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Ignite Restaurant Group Reports Third Quarter 2016 Financial Results

HOUSTON, Nov. 02, 2016 (GLOBE NEWSWIRE) -- Ignite Restaurant Group (NASDAQ:IRG) today reported financial results for the third quarter ended September 26, 2016.

Highlights for the third quarter of 2016 were as follows:

  • Total revenues were $119.9 million, compared to $133.4 million in the third quarter of 2015;
  • Comparable restaurant sales decreased 6.8% company-wide, comprised of a 6.5% decrease at Joe’s Crab Shack and a 8.9% decrease at Brick House Tavern + Tap;
  • Loss from continuing operations was $15.2 million, or $0.59 per diluted share, compared to a loss from continuing operations of $4.3 million, or $0.17 per diluted share in the third quarter of 2015; and
  • Adjusted income from continuing operations (a non-GAAP measure) was $0.8 million, or $0.03 per diluted share, compared to adjusted income from continuing operations of $1.9 million, or $0.07 per diluted share in the third quarter of 2015.

Robert S. Merritt, Chief Executive Officer of Ignite Restaurant Group, stated, “We experienced downward pressure on our comparable restaurant sales during the current quarter, most significantly in the Texas market, which was a reflection of an overall challenging environment for casual dining. Consumers have continued to be prudent with discretionary spending and remain extremely value conscious. We remain sensitive to this consumer sentiment and are currently testing some menu items that we believe increase the overall value perception of our guest. We were successful in improving certain areas of our operating margin during the quarter, but the negative impacts from commodity price inflation prevented us from seeing an overall improvement from last year. We also continued our focus on improving our balance sheet as we used excess cash flow to pay down almost $7 million of additional debt since last quarter.”

Review of Third Quarter 2016 Operating Results

Total revenues were $119.9 million in the third quarter of 2016, a decrease of 10.1% compared to $133.4 million in the third quarter of last year.

  • Revenues at Joe’s Crab Shack were $100.8 million during the third quarter of 2016 versus $114.8 million in the prior year third quarter. Comparable restaurant sales at Joe’s Crab Shack decreased 6.5%.
  • Revenues at Brick House Tavern + Tap were $19.1 million in the third quarter of 2016 compared to $18.6 million in the prior year third quarter. Comparable restaurant sales at Brick House Tavern + Tap decreased 8.9%.

Loss from continuing operations for the third quarter of 2016 was $15.2 million, or $0.59 per diluted share. The Company’s loss from continuing operations for the third quarter of 2016 included certain non-recurring items, the more significant of which are asset impairment charges of $11.1 million, a $6.4 million deferred tax valuation allowance, and costs related to stores closures of $4.5 million. Excluding the impact of these items, adjusted income from continuing operations and adjusted income from continuing operations per diluted share (which are non-GAAP financial measures), net of tax, were $0.8 million and $0.03, respectively, in the third quarter of 2016.

Loss from continuing operations for the third quarter of 2015 was $4.3 million, or $0.17 per diluted share. The Company’s loss from continuing operations for the third quarter of 2015 also included certain non-recurring items, the most significant of which are $3.9 million in asset impairment charges, $2.6 million deferred tax valuation allowance and $1.6 million in costs related to store closures. Excluding the impact of these items, adjusted income from continuing operations and adjusted income from continuing operations per diluted share (which are non-GAAP financial measures), net of tax, were $1.9 million and $0.07, respectively, in the third quarter of 2015.

Development

During the third quarter of 2016, the Company closed 14 Joe's restaurants and one Brick House restaurant and opened one Joe's franchise restaurant in Dubai, U.A.E. For the year, the Company closed 17 Joe’s restaurants and one Brick House restaurant.

Liquidity

At September 26, 2016, the Company had $0.7 million of cash and approximately $25.9 million of available borrowing capacity under its current credit facility. The Company was in compliance with the financial covenants under the credit facility.

Conference Call

Ignite will host a conference call to discuss third quarter financial results today at 5:00 PM Eastern Time. Hosting the call will be Robert S. Merritt, Chief Executive Officer, and Brad Leist, Chief Financial Officer.

The conference call can be accessed live over the phone by dialing 888-264-8926 or for international callers by dialing 913-905-1087. 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 8578396. The replay will be available until Wednesday, November 9, 2016. 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., headquartered in Houston, Texas, operates a portfolio of restaurant concepts, including Joe's Crab Shack and Brick House Tavern + Tap, in a diverse set of markets across the United States. Each brand offers a variety of high-quality food in a distinctive, casual, high-energy atmosphere. For more information on Ignite and its distinctive brands, visit www.igniterestaurants.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 28, 2015 (which can be found at the SEC’s website www.sec.gov). 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 thirty-nine weeks ended September 26, 2016 and September 28, 2015, and selected consolidated balance sheet information as of September 26, 2016 and December 28, 2015:

Consolidated Statements of Operations Thirteen Weeks Ended
September 26, 2016
Thirteen Weeks Ended
September 28, 2015
(In thousands, except percent and per share data)
Revenues $ 119,937 100.0 % $ 133,357 100.0 %
Costs and expenses
Restaurant operating costs and expenses
Cost of sales 39,751 33.1 % 41,172 30.9 %
Labor expenses 33,716 28.1 % 37,190 27.9 %
Occupancy expenses 9,702 8.1 % 10,591 7.9 %
Other operating expenses 21,409 17.9 % 25,760 19.3 %
General and administrative 5,473 4.6 % 6,502 4.9 %
Depreciation and amortization 5,933 4.9 % 7,762 5.8 %
Pre-opening costs - 0.0 % 22 0.0 %
Asset impairments and closures 15,337 12.8 % 4,752 3.6 %
Loss (gain) on disposal of assets 472 0.4 % (908) (0.7)%
Total costs and expenses 131,793 109.9 % 132,843 99.6 %
Income (loss) from operations (11,856) (9.9)% 514 0.4 %
Interest expense, net (3,158) (2.6)% (3,837) (2.9)%
Loss on insurance settlements - 0.0 % (428) (0.3)%
Loss from continuing operations before income taxes (15,014) (12.5)% (3,751) (2.8)%
Income tax expense 149 0.1 % 537 0.4 %
Loss from continuing operations (15,163) (12.6)% (4,288) (3.2)%
Income from discontinued operations, net - 0.0 % 391 0.3 %
Net loss $ (15,163) (12.6)% $ (3,897) (2.9)%
Basic and diluted net loss per share data:
Net loss per share
Basic and diluted
Loss from continuing operations $ (0.59) $ (0.17)
Income from discontinued operations, net$ - $ 0.02
Net loss $ (0.59) $ (0.15)
Weighted average shares outstanding
Basic 25,866 25,761
Diluted 25,866 25,761

Consolidated Statements of Operations Thirty-Nine Weeks Ended
September 26, 2016
Thirty-Nine Weeks Ended
September 28, 2015
(In thousands, except percent and per share data)
Revenues $ 368,593 100.0 % $ 398,746 100.0 %
Costs and expenses
Restaurant operating costs and expenses
Cost of sales 119,574 32.4 % 123,838 31.1 %
Labor expenses 107,800 29.2 % 111,997 28.1 %
Occupancy expenses 29,784 8.1 % 31,235 7.8 %
Other operating expenses 68,351 18.5 % 75,430 18.9 %
General and administrative 17,707 4.8 % 23,260 5.8 %
Depreciation and amortization 18,076 4.9 % 20,168 5.1 %
Pre-opening costs 876 0.2 % 536 0.1 %
Asset impairments and closures 23,770 6.4 % 4,835 1.2 %
Loss (gain) on disposal of assets 896 0.2 % (556) (0.1)%
Total costs and expenses 386,834 104.9 % 390,743 98.0 %
Income (loss) from operations (18,241) (4.9)% 8,003 2.0 %
Interest expense, net (9,426) (2.6)% (11,562) (2.9)%
Gain (loss) on insurance settlements 755 0.2 % (428) (0.1)%
Loss from continuing operations before income taxes (26,912) (7.3)% (3,987) (1.0)%
Income tax expense 320 0.1 % 1,766 0.4 %
Loss from continuing operations (27,232) (7.4)% (5,753) (1.4)%
Loss from discontinued operations, net - 0.0 % (20,293) (5.1)%
Net loss $ (27,232) (7.4)% $ (26,046) (6.5)%
Basic and diluted net loss per share data:
Net loss per share
Basic and diluted
Loss from continuing operations $ (1.05) $ (0.22)
Loss from discontinued operations, net $ - $ (0.79)
Net loss $ (1.05) $ (1.01)
Weighted average shares outstanding
Basic 25,819 25,719
Diluted 25,819 25,719

Selected Consolidated Balance Sheet Information September 26,
2016
December 28,
2015
(In thousands)
Cash and cash equivalents $ 729 $ 7,817
Total assets 159,277 205,182
Long term debt (including current portion) 113,309 124,733
Total liabilities 178,906 198,569
Total stockholders' equity (deficit) (19,629) 6,613

Thirteen
Weeks Ended
Thirteen
Weeks Ended
Thirty-Nine
Weeks Ended
Thirty-Nine
Weeks Ended
September 26,
2016
September 28,
2015
September 26,
2016
September 28,
2015
(dollars in thousands)
Selected Other Data:
Restaurants opened during the period - - 3 2
Number of restaurants open (end of period):
Joe's Crab Shack 113 131 113 131
Brick House Tavern + Tap 25 23 25 23
Total restaurants 138 154 138 154
Restaurant operating weeks
Joe's Crab Shack 1,622 1,769 4,988 5,368
Brick House Tavern + Tap 332 299 991 877
Average weekly sales
Joe's Crab Shack $ 62 $ 65 $ 61 $ 63
Brick House Tavern + Tap $ 58 $ 62 $ 64 $ 67
Change in comparable restaurant sales
Joe's Crab Shack (6.5%) (6.6%) (5.0%) (4.9%)
Brick House Tavern + Tap (8.9%) (0.7%) (6.5%) 2.5%
Total (6.8%) (6.1%) (5.2%) (4.1%)

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 November 2, 2016.

Thirteen
Weeks Ended
Thirteen
Weeks Ended
Thirty-Nine
Weeks Ended
Thirty-Nine
Weeks Ended
September 26,
2016
September 28,
2015
September 26,
2016
September 28,
2015
(In thousands, except per share data)
Loss from continuing operations - GAAP$ (15,163) $ (4,288) $ (27,232) $ (5,753)
Adjustments - continuing operations:
Costs related to conversions, remodels and closures 4,530 1,559 4,768 1,622
Loss (gain) on insurance settlements - 428 (755) 428
Write-off of debt issuance costs and debt discount 145 - 266 -
Asset impairments 11,099 3,881 19,102 3,881
Income tax effect of adjustments above
Current benefit (198) - (130) (8)
Deferred benefit (5,953) (2,324) (8,989) (2,341)
Deferred tax asset valuation allowance 6,368 2,624 11,674 5,357
Adjusted income (loss) from continuing operations - non-GAAP$ 828 $ 1,880 $ (1,296) $ 3,186
Weighted average shares outstanding (GAAP)
Basic 25,866 25,761 25,819 25,719
Diluted 25,866 25,792 25,819 25,738
Loss from continuing operations per share (GAAP)
Basic and diluted$ (0.59) $ (0.17) $ (1.05) $ (0.22)
Adjusted income (loss) from continuing operations per share (non-GAAP)
Basic and diluted$ 0.03 $ 0.07 $ (0.05) $ 0.12


Investor Relations Fitzhugh Taylor (203) 682-8261 fitzhugh.taylor@icrinc.com

Source:Ignite Restaurant Group, Inc.