Rubio's® Restaurants, Inc. (NASDAQ: RUBO) reported financial
results for the second quarter and first half of the fiscal year
ended June 27, 2010.
Second Quarter and First Half 2010 Financial
Highlights
Revenues in the second quarter of 2010 totaled $48.5 million, a
decrease of less than 1% from $48.7 million reported in the same
year-ago quarter. Revenue for the first half of 2010 totaled $95.2
million, up just under 1% from $95.0 million in the same year-ago
period.
Net loss was $387,000 or $(0.04) per basic and diluted share in
the second quarter of 2010 versus net income of $512,000 or $0.05
per basic and diluted share in the same year-ago quarter. The net
loss in the second quarter of 2010 included non-recurring expenses
associated with the ongoing evaluation of strategic alternatives of
$1.1 million or a tax-effected $(0.07) per share. Before these
non-recurring expenses, net income in the second quarter of 2010
was $256,000 or $0.03 per basic and diluted share.
For the first half of 2010, net loss was $20,000 or $(0.00) per
basic and diluted share, compared to net income of $757,000 or
$0.08 per basic and diluted share in the same year-ago period. The
first half of 2010 included non-recurring expenses associated with
the ongoing evaluation of strategic alternatives of $1.3 million or
a tax-effected $(0.07) per share. Before these non-recurring
expenses, net income in the first half of 2010 was $741,000 or
$0.07 per basic and diluted share.
Adjusted EBITDA (a non-GAAP term) was $2.2 million in the second
quarter of 2010, versus $3.9 million in the same year-ago period.
Excluding the aforementioned $1.1 million in non-recurring expenses
during the second quarter, adjusted EBITDA was $3.3 million (see
"About the Presentation of Non-GAAP Financial Information," below,
for an important discussion of this non-GAAP term).
For the first half of 2010, adjusted EBITDA was $5.5 million,
versus $7.2 million in the same year-ago period. Excluding the
aforementioned $1.3 million in non-recurring expenses during the
first half of 2010, adjusted EBITDA was $6.8 million.
Cash and cash equivalents at June 27, 2010 totaled $9.5 million,
unchanged from December 27, 2009.
Second Quarter 2010 Operating
Highlights
Comparable store sales (stores operating for more than 15
months) decreased 3.3% in the second quarter of 2010 versus a
comparable store sales increase of 0.9% in the same quarter last
year. In the second quarter of 2010, the impact of decreased
transaction volume more than offset an increase in the average
check per customer.
Average unit volume was $977,000 as compared to slightly over
$1.0 million from the same year-ago quarter.
Restaurant operating margin (a non-GAAP measure as defined
below) was 16.0% as compared to 16.8% in the same year-ago
quarter.
In the second quarter of 2010, as a percentage of restaurant
sales, cost of sales decreased by 100 basis points, restaurant
labor cost increased by 20 basis points, and restaurant occupancy
and other costs rose by 140 basis points versus the same quarter
last year. The decrease in cost of sales was due to lower
ingredient costs, as well as tighter food cost management. The
increase in restaurant labor was primarily attributable to
increased workers' compensation cost as the company experienced an
increase in major claims which made it necessary to increase claim
reserves. The increase in restaurant occupancy and other costs was
primarily due to higher advertising expenses, credit card fees,
rent and common area maintenance charges.
General and administrative expenses for the second quarter of
2010 were $5.6 million, as compared to $4.4 million in the same
year-ago quarter. As a percentage of sales, general and
administrative expenses increased to 11.6% from 9.1% for the same
period last year. The quarter-over-quarter increase was due to
legal and professional fees associated with the ongoing evaluation
of strategic alternatives. As a percentage of sales, general and
administrative expenses before non-recurring expenses mentioned
above were 9.3% for the second quarter of 2010.
Rubio's opened three restaurants in the second quarter of 2010,
consistent with three opened in the same period a year-ago.
Pre-opening expenses were $177,000 compared to $105,000 in the same
quarter last year.
Management Commentary
"The ongoing unemployment and housing challenges in the markets
we serve, as well as record cool temperatures in Southern
California during the second quarter, continued to put pressure on
our top line," said Dan Pittard, Rubio's president and CEO. "As the
economic and weather conditions continued into the third quarter,
we experienced a decrease in comparable store sales of 4.5% through
the first five weeks of Q3. While restaurant operating margins
declined in the second quarter versus a year ago, the decline was
attributable to increased advertising and marketing expenditures.
In response to the continued weakness in the economy and with the
prospect of a prolonged and sluggish recovery, we increased media
spending and made strategic investments in research geared towards
understanding the change in consumer preferences caused by the
recession. We continue to believe that we have a winning strategy
for Fast Casual, which remains the fastest growing segment of the
restaurant industry, and that we are well-positioned to take
advantage of an improving economy."
Cash Merger Transaction
As announced on May 10, 2010, Rubio's entered into a definitive
agreement under which Mill Road Capital has agreed to acquire each
share of Rubio's common stock held by the Rubio's stockholders
(other than Mill Road and its affiliates and certain shares held by
Ralph Rubio) through a cash merger transaction. Pursuant to the
terms of the definitive merger agreement, the outstanding shares of
common stock of Rubio's Restaurants will be acquired for $8.70 per
share. The aggregate transaction value is approximately $91
million.
After careful consideration, the Special Committee of the Board
of Directors of Rubio's unanimously determined that the merger and
the merger agreement are advisable, fair to, and in the best
interests of Rubio's and its unaffiliated stockholders. Based on
the Special Committee's unanimous recommendation, the Board of
Directors unanimously determined that the merger and the merger
agreement are advisable, fair to, and in the best interests of
Rubio's and its unaffiliated stockholders, and therefore, approved
the merger agreement and the transactions contemplated thereby,
including the merger. The merger is subject to customary closing
conditions, including the approval of Rubio's stockholders and
regulatory approvals, and is expected to close during the third
quarter of 2010. An annual meeting for consideration of the
proposed merger has been scheduled for August 23, 2010. Ralph
Rubio, Dan Pittard and Rosewood Capital, who collectively own
approximately 24% of the outstanding shares of Rubio's, have each
entered into voting agreements in which they have committed to vote
in favor of the proposed merger transaction. In addition, Mill Road
Capital, L.P. currently owns approximately 4.9% of the outstanding
shares.
About the Presentation of Non-GAAP Financial
Information
Regulation G, "Disclosure of Non-GAAP Financial Measures," and
other provisions of the Securities Exchange Act of 1934, as
amended, define and prescribe the conditions for use of certain
non-GAAP financial information. The company provides two non-GAAP
financial measures, "restaurant operating margins" and "adjusted
EBITDA."
The company uses restaurant operating margins to evaluate the
performance of its restaurants. Restaurant operating margin is
calculated by dividing (i) restaurant sales less cost of sales,
restaurant labor and restaurant occupancy and other by (ii)
restaurant sales.
The company also provides adjusted EBITDA, which is not a
recognized term under GAAP and does not purport to be an
alternative to income from operations or net income or a measure of
liquidity. The company's management uses adjusted EBITDA as a
measure of operating performance and in their evaluation of funding
requirements for future development and other needs. Adjusted
EBITDA is calculated as net (loss) income plus (less) income tax
expense (benefit), plus interest, net, plus loss on disposal/sale
of property, plus asset impairment and store closure expense or
less store closure reversal, plus depreciation and amortization,
plus share-based compensation expense.
The differences between adjusted EBITDA and GAAP net income for
the 13 and 26-week periods of 2009 and 2010 are indicated as
follows:
For the Thirteen Weeks Ended
Q1 2010 Q2 2010 Q1 2009 Q2 2009
------- ------- -------- --------
Net income (loss) 367 (387) 245 512
Income tax expense
(benefit) 162 (295) 150 214
Interest expense
(income) and
investment (income),
net 30 16 33 38
Loss on disposal/sale
of property 108 97 85 99
Asset impairment - 175 - 359
Depreciation and
amortization 2,416 2,375 2,496 2,449
Share-based
compensation 210 215 226 247
------- ------- -------- --------
ADJUSTED EBITDA $ 3,293 $ 2,196 $ 3,235 $ 3,918
======= ======= ======== ========
For the Twenty-Six
Weeks Ended
----------------
Q2 2010 Q2 2010
------- -------
Net (loss) income (20) 757
Income tax (benefit)
expense (133) 364
Interest expense
(income) and
investment (income),
net 46 71
Loss on disposal/sale
of property 205 184
Asset impairment and
store closure
expense (reversal) 175 359
Depreciation and
amortization 4,791 4,945
Share-based
compensation 425 473
------- -------
ADJUSTED EBITDA $ 5,489 $ 7,153
======= =======
The differences between adjusted EBITDA including costs incurred
for the evaluation of strategic alternatives and GAAP net income
for the 13 and 26-week periods ended June 27, 2010 are indicated as
follows:
For the Thirteen Weeks Ended
Q1 2010 Q2 2010 Q1 2009 Q2 2009
------- ------- -------- --------
Net income (loss) 367 (387) 245 512
Income tax expense
(benefit) 162 (295) 150 214
Interest expense
(income) and
investment (income),
net 30 16 33 38
Loss on disposal/sale
of property 108 97 85 99
Asset impairment - 175 - 359
Depreciation and
amortization 2,416 2,375 2,496 2,449
Share-based
compensation 210 215 226 247
Evaluation of
strategic
alternatives 170 1,134 - -
------- ------- -------- --------
ADJUSTED EBITDA
including costs for
evaluation of
strategic
alternatives $ 3,463 $ 3,330 $ 3,235 $ 3,918
======= ======= ======== ========
For the Twenty-Six
Weeks Ended
----------------
Q2 2010 Q2 2009
------- -------
Net (loss) income (20) 757
Income tax (benefit)
expense (133) 364
Interest expense
(income) and
investment (income),
net 46 71
Loss on disposal/sale
of property 205 184
Asset impairment and
store closure
expense (reversal) 175 359
Depreciation and
amortization 4,791 4,945
Share-based
compensation 425 473
Evaluation of
strategic
alternatives 1,304 -
------- -------
ADJUSTED EBITDA
including costs for
evaluation of
strategic
alternatives $ 6,793 $ 7,153
======= =======
Management believes these non-GAAP financial measures provide
important supplemental information to investors. These measures
should be used in addition to, and in conjunction with, results
presented in accordance with GAAP. These measures should not be
relied upon to the exclusion of the company's GAAP financial
measures. The company strongly encourages investors to review its
financial statements in their entirety and to not rely on any
single financial measure. Because non-GAAP financial measures are
not standardized, it may not be possible to compare these financial
measures with other companies' non-GAAP financial measures having
the same or similar names.
Conference Call Information
Rubio's will not hold a conference call to discuss the merger
transaction and financial results for the second quarter of
2010.
Cautions Regarding Forward-Looking
Statements
All statements in this press release that are not historical are
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements
may be identified by words such as "believe," "intend," "expect,"
"may," "could," "would," "will," "should," "plan," "project,"
"contemplate," "anticipate," or similar statements, including that
Mill Road Capital will acquire the outstanding shares of the
company's common stock (other than the shares held by Mill Road and
its affiliates and certain shares held by Ralph Rubio) in a cash
merger transaction pursuant to the terms of a definitive merger
agreement for $8.70 per share. Because these statements reflect
current views concerning future events, these forward-looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
in the forward-looking statements. These factors include, but are
not limited to, (1) the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement; (2) the inability to complete the merger due to the
failure to satisfy the other conditions to completion of the
merger; (3) the risk that the proposed transaction disrupts current
plans and operations and the potential difficulties in employee
retention as a result of the merger; and (4) other risks that are
set forth in the "Risk Factors," "Legal Proceedings" and
"Management Discussion and Analysis of Results of Operations and
Financial Condition" sections of Rubio's filings with the
Securities and Exchange Commission, or SEC. In addition, the
company's actual results may differ substantially from any such
forward-looking statements as a result of various factors, many of
which are beyond the company's control, including, among others,
the company's comparable store sales results and revenues, the
adverse effect the significant downturn in the economy has on the
spending and dining out frequency of the company's customers, the
company's ability to manage its product, labor expenses and other
restaurant costs, the costs associated with recent healthcare
reform legislation, the results of the company's evaluation of its
strategic alternatives, the success of the company's promotions,
new product offerings and marketing strategies, the company's
ability to recruit and retain qualified personnel, adverse effects
of weather and natural disasters, the adequacy of the company's
reserves related to closed stores or stores to be sold, increased
depreciation or asset write downs, the company's ability to manage
ongoing and unanticipated costs, such as costs to comply with
regulatory compliance and litigation costs, the company's ability
to implement a franchise strategy, the company's ability to open
additional restaurants in the coming periods that satisfy the
company's revenue objectives, the company's ability to successfully
resolve the company's employment and securities class action
lawsuits filed in California and Delaware and the effects of
ever-increasing competition. These and other factors can be found
in the company's filings with the SEC including, without
limitation, in the "Risk Factors" section of the company's most
recent Annual Report on Form 10-K and the "Legal Proceedings"
section of its most recent Quarterly Report on Form 10-Q. The
company undertakes no obligation to release publicly the results of
any revision to these forward-looking statements to reflect events
or circumstances following the date of this release.
Important Additional Information
All parties desiring details regarding the proposed transaction
with Mill Road Capital are urged to review the definitive
agreement, as amended, as filed with the SEC on Form 8-Ks dated May
9, 2010 and July 19, 2010, respectively, and are available on the
SEC's website at http://www.sec.gov. In connection with the
proposed transaction, Rubio's filed a definitive proxy statement
with the SEC on July 21, 2010, as well as other documents regarding
the proposed transaction, which are available on the SEC's website
at http://www.sec.gov. INVESTORS AND SECURITY
HOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND
OTHER FILED DOCUMENTS CAREFULLY BECAUSE THEY CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Shareholders can
obtain a free-of-charge copy of the definitive proxy statement and
other relevant documents filed with the SEC from the SEC's website
at http://www.sec.gov. Shareholders can also obtain a
free-of-charge copy of the definitive proxy statement and other
relevant documents by directing a request by mail or telephone to
Rubio's Restaurants, Inc., Attention: Frank Henigman, 1902 Wright
Place, Suite 300, Carlsbad, CA 92008, or from Rubio's website,
http://www.edocumentview.com/RUBO. Rubio's and certain of its
directors, executive officers and other members of management and
employees may, under the rules of the SEC, be deemed to be
"participants" in the solicitation of proxies from stockholders of
Rubio's in favor of the proposed transaction. Information regarding
Rubio's directors and executive officers as well as additional
information regarding the interests of such participants are
included in the definitive proxy statement and the other relevant
documents filed with the SEC.
About Rubio's® Restaurants, Inc. (NASDAQ:
RUBO)
Bold, distinctive, Baja-inspired food is the hallmark of Rubio's
Fresh Mexican Grill®. The first Rubio's was opened in 1983 in the
Mission Bay community of San Diego by Ralph Rubio and his father,
Ray Rubio. Rubio's is credited with introducing fish tacos to
Southern California and starting a phenomenon that has spread coast
to coast. In addition to chargrilled marinated chicken, lean carne
asada steak, and slow-roasted pork carnitas, Rubio's menu features
seafood items including grilled mahi mahi and shrimp. Guacamole and
a variety of salsas and proprietary sauces are made from scratch
daily, and Rubio's uses canola oil with zero grams trans fat per
serving. The menu includes tacos, burritos, salads and bowls,
quesadillas, HealthMex® offerings which are lower in fat and
calories, and domestic and imported beer in most locations. Each
restaurant design is reminiscent of the relaxed, warm and inviting
atmosphere of Baja California, a coastal state of Mexico.
Headquartered in Carlsbad, California, Rubio's operates, licenses
or franchises more than 195 restaurants in California, Arizona,
Colorado, Utah and Nevada. More information can be found at
http://www.rubios.com.
RUBIO'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
For the Thirteen For the Twenty-Six
Weeks Ended Weeks Ended
------------------ ------------------
June 27, June 28, June 27, June 28,
2010 2009 2010 2009
-------- -------- -------- --------
RESTAURANT SALES $ 48,476 $ 48,631 $ 95,184 $ 94,939
FRANCHISE AND LICENSING REVENUES 34 36 59 65
-------- -------- -------- --------
TOTAL REVENUES 48,510 48,667 95,243 95,004
COST OF SALES 12,426 12,933 24,287 25,406
RESTAURANT LABOR 15,777 15,692 31,444 30,944
RESTAURANT OCCUPANCY AND OTHER 12,503 11,848 23,936 23,143
GENERAL AND ADMINISTRATIVE EXPENSES 5,646 4,418 10,241 8,555
DEPRECIATION AND AMORTIZATION 2,375 2,449 4,791 4,945
PRE-OPENING EXPENSES 177 105 271 276
ASSET IMPAIRMENT 175 359 175 359
LOSS ON DISPOSAL/SALE OF PROPERTY 97 99 205 184
-------- -------- -------- --------
OPERATING (LOSS) INCOME (666) 764 (107) 1,192
INTEREST (EXPENSE) INCOME AND
INVESTMENT INCOME, NET (16) (38) (46) (71)
-------- -------- -------- --------
(LOSS) INCOME BEFORE INCOME TAXES (682) 726 (153) 1,121
INCOME TAX (BENEFIT) EXPENSE (295) 214 (133) 364
-------- -------- -------- --------
NET (LOSS) INCOME $ (387) $ 512 $ (20) $ 757
======== ======== ======== ========
BASIC EARNINGS DATA
EPS $ (0.04) $ 0.05 $ (0.00) $ 0.08
======== ======== ======== ========
AVERAGE SHARES OUTSTANDING 10,103 9,960 10,103 9,958
======== ======== ======== ========
DILUTED EARNINGS DATA
EPS $ (0.04) $ 0.05 $ (0.00) $ 0.08
======== ======== ======== ========
AVERAGE SHARES OUTSTANDING 10,103 10,053 10,103 10,038
======== ======== ======== ========
RUBIO'S RESTAURANTS, INC.
OPERATING RESULTS AS A PERCENTAGE OF TOTAL REVENUES
(unaudited)
Percentage of Total Percentage of Total
Revenues Revenues
For the Thirteen For the Twenty-Six
Weeks Ended Weeks Ended
--------- --------- --------- ---------
June 27, June 28, June 27, June 28,
2010 2009 2010 2009
--------- --------- --------- ---------
TOTAL REVENUES 100.0% 100.0% 100.0% 100.0%
COST OF SALES (1) 25.6% 26.6% 25.5% 26.8%
RESTAURANT LABOR (1) 32.5% 32.3% 33.0% 32.6%
RESTAURANT OCCUPANCY AND OTHER (1) 25.8% 24.4% 25.1% 24.4%
GENERAL AND ADMINISTRATIVE
EXPENSES 11.6% 9.1% 10.8% 9.0%
DEPRECIATION AND AMORTIZATION 4.9% 5.0% 5.0% 5.2%
PRE-OPENING EXPENSES 0.4% 0.2% 0.3% 0.3%
ASSET IMPAIRMENT 0.4% 0.7% 0.2% 0.4%
LOSS ON DISPOSAL/SALE OF
PROPERTY 0.2% 0.2% 0.2% 0.2%
OPERATING (LOSS) INCOME -1.4% 1.6% -0.1% 1.3%
INTEREST (EXPENSE) INCOME AND
INVESTMENT INCOME, NET 0.0% -0.1% 0.0% -0.1%
(LOSS) INCOME BEFORE INCOME
TAXES -1.4% 1.5% -0.2% 1.2%
INCOME TAX (BENEFIT) EXPENSE -0.6% 0.4% -0.1% 0.4%
NET (LOSS) INCOME -0.8% 1.1% 0.0% 0.8%
(1) As a percentage of restaurant sales
RUBIO'S RESTAURANTS, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
------------ ------------
June 27, December 27,
2010 2009
------------ ------------
CASH AND SHORT-TERM INVESTMENTS $ 9,473 $ 9,544
OTHER CURRENT ASSETS 8,876 9,505
PROPERTY - NET 44,974 43,086
OTHER ASSETS 13,466 12,566
------------ ------------
TOTAL ASSETS $ 76,789 $ 74,701
============ ============
CURRENT LIABILITIES $ 22,180 $ 20,947
OTHER LIABILITIES 7,051 6,599
STOCKHOLDERS' EQUITY 47,558 47,155
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 76,789 $ 74,701
============ ============
Company Contact: Frank Henigman Chief Financial Officer Rubio's
Restaurants, Inc. Tel (760) 929-8226 Email Contact Investor
Relations: Scott Liolios or Cody Slach Liolios Group, Inc. Tel
(949) 574-3860 Email Contact
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