Ignite Restaurant Group (NASDAQ:IRG) today reported financial results for the second quarter ended June 30, 2014.
Highlights for the second quarter of 2014 were as follows:
- Total revenues were $229.8 million, compared to $228.1 million in the second quarter of 2013;
- Comparable restaurant sales increased 8.5% at Brick House Tavern + Tap, decreased 4.7% at Joe’s Crab Shack and decreased 2.6% at Macaroni Grill;
- Net income and net income per diluted share were $1.8 million and $0.07, respectively;
- Adjusted net income and adjusted net income per diluted share (which are non-GAAP financial measures) were $2.0 million and $0.08, respectively.
Ray Blanchette, Chief Executive Officer of Ignite Restaurant Group, stated, “Our second quarter results were challenged as we faced what we believe were residual effects of 2014’s winter weather, combined with some cannibalization of Joe’s Crab Shack sales as we significantly increased the number of locations in the Northeast over the past three years. Results at Macaroni Grill were generally in line with our internal expectations, however our team continues to focus on a robust pipeline of initiatives to drive sales growth and improve profitability. We remain pleased with the ongoing sales success at Brick House Tavern + Tap and with the improvements in store level execution. Our near-term development strategy is expected to provide further opportunities to expand the Brick House concept as we continue to optimize our real estate portfolio through conversions.”
Review of Second Quarter 2014 Operating Results
Total revenues were $229.8 million in the second quarter of 2014, an increase of 0.8% compared to $228.1 million in the second quarter of last year. The increase was largely driven by the inclusion of Macaroni Grill for the full 13 weeks of the second quarter of 2014, versus 12 weeks for the comparable period of 2013 and new restaurant development, partially offset by a 3.1% decrease in comparable restaurant sales.
- Revenues at Joe’s Crab Shack were $125.5 million during the second quarter of 2014 versus $129.6 million in the prior year. Comparable restaurant sales at Joe’s Crab Shack decreased 4.7%.
- Revenues at Brick House Tavern + Tap were $17.8 million in the second quarter of 2014 compared to $12.5 million in the prior year. Comparable restaurant sales at Brick House Tavern + Tap increased 8.5%.
- Revenues at Macaroni Grill were $86.6 million in the second quarter of 2014 compared to $86.0 million in the prior year. Comparable restaurant sales at Macaroni Grill decreased 2.6%. Macaroni Grill was acquired on April 9, 2013.
Net income for the second quarter of 2014 was $1.8 million, or $0.07 per diluted share. The Company’s net income for the second quarter of 2014 included approximately $330,000 of costs related to three restaurant closures, losses on disposal of assets and transaction related costs. Excluding the impact of these items, adjusted net income and adjusted net income per diluted share (which are non-GAAP financial measures) were $2.0 million and $0.08, respectively, in the second quarter of 2014. Net loss for the second quarter of 2013 was $2.5 million, or a loss of $0.10 per diluted share. The Company incurred approximately $5.3 million of primarily acquisition related and labor related transition costs in connection with the acquisition of Romano's Macaroni Grill in the second quarter of 2013. Excluding the impact of these items, adjusted net income and adjusted net income per diluted share (which are non-GAAP financial measures) were $1.0 million and $0.04, respectively. A reconciliation between GAAP net income (loss) and adjusted net income is included in the accompanying financial data.
Development
During the second quarter of 2014, the Company closed three Macaroni Grill locations. Of these closures, one has been converted and re-opened as a Brick House Tavern + Tap and one is currently under construction and will re-open as a Brick House restaurant in the fourth quarter of 2014 or in early 2015. Subsequent to the end of the second quarter, three additional Macaroni Grill locations were closed in July for a total of eight Macaroni Grill closures year to date.
Liquidity
At June 30, 2014, the Company had approximately $20.4 million of available borrowing capacity under its current credit facility and was in compliance with the credit facility’s financial covenants. “In light of our desire to move quickly on new Brick House locations and the recent sales volatility in casual dining, we are currently reviewing refinancing alternatives of our existing credit facility,” stated Michael Dixon, President and Chief Financial Officer of Ignite Restaurant Group.
Conference Call
We will host a conference call to discuss our second quarter financial results today at 5:00 PM Eastern Standard Time. Hosting the call will be Ray Blanchette, Chief Executive Officer, and Michael Dixon, President and Chief Financial Officer. The conference call can be accessed live over the phone by dialing 877-852-6579 or for international callers by dialing 719-325-4794. A replay will be available one hour after the call and can be accessed by dialing 877-870-5176 or 858-384-5517 for international callers; the password is 1127123. The replay will be available until August 14, 2014. The call will also be webcast live from the Company's website at www.igniterestaurants.com under the “Investors” section.
About Ignite Restaurant Group
Ignite Restaurant Group, Inc. (NASDAQ: IRG) owns and operates over 300 restaurants throughout the U.S. Headquartered in Houston, Ignite's portfolio of restaurant concepts includes Joe's Crab Shack, Romano's Macaroni Grill and Brick House Tavern + Tap. Each brand offers a variety of high-quality, chef-inspired food and beverages in a distinctive, casual, high-energy atmosphere. The Company is also a franchisor for Macaroni Grill in locations in the U.S., U.S. territories and internationally. For more information on Ignite and its distinctive brands visit www.igniterestaurantgroup.com.
Cautionary Note Regarding Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond the Company’s control. The Company cautions you that the forward-looking information presented in this press release is not a guarantee of future events, and that actual events and results may differ materially from those made in or suggested by the forward-looking information contained in this press release. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “plan,” “seek,” “comfortable with,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology.
A number of important factors could cause actual events and results to differ materially from those contained in or implied by the forward-looking statements included in this press release, including the risk factors discussed in the Company’s Form 10-K for the year ended December 30, 2013 (which can be found at the SEC’s website www.sec.gov) and each such risk factor is specifically incorporated into this press release. Any forward-looking information presented herein is made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
Results of Operations
The following tables present the consolidated statements of operations and selected other data for the thirteen and twenty-six weeks ended June 30, 2014 and July 1, 2013, and selected consolidated balance sheet information as of June 30, 2014 and December 30, 2013:
| Thirteen Weeks Ended | Thirteen Weeks Ended | |||||||||||||||||||
| Consolidated Statements of Operations | June 30, 2014 | July 1, 2013 | ||||||||||||||||||
| (In thousands, except percent and per share data) | ||||||||||||||||||||
| Revenues | $ | 229,847 | 100.0 | % | $ | 228,132 | 100.0 | % | ||||||||||||
| Costs and expenses | ||||||||||||||||||||
| Restaurant operating costs and expenses | ||||||||||||||||||||
| Cost of sales | 70,722 | 30.8 | % | 66,765 | 29.3 | % | ||||||||||||||
| Labor expenses | 68,995 | 30.0 | % | 71,465 | 31.3 | % | ||||||||||||||
| Occupancy expenses | 19,577 | 8.5 | % | 18,896 | 8.3 | % | ||||||||||||||
| Other operating expenses | 47,454 | 20.6 | % | 48,039 | 21.1 | % | ||||||||||||||
| General and administrative | 11,202 | 4.9 | % | 16,611 | 7.3 | % | ||||||||||||||
| Depreciation and amortization | 7,945 | 3.5 | % | 7,356 | 3.2 | % | ||||||||||||||
| Pre-opening costs | 558 | 0.2 | % | 1,477 | 0.6 | % | ||||||||||||||
| Asset impairments and closures | 135 | 0.1 | % | 14 | 0.0 | % | ||||||||||||||
| Loss on disposal of property and equipment | 504 | 0.2 | % | 197 | 0.1 | % | ||||||||||||||
| Total costs and expenses | 227,092 | 98.8 | % | 230,820 | 101.2 | % | ||||||||||||||
| Income (loss) from operations | 2,755 | 1.2 | % | (2,688 | ) | (1.2 | ) | % | ||||||||||||
| Interest expense, net | (1,765 | ) | (0.8 | ) | % | (1,741 | ) | (0.8 | ) | % | ||||||||||
| Income (loss) before income taxes | 990 | 0.4 | % | (4,429 | ) | (1.9 | ) | % | ||||||||||||
| Income tax benefit | (777 | ) | (0.3 | ) | % | (1,967 | ) | (0.9 | ) | % | ||||||||||
| Net income (loss) | $ | 1,767 | 0.8 | % | $ | (2,462 | ) | (1.1 | ) | % | ||||||||||
| Basic and diluted net income (loss) per share data: | ||||||||||||||||||||
| Net income (loss) per share | ||||||||||||||||||||
| Basic and diluted | $ | 0.07 | $ | (0.10 | ) | |||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||
| Basic | 25,651 | 25,624 | ||||||||||||||||||
| Diluted | 25,749 | 25,624 | ||||||||||||||||||
| Twenty-Six Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||
| Consolidated Statements of Operations | June 30, 2014 | July 1, 2013 | ||||||||||||
| (In thousands, except percent and per share data) | ||||||||||||||
| Revenues | $ 444,706 | 100.0 | % | $ 346,372 | 100.0 | % | ||||||||
| Costs and expenses | ||||||||||||||
| Restaurant operating costs and expenses | ||||||||||||||
| Cost of sales | 134,140 | 30.2 | % | 103,086 | 29.8 | % | ||||||||
| Labor expenses | 135,842 | 30.5 | % | 103,372 | 29.8 | % | ||||||||
| Occupancy expenses | 39,035 | 8.8 | % | 27,450 | 7.9 | % | ||||||||
| Other operating expenses | 91,455 | 20.6 | % | 69,843 | 20.2 | % | ||||||||
| General and administrative | 23,476 | 5.3 | % | 26,902 | 7.8 | % | ||||||||
| Depreciation and amortization | 16,081 | 3.6 | % | 12,169 | 3.5 | % | ||||||||
| Pre-opening costs | 762 | 0.2 | % | 2,568 | 0.7 | % | ||||||||
| Asset impairments and closures | 1,092 | 0.2 | % | 31 | 0.0 | % | ||||||||
| Loss on disposal of property and equipment | 769 | 0.2 | % | 392 | 0.1 | % | ||||||||
| Total costs and expenses | 442,652 | 99.5 | % | 345,813 | 99.8 | % | ||||||||
| Income from operations | 2,054 | 0.5 | % | 559 | 0.2 | % | ||||||||
| Interest expense, net | (3,643) | (0.8) | % | (2,136) | (0.6) | % | ||||||||
| Gain on insurance settlements | - | 0.0 | % | 300 | 0.1 | % | ||||||||
| Loss before income taxes | (1,589) | (0.4) | % | (1,277) | (0.4) | % | ||||||||
| Income tax benefit | (3,091) | (0.7) | % | (1,000) | (0.3) | % | ||||||||
| Net income (loss) | $ 1,502 | 0.3 | % | $ (277) | (0.1) | % | ||||||||
| Basic and diluted net income (loss) per share data: | ||||||||||||||
| Net income (loss) per share | ||||||||||||||
| Basic and diluted | $ 0.06 | $ (0.01) | ||||||||||||
| Weighted average shares outstanding | ||||||||||||||
| Basic | 25,645 | 25,624 | ||||||||||||
| Diluted | 25,715 | 25,624 | ||||||||||||
June 30, | December 30, | ||||
| Selected Consolidated Balance Sheet Information | 2014 | 2013 | |||
| (In thousands) | |||||
| Cash and cash equivalents | $ 999 | $ 972 | |||
| Total assets | 344,819 | 347,084 | |||
| Long term debt (including current portion) | 118,676 | 131,982 | |||
| Total liabilities | 240,452 | 245,477 | |||
| Total stockholders' equity | 104,367 | 101,607 | |||
| Thirteen | Thirteen | Twenty-Six | Twenty-Six | ||||||||||||||
| Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | ||||||||||||||
| June 30, 2014 | July 1, 2013 | June 30, 2014 | July 1, 2013 | ||||||||||||||
| (dollars in thousands) | |||||||||||||||||
| Selected Other Data(1): | |||||||||||||||||
| Restaurants opened during the period | - | 4 | - | 6 | |||||||||||||
| Number of restaurants open (end of period): | |||||||||||||||||
| Joe's Crab Shack | 136 | 134 | 136 | 134 | |||||||||||||
| Brick House Tavern + Tap | 20 | 16 | 20 | 16 | |||||||||||||
| Romano's Macaroni Grill | 174 | 186 | 174 | 186 | |||||||||||||
| Total restaurants | 330 | 336 | 330 | 336 | |||||||||||||
| Restaurant operating weeks | |||||||||||||||||
| Joe's Crab Shack | 1,768 | 1,727 | 3,536 | 3,404 | |||||||||||||
| Brick House Tavern + Tap | 260 | 201 | 520 | 396 | |||||||||||||
| Romano's Macaroni Grill | 2,281 | 2,232 | 4,595 | 2,232 | |||||||||||||
| Average weekly sales | |||||||||||||||||
| Joe's Crab Shack | $ | 71 | $ | 75 | $ | 65 | $ | 69 | |||||||||
| Brick House Tavern + Tap | $ | 68 | $ | 62 | $ | 68 | $ | 61 | |||||||||
| Romano's Macaroni Grill | $ | 37 | $ | 38 | $ | 38 | $ | 38 | |||||||||
| Change in comparable restaurant sales | |||||||||||||||||
| Joe's Crab Shack | (4.7 | %) | 0.7 | % | (5.3 | %) | (0.5 | %) | |||||||||
| Brick House Tavern + Tap | 8.5 | % | 6.4 | % | 9.2 | % | 5.2 | % | |||||||||
| Romano's Macaroni Grill | (2.6 | %) | (7.4 | %) | (3.4 | %) | (7.4 | %) | |||||||||
| Total | (3.1 | %) | (2.5 | %) | (3.6 | %) | (2.2 | %) | |||||||||
(1) Activity for Romano's Macaroni Grill commenced from the acquisition date of April 9, 2013. | |||||||||||||||||
Reconciliation of Non-GAAP Results to GAAP Results
The Company provided detailed explanation of this non-GAAP financial measure, including a discussion of the usefulness and purpose of the measure, in its Form 8-K filed with the Securities and Exchange Commission on August 7, 2014.
| Thirteen | Thirteen | Twenty-Six | Twenty-Six | ||||||||||||||
| Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | ||||||||||||||
| June 30, 2014 | July 1, 2013 | June 30, 2014 | July 1, 2013 | ||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||
| Net income (loss) - GAAP | $ | 1,767 | $ | (2,462 | ) | $ | 1,502 | $ | (277 | ) | |||||||
| Adjustments: | |||||||||||||||||
| Transaction costs | 89 | 4,185 | 89 | 5,203 | |||||||||||||
| Proposed secondary offering expenses | - | 300 | - | 300 | |||||||||||||
| Costs related to conversions, remodels and closures | 241 | - | 1,227 | - | |||||||||||||
| Write-off of debt issuance costs | - | 483 | - | 483 | |||||||||||||
| Non-recurring recruitment and training expenses | - | 327 | - | 327 | |||||||||||||
| Gain on insurance settlements | - | - | - | (300 | ) | ||||||||||||
| Income tax effect of adjustments above | (130 | ) | (1,860 | ) | (518 | ) | (2,037 | ) | |||||||||
| Adjusted net income - non-GAAP | $ | 1,967 | $ | 973 | $ | 2,300 | $ | 3,699 | |||||||||
| Weighted average shares outstanding (GAAP) | |||||||||||||||||
| Basic | 25,651 | 25,624 | 25,645 | 25,624 | |||||||||||||
| Diluted | 25,749 | 25,624 | 25,715 | 25,624 | |||||||||||||
| Net income (loss) per share (GAAP) | |||||||||||||||||
| Basic and diluted | $ | 0.07 | $ | (0.10 | ) | $ | 0.06 | $ | (0.01 | ) | |||||||
| Adjusted net income per share (non-GAAP) | |||||||||||||||||
| Basic and diluted | $ | 0.08 | $ | 0.04 | $ | 0.09 | $ | 0.14 | |||||||||
Contacts:
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Relations
Fitzhugh Taylor, 203-682-8261
fitzhugh.taylor@icrinc.com
or
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Liz Brady DiTrapano, 646-277-1226
liz.ditrapano@icrinc.com
