UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8‑K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2015
RED ROBIN GOURMET BURGERS, INC.
(Exact name of registrant as specified in its charter)
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Delaware | 001-34851 |
84-1573084 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
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6312 S. Fiddler’s Green Circle, Suite 200N Greenwood Village, Colorado | 80111 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (303) 846-6000
Not Applicable
(Former name or former address, if changed since last report.)
___________________________________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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ITEM 2.02 | Results of Operations and Financial Condition |
On November 3, 2015, Red Robin Gourmet Burgers, Inc. issued a press release describing selected financial results for the third fiscal quarter ended October 4, 2015. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. A copy of the supplemental financial information for the third fiscal quarter ended October 4, 2015, that will be referred to during today’s investor conference call and webcast is being furnished as Exhibit 99.2 to this Form 8-K.
The information in this Item 2.02, including the information set forth in Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
ITEM 9.01 Financial Statements and Exhibits
(d) Exhibits
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Exhibit No. | Description |
99.1 | Red Robin Gourmet Burgers, Inc. Press Release dated November 3, 2015. |
99.2 | Supplemental Financial Information dated November 3, 2015, provided by Red Robin Gourmet Burgers, Inc. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
RED ROBIN GOURMET BURGERS, INC.
Date: November 3, 2015
By: /s/ Stuart B. Brown
Name: Stuart B. Brown
Title: Senior Vice President and Chief Financial Officer
EXHIBIT INDEX
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Exhibit No. | Description |
99.1 | Red Robin Gourmet Burgers, Inc. Press Release dated November 3, 2015. |
99.2 | Supplemental Financial Information dated November 3, 2015 provided by Red Robin Gourmet Burgers, Inc. |
Exhibit 99.1
Red Robin Gourmet Burgers Reports Earnings per Diluted Share Up 16% for the Fiscal Third Quarter
Ended October 4, 2015
Greenwood Village, CO – November 3, 2015 – Red Robin Gourmet Burgers, Inc., (NASDAQ: RRGB), a casual dining restaurant chain serving an innovative selection of high-quality gourmet burgers in a family-friendly atmosphere, today reported financial results for the 12 weeks ended October 4, 2015.
Third Quarter 2015 Financial Highlights
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• | Total revenues were $283.4 million, an increase of 6.0% |
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• | Comparable restaurant revenue increased 3.5% |
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• | Restaurant-level operating profit, as a percent of restaurant revenue, increased to 21.6% from 19.5% (see Schedule II) |
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• | EBITDA increased 22.1% to $31.2 million from $25.6 million (see Schedule III) |
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• | Net income increased 14.9% to $8.3 million from $7.2 million |
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• | Earnings per diluted share increased 16.0% to $0.58 compared to $0.50 |
Year to date net income was $36.0 million, an increase of 25.8%. After adjusting for a change in accounting estimate for gift card breakage in the current year and executive transition costs in the prior year, year to date net income increased 21.0% to $35.1 million. Year to date earnings per diluted share was $2.52, compared to $1.97 a year ago, an increase of 27.9%. Year to date earnings per diluted share on an adjusted basis was $2.46 compared to $2.00 a year ago, an increase of 23.0%. 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, respectively.
“Our guests continue to react favorably to our restaurant upgrades and our menu innovation, both of which are critical in this increasingly competitive environment,” said Steve Carley, Red Robin Gourmet Burgers, Inc. chief executive officer. “Our third quarter sales increase is the direct result of guests enjoying more of what we have to offer.”
Operating Results
Total Company revenues, which primarily include Company-owned restaurant revenue and franchise royalties, increased 6.0% to $283.4 million in the third quarter of 2015 from $267.4 million in the third quarter of 2014. Comparable restaurant revenue increased $8.2 million, new restaurant openings, including acquisitions and net of closures, contributed $7.4 million of additional revenue, and franchise and other revenue increased $0.4 million. The $7.4 million additional revenue from newly opened and acquired restaurants included a $2.1 million unfavorable foreign exchange impact.
System-wide restaurant revenue (including franchised units) for the third quarter of 2015 totaled $350.6 million, compared to $330.9 million for the third quarter in 2014.
Comparable restaurant revenue increased 3.5% in the third quarter of 2015 compared to the same period a year ago, driven by a 3.6% increase in average guest check and offset by 0.1% decrease in guest count. 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.
Restaurant-level operating profit margin (a non-GAAP financial measure) was 21.6% in the third quarter of 2015 compared to 19.5% in the same period a year ago, an improvement of 210 basis points. The improved margin resulted from a 150 basis point decrease in cost of sales and a 70 basis point decrease in labor costs, partially offset by higher occupancy 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.
Restaurant Revenue Performance (1)
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| | | | | | | |
| Q3 2015 | | Q3 2014 |
Average weekly sales per unit: |
| | |
Company-owned – Total | $ | 55,780 |
| | $ | 54,684 |
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Company-owned – Comparable | $ | 56,462 |
| | $ | 54,580 |
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Franchised units – Comparable | $ | 59,664 |
| | $ | 57,179 |
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Total operating weeks: |
| | |
Company-owned units | 4,978 |
| | 4,803 |
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Franchised units | 1,195 |
| | 1,176 |
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_________________________________________________________
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(1) | Excludes Red Robin Burger Works® fast casual restaurants, which had 120 and 84 operating weeks in the third quarter of 2015 and 2014 |
Other Results
Depreciation and amortization costs increased to $18.6 million in the third quarter of 2015 from $15.2 million in the third quarter of 2014. The increased depreciation was primarily related to restaurants remodeled under the Brand Transformation Initiative and new restaurants opened since the third quarter 2014.
General and administrative costs were $23.7 million, or 8.4% of total revenues, in the third quarter of 2015, compared to $20.1 million, or 7.5% of revenues in the same period a year ago. The increase of $3.6 million resulted primarily from increased incentive compensation, and higher manager hiring and training costs.
Selling expenses were flat at $7.9 million, or 2.8% of total revenues, in the third quarter of 2015, compared to $7.7 million, or 2.9% of total revenues in the prior year.
Pre-opening costs, including acquisition-related costs, were $2.2 million in the third quarter of 2015, compared to $2.6 million in the same period a year ago. A $0.5 million decrease in acquisition costs was partially offset by an increase in restaurant pre-opening costs due to the timing of restaurant openings in 2015.
The Company had an effective tax rate of 21.9% in the third quarter of 2015, compared to a 12.5% rate in the same period a year ago. The year to date effective tax rate was 26.5%, compared to a 23.9% rate in same period of 2014.
Restaurant Development
As of the end of the third quarter of 2015, there were 418 Company-owned Red Robin® restaurants, 10 Red Robin Burger Works® and 99 franchised Red Robin restaurants for a total of 527 restaurants. During the third quarter, the Company opened five Red Robin restaurants, relocated three Red Robin restaurants, and acquired one franchised restaurant.
Under the Brand Transformation Initiative, the Company completed 53 remodels during the third quarter towards its goal of 150 remodels this year. The Company anticipates having over 300 restaurants conforming to the new brand standards by year end, including new restaurant openings.
Balance Sheet and Liquidity
As of October 4, 2015, the Company had cash and cash equivalents of $21.8 million and total debt of $172.9 million, including $8.1 million of capital lease liabilities. The Company increased debt by $25.0 million since the beginning of fiscal year 2015.
During the third quarter, the Company purchased 136,568 shares of the Company's common stock for $10.6 million. As of October 4, 2015, there was approximately $39.4 million remaining under the current board authorization for stock repurchases.
Outlook for 2015
Red Robin’s 2015 fiscal year consists of 52 weeks and will end on December 27, 2015.
In fiscal year 2015, the Company expects comparable revenue growth of approximately 2.5% and total revenue growth near 11.0%. The Company plans to open 20 new Red Robin restaurants and three Red Robin Burger Works in fiscal year 2015 resulting in operating week growth, inclusive of 2014 acquisitions, approaching 8.5%.
Capital investments in fiscal year 2015 are expected to be approximately $170 million. In addition to the new restaurant openings, the Company plans to relocate three restaurants and remodel approximately 150 Red Robin restaurants as part of its Brand Transformation Initiative.
Restaurant-level operating profit margin (a non-GAAP financial measure) in fiscal year 2015 is expected to be approximately 22.3%.
General and administrative costs are expected to be between $102 million and $103 million, while selling expenses are expected to be approximately 3.3% of sales. Pre-opening expense is expected to be approximately $7.0 million. Depreciation and amortization is projected to be between $78 million and $79 million.
Interest expense is expected to be approximately $4.0 million while the income tax rate in fiscal year 2015 is expected to be approximately 26.5%.
The sensitivity of the Company’s earnings per diluted share to a 1% change in guest counts for fiscal year 2015 is estimated to be $0.33 on an annualized basis. Additionally, a 10 basis point change in restaurant-level operating profit margin is expected to impact earnings per diluted share by approximately $0.08, and a change of approximately $145,000 in pre-tax income or expense is equivalent to approximately $0.01 per diluted share.
Investor Conference Call and Webcast
Red Robin will host an investor conference call to discuss its third quarter 2015 results today at 10:00 a.m. ET. The conference call number is (888) 812-8515, or for international callers (913) 312-6675. The financial information that the Company intends to discuss during the conference call is included in this press release and will be available on the “Investors” link of the Company’s website at www.redrobin.com. Prior to the conference call, the Company will post supplemental financial information that will be discussed during the call and live webcast.
To access the supplemental financial information and webcast, please visit www.redrobin.com and select the “Investors” link from the menu. A replay of the live conference call will be available from two hours after the call until midnight on Tuesday, November 10, 2015. The replay can be accessed by dialing (877) 870-5176, or (858) 384-5517 for international callers. The conference ID is 205397.
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., 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. In addition to its many burger offerings, Red Robin serves a wide variety of salads, soups, appetizers, entrees, desserts and signature Mad Mixology® 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 the 2014 VIBE Vista Award for Best Beer Program in a Multi-Unit Chain Restaurant. There are more than 500 Red Robin restaurants across the United States and Canada, including those operating under franchise agreements. Red Robin… YUMMM®! Connect with Red Robin on Facebook and Twitter.
Forward-Looking Statements
Forward-looking statements in this press release regarding our strategic initiatives, revenues and profit margins, new restaurant openings (including Red Robin Burger Works) and operating weeks, capital investments including our Brand Transformation Initiative and restaurant remodeling, restaurant relocations, future economic performance, market share, anticipated costs, expenses, tax rate, sensitivity of earnings per share and other projected financial measures, statements under the heading “Outlook for 2015” and all other statements that are not historical facts, are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on assumptions believed by the Company to be reasonable and speak only as of the date on which such statements are made. Without limiting the generality of the foregoing, words such as “expect,” “anticipate,” “intend,” “plan,” “project,” “will” or “estimate,” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. We undertake no obligation to update such statements to reflect events or circumstances arising after such date, and we caution investors not to place undue reliance on any such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements based on a number of factors, including but not limited to the following: the effectiveness of the
Company’s marketing strategies and initiatives to achieve restaurant sales growth; the ability to fulfill planned expansion and restaurant remodeling; the cost and availability of key food products, labor, and energy; the ability to achieve anticipated revenue and cost savings from our anticipated new technology systems and other initiatives; availability of capital or credit facility borrowings; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; federal, state, and local regulation of our business; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) filed with the U.S. Securities and Exchange Commission.
For media relations questions contact:
Jennifer DeNick, Coyne PR
(973) 588-2000
For investor relations questions contact:
Stuart Brown, Chief Financial Officer
(303) 846-6000
RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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| | | | | | | | | | | | | | | | |
| | Twelve Weeks Ended | | Forty Weeks Ended |
| | October 4, 2015 | | October 5, 2014 | | October 4, 2015 | | October 5, 2014 |
Revenues: | | | | | | | | |
Restaurant revenue | | $ | 279,496 |
| | $ | 263,883 |
| | $ | 956,709 |
| | $ | 850,696 |
|
Franchise royalties, fees and other revenue | | 3,916 |
| | 3,493 |
| | 14,583 |
| | 13,297 |
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Total revenues | | 283,412 |
| | 267,376 |
| | 971,292 |
| | 863,993 |
|
| | | | | | | | |
Costs and expenses: | | | | | | | | |
Restaurant operating costs (exclusive of depreciation
and amortization shown separately below): | | | | | | | | |
Cost of sales | | 68,197 |
| | 68,241 |
| | 237,812 |
| | 216,150 |
|
Labor | | 92,097 |
| | 88,918 |
| | 309,966 |
| | 282,410 |
|
Other operating | | 36,144 |
| | 34,124 |
| | 118,084 |
| | 105,744 |
|
Occupancy | | 22,804 |
| | 21,222 |
| | 76,161 |
| | 64,122 |
|
Depreciation and amortization | | 18,618 |
| | 15,209 |
| | 58,881 |
| | 48,216 |
|
General and administrative | | 23,709 |
| | 20,106 |
| | 81,748 |
| | 72,645 |
|
Selling | | 7,899 |
| | 7,725 |
| | 32,047 |
| | 27,928 |
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Pre-opening costs and acquisition costs | | 2,239 |
| | 2,605 |
| | 4,563 |
| | 7,045 |
|
Total costs and expenses | | 271,707 |
| | 258,150 |
| | 919,262 |
| | 824,260 |
|
| | | | | | | | |
Income from operations | | 11,705 |
| | 9,226 |
| | 52,030 |
| | 39,733 |
|
| | | | | | | | |
Other expense: | | | | | | | | |
Interest expense, net and other | | 1,098 |
| | 986 |
| | 3,062 |
| | 2,134 |
|
| | | | | | | | |
Income before income taxes | | 10,607 |
| | 8,240 |
| | 48,968 |
| | 37,599 |
|
Provision for income taxes | | 2,325 |
| | 1,032 |
| | 12,955 |
| | 8,977 |
|
Net income | | $ | 8,282 |
| | $ | 7,208 |
| | $ | 36,013 |
| | $ | 28,622 |
|
Earnings per share: | | | | | | | | |
Basic | | $ | 0.59 |
| | $ | 0.51 |
| | $ | 2.55 |
| | $ | 2.00 |
|
Diluted | | $ | 0.58 |
| | $ | 0.50 |
| | $ | 2.52 |
| | $ | 1.97 |
|
Weighted average shares outstanding: | | | | | | | | |
Basic | | 14,138 | | 14,216 | | 14,115 | | 14,299 |
Diluted | | 14,308 | | 14,397 | | 14,297 | | 14,517 |
RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
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| | | | | | | | |
| | (Unaudited) October 4, 2015 | | December 28, 2014 |
Assets: | | | | |
Current Assets: | | | | |
Cash and cash equivalents | | $ | 21,823 |
| | $ | 22,408 |
|
Accounts receivable, net | | 12,875 |
| | 23,740 |
|
Inventories | | 26,643 |
| | 25,947 |
|
Prepaid expenses and other current assets | | 19,360 |
| | 23,160 |
|
Deferred tax asset and other | | 4,184 |
| | 4,677 |
|
Total current assets | | 84,885 |
| | 99,932 |
|
| | | | |
Property and equipment, net | | 580,631 |
| | 496,262 |
|
Goodwill | | 82,646 |
| | 84,115 |
|
Intangible assets, net | | 40,275 |
| | 42,479 |
|
Other assets, net | | 13,892 |
| | 13,101 |
|
Total assets | | $ | 802,329 |
| | $ | 735,889 |
|
| | | | |
Liabilities and Stockholders’ Equity: | | | | |
Current Liabilities: | | | | |
Trade accounts payable | | $ | 22,244 |
| | $ | 28,522 |
|
Construction related payables | | 33,248 |
| | 15,652 |
|
Accrued payroll and payroll related liabilities | | 46,494 |
| | 47,362 |
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Unearned revenue | | 30,221 |
| | 45,049 |
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Accrued liabilities and other | | 31,512 |
| | 27,084 |
|
Total current liabilities | | 163,719 |
| | 163,669 |
|
| | | | |
Deferred rent | | 63,635 |
| | 57,341 |
|
Long-term debt | | 164,875 |
| | 139,375 |
|
Long-term portion of capital lease obligations | | 7,534 |
| | 7,938 |
|
Other non-current liabilities | | 9,647 |
| | 7,795 |
|
Total liabilities | | 409,410 |
| | 376,118 |
|
| | | | |
Stockholders’ Equity: | | | | |
Common stock; $0.001 par value: 45,000 shares authorized; 17,851 and 17,851 shares issued; 14,047 and 14,043 shares outstanding | | 18 |
| | 18 |
|
Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding | | — |
| | — |
|
Treasury stock 3,804 and 3,808 shares, at cost | | (137,211 | ) | | (132,252 | ) |
Paid-in capital | | 205,255 |
| | 200,617 |
|
Accumulated other loss, net of tax | | (4,468 | ) | | (1,924 | ) |
Retained earnings | | 329,325 |
| | 293,312 |
|
Total stockholders’ equity | | 392,919 |
| | 359,771 |
|
Total liabilities and stockholders’ equity | | $ | 802,329 |
| | $ | 735,889 |
|
Schedule I
Reconciliation of Non-GAAP Results to GAAP Results
(In thousands, except per share data)
In addition to the results provided in accordance with Generally Accepted Accounting Principles (“GAAP”) throughout this press release, the Company has provided non-GAAP measurements which present the 12 and 40 weeks ended October 4, 2015 and the 12 and 40 weeks ended October 5, 2014, net income and basic and diluted earnings per share, excluding the effects of a change in accounting estimate for gift card breakage. The Company believes that the presentation of net income and earnings per share exclusive of the identified item gives the reader additional insight into the ongoing operational results of the Company. This supplemental information will assist with comparisons of past and future financial results against the present financial results presented herein. Income tax expense related to the change in accounting estimate was calculated based on the change in the total tax provision calculation after adjusting for the identified item. The non-GAAP measurements are intended to supplement the presentation of the Company’s financial results in accordance with GAAP.
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| | | | | | | | | | | | | | | | |
| | Twelve Weeks Ended | | Forty Weeks Ended |
| | October 4, 2015 | | October 5, 2014 | | October 4, 2015 | | October 5, 2014 |
Net income as reported | | $ | 8,282 |
| | $ | 7,208 |
| | $ | 36,013 |
| | $ | 28,622 |
|
Change in estimate for gift card breakage | | — |
| | — |
| | (1,369 | ) | | — |
|
Executive transition costs | | — |
| | — |
| | — |
| | 544 |
|
Income tax benefit (expense) | | — |
| | — |
| | 439 |
| | (183 | ) |
Adjusted net income | | $ | 8,282 |
| | $ | 7,208 |
| | $ | 35,083 |
| | $ | 28,983 |
|
| | | | | | | | |
Basic net income per share: | | | | | | | | |
Net income as reported | | $ | 0.59 |
| | $ | 0.51 |
| | $ | 2.55 |
| | $ | 2.00 |
|
Change in estimate for gift card breakage | | — |
| | — |
| | (0.10 | ) | | — |
|
Executive transition costs | | — |
| | — |
| | — |
| | 0.04 |
|
Income tax benefit (expense) | | — |
| | — |
| | 0.03 |
| | (0.01 | ) |
Adjusted earnings per share - basic | | $ | 0.59 |
| | $ | 0.51 |
| | $ | 2.48 |
| | $ | 2.03 |
|
| | | | | | | | |
Diluted net income per share: | | | | | | | | |
Net income as reported | | $ | 0.58 |
| | $ | 0.50 |
| | $ | 2.52 |
| | $ | 1.97 |
|
Change in estimate for gift card breakage | | — |
| | — |
| | (0.09 | ) | | — |
|
Executive transition costs | | — |
| | — |
| | — |
| | 0.04 |
|
Income tax benefit (expense) | | — |
| | — |
| | 0.03 |
| | (0.01 | ) |
Adjusted earnings per share - diluted | | $ | 0.58 |
| | $ | 0.50 |
| | $ | 2.46 |
| | $ | 2.00 |
|
| | | | | | | | |
Weighted average shares outstanding | | | | | | | | |
Basic | | 14,138 |
| | 14,216 |
| | 14,115 |
| | 14,299 |
|
Diluted | | 14,308 |
| | 14,397 |
| | 14,297 |
| | 14,517 |
|
Schedule II
Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income
from Operations and Net Income
(In thousands)
The Company believes that restaurant-level operating profit is an important measure for management and investors because it is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. The Company defines restaurant-level operating profit to be restaurant revenue minus restaurant-level operating costs, excluding restaurant closures and impairment costs. The measure includes restaurant- level occupancy costs, which include fixed rents, percentage rents, common area maintenance charges, real estate and personal property taxes, general liability insurance, and other property costs, but excludes depreciation related to restaurant buildings and leasehold improvements. The measure excludes depreciation and amortization expense, substantially all of which is related to restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlay for the restaurants. The measure also excludes selling, general, and administrative costs, and therefore excludes occupancy costs associated with selling, general, and administrative functions, and pre-opening costs. The Company excludes restaurant closure costs as they do not represent a component of the efficiency of continuing operations. Restaurant impairment costs are excluded, because, similar to depreciation and amortization, they represent a non-cash charge for the Company’s investment in its restaurants and not a component of the efficiency of restaurant operations. Restaurant-level operating profit is not a measurement determined in accordance with generally accepted accounting principles (“GAAP”) and should not be considered in isolation, or as an alternative, to income from operations or net income as indicators of financial performance. Restaurant-level operating profit as presented may not be comparable to other similarly titled measures of other companies. The table below sets forth certain unaudited information for the 12 and 40 weeks weeks ended October 4, 2015 and the 12 and 40 weeks weeks ended October 5, 2014, expressed as a percentage of total revenues, except for the components of restaurant-level operating profit, which are expressed as a percentage of restaurant revenue.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Twelve Weeks Ended | | Forty Weeks Ended |
| | October 4, 2015 | | October 5, 2014 | | October 4, 2015 | | October 5, 2014 |
Restaurant revenues | | $ | 279,496 |
| | 98.6 | % | | $ | 263,883 |
| | 98.7 | % | | $ | 956,709 |
| | 98.5 | % | | $ | 850,696 |
| | 98.5 | % |
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | | | | | | | | | | | | | | | | |
Cost of sales | | 68,197 |
| | 24.4 | % | | 68,241 |
| | 25.9 | % | | 237,812 |
| | 24.9 | % | | 216,150 |
| | 25.4 | % |
Labor | | 92,097 |
| | 33.0 | % | | 88,918 |
| | 33.7 | % | | 309,966 |
| | 32.4 | % | | 282,410 |
| | 33.2 | % |
Other operating | | 36,144 |
| | 12.9 | % | | 34,124 |
| | 12.9 | % | | 118,084 |
| | 12.3 | % | | 105,744 |
| | 12.4 | % |
Occupancy | | 22,804 |
| | 8.1 | % | | 21,222 |
| | 8.0 | % | | 76,161 |
| | 8.0 | % | | 64,122 |
| | 7.6 | % |
Restaurant-level operating profit | | 60,254 |
| | 21.6 | % | | 51,378 |
| | 19.5 | % | | 214,686 |
| | 22.4 | % | | 182,270 |
| | 21.4 | % |
| | | | | | | | | | | | | | | | |
Add – Franchise royalties, fees and other revenue | | 3,916 |
| | 1.4 | % | | 3,493 |
| | 1.3 | % | | 14,583 |
| | 1.5 | % | | 13,297 |
| | 1.5 | % |
Deduct – other operating: | | | | | | | | | | | | | | | | |
Depreciation and amortization | | 18,618 |
| | 6.6 | % | | 15,209 |
| | 5.7 | % | | 58,881 |
| | 6.1 | % | | 48,216 |
| | 5.6 | % |
General and administrative expenses | | 23,709 |
| | 8.4 | % | | 20,106 |
| | 7.5 | % | | 81,748 |
| | 8.4 | % | | 72,645 |
| | 8.4 | % |
Selling | | 7,899 |
| | 2.8 | % | | 7,725 |
| | 2.9 | % | | 32,047 |
| | 3.3 | % | | 27,928 |
| | 3.2 | % |
Pre-opening & acquisition costs | | 2,239 |
| | 0.8 | % | | 2,605 |
| | 1.0 | % | | 4,563 |
| | 0.5 | % | | 7,045 |
| | 0.8 | % |
Total other operating | | 52,465 |
| | 18.6 | % | | 45,645 |
| | 17.1 | % | | 177,239 |
| | 18.3 | % | | 155,834 |
| | 18.0 | % |
| | | | | | | | | | | | | | | | |
Income from operations | | 11,705 |
| | 4.1 | % | | 9,226 |
| | 3.5 | % | | 52,030 |
| | 5.4 | % | | 39,733 |
| | 4.6 | % |
| | | | | | | | | | | | | | | | |
Interest expense, net and other | | 1,098 |
| | 0.4 | % | | 986 |
| | 0.4 | % | | 3,062 |
| | 0.4 | % | | 2,134 |
| | 0.2 | % |
Income tax expense | | 2,325 |
| | 0.8 | % | | 1,032 |
| | 0.4 | % | | 12,955 |
| | 1.3 | % | | 8,977 |
| | 1.1 | % |
Total other | | 3,423 |
| | 1.2 | % | | 2,018 |
| | 0.8 | % | | 16,017 |
| | 1.7 | % | | 11,111 |
| | 1.3 | % |
| | | | | | | | | | | | | | | | |
Net income | | $ | 8,282 |
| | 2.9 | % | | $ | 7,208 |
| | 2.7 | % | | 36,013 |
| | 3.7 | % | | 28,622 |
| | 3.3 | % |
Certain percentage amounts in the table above do not total due to rounding as well as the fact that components of restaurant-level operating profit are expressed as a percentage of restaurant revenue and not total revenues.
Schedule III
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(In thousands, unaudited)
The Company defines EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, and non-cash stock based compensation. EBITDA and adjusted EBITDA are presented because the Company believes that investors' understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for evaluating our ongoing results of operations without the effect of non-cash charges such as depreciation and amortization expenses and asset disposals, stock-based compensation, closure costs and restaurant impairments. EBITDA and adjusted EBITDA are supplemental measures of operating performance that do not represent and should not be considered as alternatives to net income or cash flow from operations, as determined by GAAP, and our calculation thereof may not be comparable to that reported by other companies. Adjusted EBITDA further adjusts EBITDA to reflect the additions and eliminations shown in the table below. The use of adjusted EBITDA as a performance measure permits a comparative assessment of our operating performance relative to our performance based on our GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance. Adjusted EBITDA as presented may not be comparable to other similarly-titled measures of other companies, and our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by excluded or unusual items.
|
| | | | | | | | | | | | | | | | |
| | Twelve Weeks Ended | | Forty Weeks Ended |
| | October 4, 2015 | | October 5, 2014 | | October 4, 2015 | | October 5, 2014 |
Net income as reported | | $ | 8,282 |
| | $ | 7,208 |
| | $ | 36,013 |
| | $ | 28,622 |
|
Interest expense, net | | 777 |
| | 927 |
| | 2,670 |
| | 2,233 |
|
Provision for income taxes | | 2,325 |
| | 1,032 |
| | 12,955 |
| | 8,977 |
|
Depreciation and amortization | | 18,618 |
| | 15,209 |
| | 58,881 |
| | 48,216 |
|
Non-cash stock based compensation | | 1,194 |
| | 1,178 |
| | 4,043 |
| | 3,211 |
|
EBITDA | | 31,196 |
| | 25,554 |
| | 114,562 |
| | 91,259 |
|
| | | | | | | | |
Change in estimate for gift card breakage | | — |
| | — |
| | (1,369 | ) | | — |
|
Executive transition | | — |
| | — |
| | — |
| | 544 |
|
Adjusted EBITDA | | $ | 31,196 |
| | $ | 25,554 |
| | $ | 113,193 |
| | $ | 91,803 |
|
CLASSIFIED – INTERNAL USE Third Quarter 2015 Results November 3, 2015
2CLASSIFIED – INTERNAL USE Forward-Looking Statements Forward-looking statements in this presentation regarding our revenues, restaurant-level operating profit margins, new restaurant growth (including Red Robin Burger Works and new prototypes) and remodels, future economic performance, costs, expenses, tax rate, capital investments, promotions, and other statements under the heading “2015 Outlook,” and all other statements that are not historical facts, are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on assumptions believed by the Company to be reasonable and speak only as of the date on which such statements are made. Without limiting the generality of the foregoing, words such as “expect,” “anticipate,” “intend,” “plan,” “project,” or “estimate,” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. We undertake no obligation to update such statements to reflect events or circumstances arising after such date, and we caution investors not to place undue reliance on any such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements based on a number of factors, including but not limited to the following: the effectiveness of the Company’s marketing and menu strategies to achieve restaurant sales growth; the number, cost, timing, and ability to fulfill planned expansion and restaurant remodeling; the cost and availability of key food products, labor, and energy; the ability to achieve revenue and cost savings from our anticipated new technology systems and other initiatives; the macro economic and competitive environment; availability of capital or credit facility borrowings; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; federal, state, and local regulation of our business; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the U.S. Securities and Exchange Commission. This presentation may also contain non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period-to- period comparisons. For a reconciliation of non-GAAP measures presented in this document, see the Appendix of this presentation or the Schedules to the Q2 press release posted on redrobin.com.
3CLASSIFIED – INTERNAL USE Strategic Priorities Engagement Efficiency Expansion
4CLASSIFIED – INTERNAL USE Red Robin Delivered Strong Q3 Results • Comparable restaurant revenue up 3.5% • Restaurant revenue increased 5.9% • Restaurant-level operating profit* was 21.6% compared to 19.5% in prior year • Diluted EPS was $0.58, an increase of 16.0% • EBITDA* was $31.2 million, an increase of 22.1% • Opened 5 Red Robin® restaurants, acquired 1 franchised restaurant, and relocated 3 restaurants in Q3 * See reconciliation in Appendix
5CLASSIFIED – INTERNAL USE Brand Transformation Initiative Progress • 53 completed during Q3 2015 toward goal of 150 remodels this year. Completed 102 year to date. • Over 300 restaurants conforming to new brand standard by year end, including new restaurant openings Patriot Place restaurant in Foxboro, MA
6CLASSIFIED – INTERNAL USE robin™ Ziosk deployed nationally ahead of planned launch date • Guests appreciate ability to pay-at-the table • Accelerates Red Robin Royalty™ registrations • Provides us real time guest feedback • Entertainment options enhance guest experience
7CLASSIFIED – INTERNAL USE New “Center Bar” prototype • Opened new prototype designed to enhance restaurant flow and improve exterior branding while keeping key BTI elements including separation of dining areas • First two free-standing, mid-sized prototypes were opened in Castleton (Indianapolis), IN on September 28th and Dayton, OH on October 26th • Additional sites will open this year
8CLASSIFIED – INTERNAL USE Food Innovation Fall Promotion: • Uberburger- Finest Line LTO with a ½ pound Black Angus burger topped with candied bacon, grilled bratwurst and beer cheese on a pretzel bun • Great Northern Poutine Fries – 1st national chain to roll out • Our famous steak fries topped with brown gravy, garlic aioli, sautéed mushrooms and fried cheese curds
9CLASSIFIED – INTERNAL USE Great American Beer Fest Success
10CLASSIFIED – INTERNAL USE Red Robin Royalty - Earn money for your school! • Burgers for Better Schools • Visit www.redrobin.com/betterschools to sign up
11CLASSIFIED – INTERNAL USE Traffic Driving Initiatives
CLASSIFIED – INTERNAL USE 12 Financial Update
13CLASSIFIED – INTERNAL USE $32.5 $29.7 $21.0 $25.8 $37.0 $29.3 $25.6 $31.1 $47.0 $35.0 $31.2 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 $50.0 Q1 Q2 Q3 Q4 2013 2014 2015 22.8% Growth Trailing 4 Quarters Q3 2015 $144.3M Q3 2014 $117.6M Adjusted EBITDA ($ in millions) 13 See slide 28 for reconciliation of non-GAAP Adjusted EBITDA to Net Income
14CLASSIFIED – INTERNAL USE Q3-15 Sales Highlights Q3-15 (12 Weeks) Q3-14 (12 Weeks) Change Q3-15 YTD (40 Weeks) Q3-14 YTD (40 Weeks) Change Restaurant revenue $279.5 million $263.9 million 5.9% $956.7 million $850.7 million 12.5% Total company revenues $283.4 million $267.4 million 6.0% $971.3 million $864.0 million 12.4% Company-owned comp revenue 3.5% 0.9% 3.2% 2.9% Price/Mix 3.6% 3.2% 2.5% 4.0% Guest counts -0.1% -2.3% 0.7% -1.1% Franchised comp revenue 4.3% 2.8% 6.3% 4.1% Company avg. weekly revenue/unit(1) - total $55,780 $54,684 2.0% $57,904 $56,944 1.7% Company avg. weekly revenue/unit(1) - comp $56,462 $54,580 3.4% $59,090 $57,238 3.2% Avg. weekly restaurant level operating profit/unit(1) - comp $12,838 $11,185 14.8% $14,083 $12,689 11.0% Red Robin operating weeks(1) 4,978 4,803 3.6% 16,420 14,881 10.3% Burger Works operating weeks 120 84 42.9% 374 240 55.8% Net sales/sq. ft (TTM) $469 $460 2.0% (1) Excludes Red Robin Burger Works® fast casual restaurants
15CLASSIFIED – INTERNAL USE Comparable Restaurant Revenue Growth 5.4% 1.2% 0.9% 3.6% 3.1% 2.9% 3.5% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Q114 Q214 Q314 Q414 Q115 Q215 Q315
16CLASSIFIED – INTERNAL USE Taking Market Share – Year Over Year 2.4% 5.2% 7.7% 5.2% 7.0% 2.6% -0.6% 2.3% 1.1% 1.7% 3.1% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Q1 Q2 Q3 Q4 Sales Outperformance vs. Industry 2013 2014 2015 Source: Based on current Black Box Intelligence Casual Dining (All Cuisine) peers as of October 4, 2015
17CLASSIFIED – INTERNAL USE Taking Market Share – Year Over Year 1.7% 2.1% 4.6% 2.2% 4.2% 0.5% -1.1% 1.8% 2.1% 2.3% 1.5% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% Q1 Q2 Q3 Q4 Traffic Outperformance vs. Industry 2013 2014 2015 Source: Based on current Black Box Intelligence Casual Dining (All Cuisine) peers as of October 4, 2015
18CLASSIFIED – INTERNAL USE 21.5% 23.3% 20.4% 21.7% 22.4% 22.2% 19.5% 21.3% 23.0% 22.5% 21.6% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0% 23.0% 24.0% 25.0% Q1 Q2 Q3 Q4 2013 2014 2015 (2) (2) (2) (2) RLOP (1) Margins 18 (1) See reconciliation of non-GAAP restaurant-level operating profit to income from operations and net income on Schedule II of the Q3 press release posted on redrobin.com (2) Excluding 2014 acquired restaurants, restaurant-level operating profit margin was 23.1% in the second quarter of 2015, 23.7% in the first quarter of 2015, 22.2% in the fourth quarter of 2014, and 20.1% in the third quarter of 2014
19CLASSIFIED – INTERNAL USE Q3-15 Restaurant Results 19 % of Restaurant Revenue Q3-15 % of Restaurant Revenue Q3-14 Favorable (Unfavorable) Cost of sales 24.4% 25.9% 150 bps Labor 33.0% 33.7% 70 bps Other operating 12.9% 12.9% 0 bps Occupancy 8.1% 8.0% (10 bps) Restaurant Level Operating Profit (Non-GAAP) 21.6% 19.5% 210 bps
20CLASSIFIED – INTERNAL USE Adjusted Net Income $9.5 $11.1 $4.7 $9.1 $11.9 $9.8 $7.2 $9.4 $15.6 $11.2 $8.3 $3.0 $5.0 $7.0 $9.0 $11.0 $13.0 $15.0 $17.0 Q1 Q2 Q3 Q4 2013 2014 2015 ($ in millions) 20 See slide 29 for reconciliation of non-GAAP Adjusted Net Income to Net Income
21CLASSIFIED – INTERNAL USE Adjusted Earnings Per Diluted Share $0.66 $0.77 $0.32 $0.62 $0.82 $0.68 $0.50 $0.66 $1.10 $0.78 $0.58 $0.15 $0.35 $0.55 $0.75 $0.95 $1.15 Q1 Q2 Q3 Q4 2013 2014 2015 21 See slide 29 for reconciliation of non-GAAP Adjusted Earnings Per Diluted Share to Earnings Per Diluted share 23.0% Growth Q3 2015 YTD vs Q3 2014 YTD
22CLASSIFIED – INTERNAL USE 2015 Outlook • Total revenue growth near 11.0% • Comparable restaurant revenue growth of approximately 2.5% • RLOP margins expected to be approximately 22.3% • Open 20 new and relocate 3 company-owned Red Robin restaurants, open 3 Red Robin Burger Works, and complete approximately 150 remodels • Capital investments expected to be approximately $170 million • G&A costs expected to be between $102 million and $103 million; selling expenses expected to be approximately 3.3% of sales • Pre-opening expense approximately $7.0 million • Depreciation and amortization costs projected to be between $78 million and $79 million • Interest expense expected to be approximately $4 million and the income tax rate is expected to be approximately 26.5%
23CLASSIFIED – INTERNAL USE In Closing 23
24CLASSIFIED – INTERNAL USE Thank you to all of our Team Members! 17
CLASSIFIED – INTERNAL USE 25 Appendix
26CLASSIFIED – INTERNAL USE $40.4 $30.6 $11.2 $31.3 $36.0 $20.1 $26.8 $40.7 $36.0 $31.3 $34.0 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 Q1 Q2 Q3 Q4 2013 2014 2015 Cash Flow from Operations ($ in millions) 26 24.2% Growth Trailing 4 Quarters Q3 2015 $142.0M Q3 2014 $114.3M
27CLASSIFIED – INTERNAL USE Q3-15 Commodity Update 27 % of Total COGS in Q3-15 Market vs. Contract Ground beef 15.1% Market Poultry 10.7% 100% covered thru 12/15; 40% covered thru 12/16 Steak fries 10.3% Contract through 10/16 Meat 7.7% Bacon through 11/15; Prime rib through 6/16 Produce 7.3% 90% contracted through 3/16 Bread 6.2% Contract through 12/15 Seafood 3.0% Cod through 6/16; Shrimp through 6/16 Fry oil 1.7% Contract through 6/16
28CLASSIFIED – INTERNAL USE EBITDA and Adjusted EBITDA Reconciliation to Net Income 28 2013 2014 2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Net income as reported $ 9,480 $11,139 $4,661 $6,959 $11,944 $9,470 $ 7,208 $3,939 $16,565 $11,166 $8,282 Adjustments to net income: Income tax expense 2,977 3,576 1,517 940 4,424 3,521 1,032 321 6,220 4,410 2,325 Interest expense, net 1,052 623 558 399 689 619 927 720 1,088 805 777 Depreciation and amortization 17,834 13,319 13,436 13,611 18,886 14,120 15,209 16,364 23,003 17,260 18,618 Non-cash stock-based compensation 1,192 1,050 857 724 1,009 1,021 1,178 959 1,446 1,403 1,194 EBITDA $32,535 $29,707 $21,029 $22,633 $36,952 $28,751 $25,554 $22,303 $48,322 $35,044 $31,196 Change in estimate for gift card breakage - - - - - - - - (1,369) - - Executive transition & severance - - - - - 544 - - - - - Impairment and closure charges - - - 1,517 - - - 8,833 - - - Non-recurring special bonus - - - 1,626 - - - - - - - Adjusted EBITDA $32,535 $29,707 $21,029 $25,776 $36,952 $29,295 $25,554 $31,136 $46,953 $35,044 $31,196 ($ in thousands)
29CLASSIFIED – INTERNAL USE Reconciliation of Adjusted Net Income to Net Income and Adjusted Earnings Per Diluted Share to Earnings Per Diluted Share 29 2013 2014 2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Net income as reported $ 9,480 $ 11,139 $ 4,661 $ 6,959 $ 11,944 $ 9,470 $ 7,208 $ 3,939 $ 16,565 $ 11,166 $ 8,282 Adjustments to net income: Change in estimate for gift card breakage - - - - - - - - (1,369) - - Executive transition & severance - - - - - 544 - - - - - Impairment and closure charges - - - 1,517 - - - 8,833 - - - Non-recurring special bonus - - - 1,626 - - - - - - - Income tax expense of adjustments - - - (974) - (183) - (3,379) 439 - - Adjusted net income $ 9,480 $ 11,139 $ 4,661 $ 9,128 $ 11,944 $ 9,831 $ 7,208 $ 9,393 $ 15,635 $ 11,166 $ 8,282 Diluted net income per share: Net income as reported $ 0.66 $ 0.77 $ 0.32 $ 0.48 $ 0.82 $ 0.65 $ 0.50 $ 0.28 $ 1.16 $ 0.78 $ 0.58 Adjustments to net income: Change in estimate for gift card breakage - - - - - - - - (0.09) - - Executive transition & severance - - - - - 0.04 - - - - - Impairment and closure charges - - - 0.10 - - - 0.62 - - - Non-recurring special bonus - - - 0.11 - - - - - - - Income tax expense of adjustments - - - (0.07) - (0.01) - (0.24) 0.03 - - Adjusted EPS – diluted $ 0.66 $ 0.77 $ 0.32 $ 0.62 $ 0.82 $ 0.68 $ 0.50 $ 0.66 $ 1.10 $ 0.78 $ 0.58 ($ in thousands, except per share data)
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