Ignite Restaurant Group Reports Fourth Quarter 2015 Financial Results

Total revenues were $93.3 million, compared to $97.9 million in the fourth quarter of 2014; Comparable restaurant sales decreased 2.8% at Brick House Tavern + Tap and decreased 2.9% at Joe’s Crab Shack

Ignite Restaurant Group (NASDAQ:IRG) reported financial results for the fourth quarter and fiscal year ended December 28, 2015.

Highlights for the fourth quarter of 2015 were as follows:

• Total revenues were $93.3 million, compared to $97.9 million in the fourth quarter of 2014;
• Comparable restaurant sales decreased 2.8% at Brick House Tavern + Tap and decreased 2.9% at Joe’s Crab Shack;
• Loss from continuing operations was $19.1 million, or $0.74 per diluted share, compared to $33.5 million, or $1.30 per diluted share in the fourth quarter of 2014; and
• Adjusted loss from continuing operations (a non-GAAP measure) was $7.5 million, or $0.29 per diluted share, compared to $7.9 million, or $0.31 per diluted share in the fourth quarter of 2014.

Highlights for the fiscal year of 2015 were as follows:

• Total revenues were $492.0 million, compared to $503.5 million in 2014;
• Comparable restaurant sales increased 1.0% at Brick House Tavern + Tap and decreased 4.5% at Joe’s Crab Shack;
• Loss from continuing operations was $24.9 million, or $0.97 per diluted share, compared to $33.4 million, or $1.30 per diluted share in 2014; and
• Adjusted loss from continuing operations (a non-GAAP measure) was $4.3 million, or $0.17 per diluted share, compared to $5.0 million, or $0.19 per diluted share in 2014

Robert S. Merritt, Chief Executive Officer of Ignite Restaurant Group, stated, “We continued to experience declining sales at Joe’s during the fourth quarter and we also began to see sales declines at Brick House later in the year. In order to reverse the negative sales trends, we have narrowed the focus of the operations team to three core areas that we believe provide the best opportunity to increase sales and operating margins in both brands – execution, people, and food. We believe that these core areas are critical to making sure that we are providing a more consistent dining experience for our guests including high quality food and excellent service on every visit. We also initiated several new weekday value programs at Joe’s, including All-You-Can-Eat crab on Wednesdays, which have contributed to increases in comparable sales and guest traffic in sequential periods at Joe’s since being rolled out system-wide in mid-November.”

Review of Fourth Quarter 2015 Operating Results

Total revenues were $93.3 million in the fourth quarter of 2015, a decrease of 4.7% compared to $97.9 million in the fourth quarter of last year.

• Revenues at Joe’s Crab Shack were $74.1 million during the fourth quarter of 2015 versus $80.0 million in the prior year fourth quarter. Comparable restaurant sales at Joe’s Crab Shack decreased 2.9%.
• Revenues at Brick House Tavern + Tap were $19.2 million in the fourth quarter of 2015 compared to $17.9 million in the prior year fourth quarter. Comparable restaurant sales at Brick House Tavern + Tap decreased 2.8%.

Loss from continuing operations for the fourth quarter of 2015 was $19.1 million, or $0.74 per diluted share. The Company’s loss from continuing operations for the fourth quarter of 2015 included a $7.5 million deferred tax valuation allowance, a $5.5 million non-cash impairment charge, a $1.0 million write-off of debt issuance costs and debt discount, and $0.3 million of costs related to conversions, remodels and closures. Excluding the impact of these items, adjusted loss from continuing operations and adjusted loss from continuing operations per diluted share (which are non-GAAP financial measures), net of tax, were $7.5 million and $0.29, respectively, in the fourth quarter of 2015.

Loss from continuing operations for the fourth quarter of 2014 was $33.5 million, or $1.30 per diluted share. The Company’s loss from continuing operations for the fourth quarter of 2014 included a $25.6 million deferred tax valuation allowance. Excluding the impact of this item, adjusted loss from continuing operations and adjusted loss from continuing operations per diluted share (which are non-GAAP financial measures), net of tax, were $7.9 million and $0.31, respectively, in the fourth quarter of 2014.

Development

During the fourth quarter of 2015, the Company closed one Joe’s restaurant, which will be converted to a Brick House, and opened one Joe’s franchise restaurant in Dubai, U.A.E. For the year, the Company opened two Brick House restaurants and closed nine Joe’s restaurants, of which three were converted to Brick Houses and opened in the first quarter of 2016. The three converted Brick House restaurants are located in Latham, NY, Sugarland, TX, and Methuen, MA.

Liquidity

At December 28, 2015, the Company had $7.8 million of cash and approximately $26.4 million of available borrowing capacity under its current credit facility. The Company was in compliance with the financial covenants under the credit facility.

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. 

Results of Operations

The following tables present the consolidated statements of operations and selected other data for the thirteen and fifty-two weeks ended December 28, 2015 and December 29, 2014, and selected consolidated balance sheet information as of December 28, 2015 and December 29, 2014:

Consolidated Statements of Operations					Thirteen Weeks Ended December 28, 2015								Thirteen Weeks Ended December 29, 2014
					(In thousands, except percent and per share data)
Revenues					$	93,298			100.0		%		$	97,858			100.0		%
Costs and expenses
	Restaurant operating costs and expenses
		Cost of sales				30,112			32.3		%			31,846			32.5		%
		Labor expenses				30,212			32.4		%			30,297			31.0		%
		Occupancy expenses				9,655			10.3		%			10,062			10.3		%
		Other operating expenses				20,274			21.7		%			19,154			19.6		%
	General and administrative					7,263			7.8		%			9,012			9.2		%
	Depreciation and amortization					5,663			6.1		%			6,246			6.4		%
	Pre-opening costs					391			0.4		%			827			0.8		%
	Asset impairments and closures					5,662			6.1		%			26			0.0		%
	Loss on disposal of assets					435			0.5		%			509			0.5		%
		Total costs and expenses				109,667			117.5		%			107,979			110.3		%
Loss from operations						(16,369	)		(17.5	)	%			(10,121	)		(10.3	)	%
Interest expense, net						(4,801	)		(5.1	)	%			(3,839	)		(3.9	)	%
Loss from continuing operations before income taxes						(21,170	)		(22.7	)	%			(13,960	)		(14.3	)	%
Income tax expense (benefit)						(2,074	)		(2.2	)	%			19,527			20.0		%
Loss from continuing operations						(19,096	)		(20.5	)	%			(33,487	)		(34.2	)	%
Loss from discontinued operations, net						(1,223	)		(1.3	)	%			(15,034	)		(15.4	)	%
Net loss					$	(20,319	)		(21.8	)	%		$	(48,521	)		(49.6	)	%
Basic and diluted net loss per share data:
	Net loss per share
		Basic and diluted
			Loss from continuing operations		$	(0.74	)						$	(1.30	)
			Loss from discontinued operations, net		$	(0.05	)						$	(0.59	)
			Net loss		$	(0.79	)						$	(1.89	)
	Weighted average shares outstanding
		Basic and diluted				25,769								25,673

Consolidated Statements of Operations					Fifty-Two Weeks Ended December 28, 2015								Fifty-Two Weeks Ended December 29, 2014
					(In thousands, except percent and per share data)
Revenues					$	492,044			100.0		%		$	503,508			100.0		%
Costs and expenses
	Restaurant operating costs and expenses
		Cost of sales				154,270			31.4		%			163,407			32.5		%
		Labor expenses				142,209			28.9		%			142,662			28.3		%
		Occupancy expenses				40,890			8.3		%			39,401			7.8		%
		Other operating expenses				95,384			19.4		%			94,086			18.7		%
	General and administrative					30,523			6.2		%			38,669			7.7		%
	Depreciation and amortization					25,831			5.2		%			23,901			4.7		%
	Pre-opening costs					927			0.2		%			2,799			0.6		%
	Asset impairments and closures					10,497			2.1		%			1,980			0.4		%
	Loss (gain) on disposal of assets					(121	)		(0.0	)	%			1,340			0.3		%
		Total costs and expenses				500,410			101.7		%			508,245			100.9		%
Loss from operations						(8,366	)		(1.7	)	%			(4,737	)		(0.9	)	%
Interest expense, net						(16,363	)		(3.3	)	%			(12,521	)		(2.5	)	%
Gain (loss) on insurance settlements						(428	)		(0.1	)	%			89			0.0		%
Loss from continuing operations before income taxes						(25,157	)		(5.1	)	%			(17,169	)		(3.4	)	%
Income tax expense (benefit)						(308	)		(0.1	)	%			16,213			3.2		%
Loss from continuing operations						(24,849	)		(5.1	)	%			(33,382	)		(6.6	)	%
Loss from discontinued operations, net						(21,516	)		(4.4	)	%			(20,167	)		(4.0	)	%
Net loss					$	(46,365	)		(9.4	)	%		$	(53,549	)		(10.6	)	%
Basic and diluted net loss per share data:
	Net loss per share
		Basic and diluted
			Loss from continuing operations		$	(0.97	)						$	(1.30	)
			Loss from discontinued operations, net		$	(0.84	)						$	(0.79	)
			Net loss		$	(1.80	)						$	(2.09	)
	Weighted average shares outstanding
		Basic and diluted				25,731								25,659

Selected Consolidated Balance Sheet Information					December 28, 2015					December 29, 2014
					(In thousands)
Cash and cash equivalents					$	7,817				$		20,564
Total assets						207,371						327,720
Long term debt (including current portion)						126,922						162,702
Total liabilities						200,758						276,421
Total stockholders’ equity						6,613						51,299

					Thirteen Weeks Ended				Thirteen Weeks Ended				Fifty-Two Weeks Ended				Fifty-Two Weeks Ended
					December 28, 2015				December 29, 2014				December 28, 2015				December 29, 2014
					(dollars in thousands)
Selected Other Data:
Restaurants opened during the period						–				1				2				4
Number of restaurants open (end of period):
Joe’s Crab Shack						130				139				130				139
Brick House Tavern + Tap						23				21				23				21
Total restaurants						153				160				153				160
Restaurant operating weeks
Joe’s Crab Shack						1,690				1,797				7,058				7,107
Brick House Tavern + Tap						299				273				1,176				1,062
Average weekly sales
Joe’s Crab Shack					$	44			$	45			$	59			$	61
Brick House Tavern + Tap					$	65			$	65			$	66			$	66
Change in comparable restaurant sales
Joe’s Crab Shack						(2.9	%)			(4.5	%)			(4.5	%)			(4.9	%)
Brick House Tavern + Tap						(2.8	%)			5.7	%			1.0	%			7.9	%
Total						(2.9	%)			(3.1	%)			(3.9	%)			(3.5	%)

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 March 3, 2016.

	Thirteen Weeks Ended				Thirteen Weeks Ended				Fifty-Two Weeks Ended				Fifty-Two Weeks Ended
	December 28, 2015				December 29, 2014				December 28, 2015				December 29, 2014
	(In thousands, except per share data)
Loss from continuing operations – GAAP	$	(19,096	)		$	(33,487	)		$	(24,849	)		$	(33,382	)
Adjustments – continuing operations:
Transaction costs		–				–				–				510
Costs related to conversions, remodels and closures		332				–				1,954				127
Write-off of debt issuance costs and debt discount		962				–				962				2,241
Asset impairment		5,528				–				9,409				1,770
Loss (gain) on insurance settlements		–				–				428				(89	)
Income tax effect of adjustments above		(2,626	)			–				(4,975	)			(1,796	)
Deferred tax asset valuation allowance		7,450				25,632				12,807				25,632
Adjusted loss from continuing operations – non-GAAP	$	(7,450	)		$	(7,855	)		$	(4,264	)		$	(4,987	)
Weighted average shares outstanding (GAAP)
Basic and diluted		25,769				25,673				25,731				25,659
Loss from continuing operations per share (GAAP)
Basic and diluted	$	(0.74	)		$	(1.30	)		$	(0.97	)		$	(1.30	)
Adjusted loss from continuing operations per share (non-GAAP)
Basic and diluted	$	(0.29	)		$	(0.31	)		$	(0.17	)		$	(0.19	)

Posted by Nevistas News on March 4, 2016.

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