, we are raising our overall outlook for 2018. While we remain cautiously optimistic regarding comparable restaurant sales trends as we lap our very strong performance in the second half of last year, we expect Adjusted EBITDA to now grow to $100 million to $105 million compared to $91.4 million in 2017.”
Second Quarter 2018 Financial Results
Restaurant sales increased 8.4% to $303.0 million in the second quarter of 2018 compared to $279.5 million in the second quarter of 2017. Comparable restaurant sales increased 5.0%, including an average check increase of 4.4% and customer traffic increase of 0.6% from the prior year period.
Restaurant-level EBITDA(1) was $47.4 million in the second quarter of 2018 and increased 16.7% from $40.6 million in the second quarter of 2017. Restaurant-Level EBITDA margin was 15.6% of restaurant sales and increased 111 basis points from the prior year period. In addition to benefitting from a 6.3% reduction in ground beef costs, many other operating costs were favorably leveraged due to the strong sales performance in the quarter. Restaurant labor costs, however increased 0.5%, as a percentage of restaurant sales, primarily due to higher workers compensation, medical and incentive costs.
General and administrative expenses were $16.0 million in the second quarter of 2018 compared to $14.4 million in the prior year period. As a percentage of restaurant sales, general and administrative expenses increased 13 basis points to 5.3% compared to the prior year period reflecting higher incentive and stock compensation costs.
Adjusted EBITDA(1) increased 19.4% to $32.8 million in the second quarter of 2018 compared to $27.5 million in the second quarter of 2017. Adjusted EBITDA margin increased 100 basis points to 10.8% of restaurant sales.
Income from operations was $13.8 million in the second quarter of 2018 compared to $12.3 million in the prior year period. Impairment and other lease charges increased $2.4 million from the second quarter of 2017 including a $1.9 million write-off for defective restaurant equipment that has been replaced in approximately 300 restaurants. The Company has commenced legal action against the equipment supplier.
Interest expense increased to $5.9 million in the second quarter of 2018 from $5.0 million in the same period last year due to the Company’s add-on offering and issuance of $75 million of its senior secured second lien notes completed in the second quarter of 2017. Cash balances totaled $38.2 million at the end of the second quarter of 2018.
Net income was $7.8 million for the second quarter of 2018, or $0.17 per diluted share, compared to net income of $6.0 million, or $0.13 per diluted share, in the prior year period.
Adjusted net income in the second quarter of 2018 was $10.0 million, or $0.22 per diluted share, compared to adjusted net income of $6.6 million, or $0.14 per diluted share, in the prior year period.
In late July, Carrols exercised its right of first refusal to purchase 31 BURGER KING® restaurants in Virginia and separately exercised its right of first refusal to purchase two restaurants in Detroit, Michigan under the terms and conditions of purchase and sale agreements between the sellers and unrelated third parties. The Company anticipates these transactions to close along with two small acquisitions (a total of four restaurants) before the end of the third quarter of 2018.
Full Year 2018 Outlook
The Company is revising its guidance for 2018 which includes the anticipated acquisition of 37 BURGER KING® restaurants (discussed above) that it expects to be completed in the third quarter of 2018:
- Total restaurant sales are expected to be $1.16 billion to $1.18 billion (previously $1.15 billion to $1.17 billion), including a comparable restaurant sales increase of 3% to 4% (which has been narrowed from 3% to 5% previously);
- Commodity costs are expected to be flat (previously a 1% to 2% increase) including a 1% to 2% decrease in beef costs (previously a 2% to 3% increase);
- General and administrative expenses are still expected to be $58 million to $60 million, excluding stock compensation expense and acquisition-related costs;
- Adjusted EBITDA is expected to be $100 million to $105 million (previously $95 million to $102 million);
- The effective income tax rate is expected to be 0% to 5%;
- Capital expenditures before discretionary growth-related expenditures (i.e., new restaurant development and acquisitions) are expected to be $58 million to $62 million (previously $50 million to $60 million). In addition, capital expenditures for the construction of 13 to 15 new units and remaining costs from 2017 construction are expected to be $20 million to $25 million (previously $15 million to $25 million for 10 to 15 new units);
- Expenditures for the acquisition of 37 restaurants included in the Company’s guidance are expected to be $30 million to $32 million;
- Proceeds from sale/leasebacks are still expected to be $10 million to $15 million; and
- The Company expects to close 15 to 20 existing restaurants (previously 20 to 25 restaurants) of which five have already closed.
The Company has not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because it does not provide guidance for net income or for the various reconciling items. The Company is unable to provide guidance for these reconciling items since certain items that impact net income are outside of the Company’s control or cannot be reasonably predicted.
About the Company
Carrols is the largest BURGER KING® franchisee in the United States with 807 restaurants as of July 1, 2018 and has operated BURGER KING® restaurants since 1976.
Carrols Restaurant Group, Inc.
Consolidated Statements of Operations
(in thousands except per share amounts)
Fiesta Restaurant Group, Inc. Reports Second Quarter 2018 Results
Pollo Tropical Quarterly Comparable Restaurant Sales Growth of 3.4%
Taco Cabana Quarterly Comparable Restaurant Sales Growth of 3.1%
July Comparable Restaurant Sales Increased 2.2% at Pollo Tropical and 8.8% at Taco Cabana
August 7, 2018–(Restaurant News Resource)
Fiesta Restaurant Group, Inc. (NASDAQ:FRGI), parent company of the Pollo Tropical® and Taco Cabana® restaurant brands, today reported results for the 13-week second quarter of 2018, which ended on July 1, 2018. The Company also provided an update on the continuing progress of its ongoing Strategic Renewal Plan (the “Plan”) to drive long-term shareholder value creation.
Fiesta President and Chief Executive Officer Richard Stockinger said, “Our solid second quarter results are in-line with what we expected to see from our Plan, which is aimed at restoring our iconic brands to full strength and growth. Quarterly comparable restaurant sales grew over three percent at both Pollo Tropical and Taco Cabana, validating the tremendous job our teams are doing in executing our Plan. We believe our guests truly appreciate the heightened food quality and other hospitality improvements in place and this is reflected in both our rising Net Promoter Scores and our positive restaurant sales trajectory. However, our work is far from done. In the second half of 2018, we will introduce new delivery, catering and digital loyalty platforms to grow sales and upgrade our POS tablets to increase speed of service. We will also continue to innovate our product pipeline while continuing to rebalance our mix of broadcast, digital and social media and extend our local store marketing programs to drive increased awareness and frequency. Finally, we will test kiosks and complete the implementation of several initiatives already underway to improve food and labor costs.”
Mr. Stockinger continued, “Through July, we have reported eight consecutive months of positive comparable restaurant sales growth at Pollo Tropical. To date, our hand-battered crispy chicken platform has been a resounding success, with broad appeal and high sales mix across all markets while leveraging our signature 24-hour citrus marinated chicken. We continue to focus on operational execution to support sales increases across all markets as we continue to implement the Plan.”
Mr. Stockinger concluded, “Taco Cabana has also made significant headway in enhancing the overall guest experience. Our brand re-launch began in July when we completed numerous menu enhancements. We have improved the breadth and depth of our menu which now features USDA Choice steak and applewood-smoked brisket, and improved chicken and ground beef, delivering on our promise of authentic, high quality and freshly prepared cuisine, inspired by our original recipes. We are further encouraged by the brand’s sales trajectory and its four consecutive months of comparable restaurant sales growth. We plan to build on this momentum with, among other things, all day breakfast tacos, tacos by the dozen and patio parties featuring an expansion of alcoholic beverages such as our frozen raspberry lemonade made with Tito’s® handmade vodka, complementing our new, shareable appetizers. We are gaining traction and believe that our strategic repositioning of Taco Cabana is attracting new and returning loyal guests.”
Second Quarter 2018 Financial Summary
- Total revenues increased 2.4% from the prior year period to $176.8 million due primarily to comparable restaurant sales growth at both Pollo Tropical and Taco Cabana;
- Comparable restaurant sales at Pollo Tropical increased 3.4%, the second consecutive quarter of positive comparable restaurant sales. Comparable restaurant sales were positively impacted by approximately 0.2% related to the fiscal calendar shift of Easter;
- Comparable restaurant sales at Taco Cabana increased 3.1%, the first quarter of positive comparable restaurant sales since the second quarter of 2016. Comparable restaurant sales were positively impacted by approximately 0.3% related to the fiscal calendar shift of Easter;
- Net income of $9.5 million or $0.35 per diluted share, compared to the prior year period net loss of $(2.2) million, or $(0.08) per diluted share;
- Adjusted net income of $6.8 million, or $0.25 per diluted share, compared to the prior year period adjusted net income of $8.1 million, or $0.30 per diluted share (see non-GAAP reconciliation table below); and
- Consolidated Adjusted EBITDA of $20.2 million compared to the prior year period Consolidated Adjusted EBITDA of $24.1 million (see non-GAAP reconciliation table below).
July 2018 Comparable Restaurant Sales
July 2018 comparable restaurant sales increased 2.2% at Pollo Tropical and increased 8.8% at Taco Cabana.
Second Quarter 2018 Brand Results
Pollo Tropical restaurant sales increased 1.1% to $95.4 million in the second quarter of 2018 compared to the prior year period due primarily to a comparable restaurant sales increase of 3.4%, partially offset by the impact of closing unprofitable restaurants in 2017. The increase in comparable restaurant sales resulted from a 4.4% increase in average check, partially offset by a 1.0% decrease in comparable restaurant transactions. Comparable restaurant sales were positively impacted by approximately 0.2% related to the fiscal calendar shift of Easter. The increase in average check was driven by menu price increases of 4.5%.
Adjusted EBITDA for Pollo Tropical decreased to $15.5 million in the second quarter of 2018 from $17.1 million in the second quarter of 2017 due primarily to the impact of an increase in cost of sales as a percentage of restaurant sales and higher advertising costs primarily driven by the Plan, partially offset by higher comparable restaurant sales and the impact of closing unprofitable restaurants in 2017.
Taco Cabana restaurant sales increased 4.0% to $80.8 million in the second quarter of 2018 compared to the prior year period due primarily to a comparable restaurant sales increase of 3.1%. The increase in comparable restaurant sales resulted from a 10.2% increase in average check, partially offset by a 7.1% decrease in comparable restaurant transactions. Comparable restaurant transactions were negatively impacted primarily by the elimination of deep discounting related to the repositioning of the brand, and by the reduction in overnight operating hours which negatively impacted comparable restaurant sales by 1.5%. Comparable restaurant sales were positively impacted by approximately 0.3% related to the fiscal calendar shift of Easter. The increase in average check was primarily driven by menu price increases of 6.3% and positive sales mix associated with higher priced promotions and new menu items related to brand repositioning.
Adjusted EBITDA for Taco Cabana decreased to $4.6 million in the second quarter of 2018 from $7.0 million in the second quarter of 2017 due primarily to the impact of higher cost of sales as a percentage of restaurant sales and higher restaurant wages and related expenses primarily driven by the Plan, partially offset by higher comparable restaurant sales.
Other Expense (Income)
Other income, net was $3.5 million in the second quarter of 2018 and primarily consisted of $2.8 million in additional insurance recoveries related to Hurricanes Harvey and Irma (the “Hurricanes”) and total gains of $1.1 million on the sales of two restaurant properties, partially offset by the write-off of site development costs of $0.2 million and costs for the removal, transfer and storage of equipment from previously closed restaurants of $0.2 million.
Anticipated capital expenditures in 2018 include opening seven new Company-owned Pollo Tropical restaurants in Florida and seven new Company-owned Taco Cabana restaurants in Texas. Up to five of the new Taco Cabana restaurants are conversions from closed Pollo Tropical restaurants, four of which were completed by the end of the second quarter of 2018. Total capital expenditures in 2018 are now expected to be at the high-end of the $60.0 million to $70.0 million range due in part to additional restaurant investments being made to improve food quality and support new menu, catering and technology platforms. We continue to anticipate capital expenditures for the development of new restaurants to be $22.0 million to $25.0 million in 2018.
As of July 1, 2018, there were 150 Company-owned Pollo Tropical restaurants, 170 Company-owned Taco Cabana restaurants, 30 franchised Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas, Guyana and Panama and eight franchised Taco Cabana restaurants in the U.S.
During the second quarter of 2018, Fiesta opened four Company-owned Pollo Tropical restaurants in Florida and six Company-owned Taco Cabana restaurants in Texas. Two Taco Cabana restaurants closed during the second quarter of 2018 when we opened new Taco Cabana restaurants in superior sites in the same trade areas.
About Fiesta Restaurant Group, Inc.
Fiesta Restaurant Group, Inc., owns, operates and franchises Pollo Tropical® and Taco Cabana® restaurant brands. The brands specialize in the operation of fast casual/quick service restaurants that offer distinct and unique flavors with broad appeal at a compelling value. The brands feature fresh-made cooking, drive-thru service and catering.
FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JULY 1, 2018 AND JULY 2, 2017
(In thousands of dollars, except share and per share amounts)