RAVE RESTAURANT GROUP, INC. - FORM 8-K - EX-99.1 - PRESS RELEASE - May 11, 2016

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8-K - RAVE RESTAURANT GROUP, INC.rave8k051016.htm
 
 
May 11, 2016
 
RAVE Restaurant Group, Inc. Reports Third Fiscal Quarter Financial Results
Pie Five Pizza Co. adds more units

Dallas, Texas – RAVE Restaurant Group, Inc. (NASDAQ:RAVE) today reported financial results for the third quarter of fiscal 2016 ended March 27, 2016.
Third Quarter Highlights:
·
Total consolidated revenue increased 28.2% to $15.3 million compared to $11.9 million in the third quarter of fiscal 2016.
·
Pie Five comparable store retail sales decreased 4.0% from the same period of the prior year.
·
Pie Five system-wide retail sales increased 118%, and average weekly sales declined 8.6%, year over year.
·
Pizza Inn domestic comparable store retail sales decreased 2.2% from the same period of the prior year, while total domestic retail sales decreased by 9.0%.
·
Net loss of $1.2 million was $0.7 million greater than the same quarter of the prior year due to lower sales and financial performance by Company-owned Pie Five stores in newer markets and the absence of income tax benefits.
·
Adjusted EBITDA of ($0.2) million was $0.3 million less than the same quarter of the prior year.
·
Pie Five Company-owned restaurant operating cash flow decreased to $0.1 million from $0.4 million in the same period of the prior year.
·
Opening of six Pie Five restaurants during the quarter brought the total Pie Five restaurants open at the end of the quarter to 85.
Revenues of $15.3 million and $45.1 million for the third quarter and year to date fiscal 2016 were 28.2% and 31.4%, respectively, higher than the same periods of the prior year.  For the three and nine months ended March 27, 2016, the Company reported a net loss of $1.2 million and $6.6 million, respectively, compared to a loss of $0.6 million and $1.2 million for the comparable periods of the prior year.  On a fully diluted basis, the loss was $0.12 per share and $0.61 per share for the third quarter and year to date fiscal 2016, compared to a loss of $0.05 per share and $0.12 per share for the same periods of the prior year.  The increased losses for the three month period ended March 27, 2016 was primarily the result of the absence of income tax benefits, higher general and administrative costs related to additional corporate personnel and digital initiatives, decreased income from the Pizza Inn international franchisee in the Middle East and the impact of compressed margins in newly entered Pie Five company markets, which negative effects were partially offset by increased income from the Pizza Inn and Pie Five franchise systems.  The increased loss for the nine month period ended March 27, 2016 was also impacted by an impairment expense of $0.8 million, a full valuation allowance of $4.0 million against all net deferred tax assets and increased pre-opening expenses.
 

"The highlight for the quarter was continued expansion of the Pie Five system," said Randy Gier, Chief Executive Officer, Rave Restaurant Group, Inc. "Comps for the quarter were disappointing and while we are experiencing similar headwinds as the rest of the industry, we have identified root causes and corrective actions that will take place over the coming quarters. We are emphasizing operations and service initiatives designed to enhance efficiency, throughput, and guest experience that we believe will allow us to continue the positive comparable store growth trend that we previously experienced."
Third Quarter Fiscal 2016 Operating Results
Total revenues for the third quarter of fiscal 2016 and the comparable prior year quarter were $15.3 million and $11.9 million, respectively, an increase of 28.2% year over year.  Additional franchise development fees previously received from Pie Five franchisees have been deferred and will be recognized as future restaurants are opened.  Pizza Inn domestic comparable store retail sales decreased 2.2% from the same period in the prior year.
For Pie Five, system-wide retail sales increased 118% for the third quarter of fiscal 2016 when compared to the same period in the prior year driven by a 140% increase in average units open, while system-wide average weekly sales decreased by 8.6%.  Comparable store retail sales decreased by 4.0% for the most recent fiscal quarter compared to the same period in the prior year.  Several factors contributed to this decrease, including (i) new franchise stores entering the comp base this quarter overlapping prior year extended honeymoon period sales, (ii) continued impact of cannibalization from several new restaurants in the Dallas market, (iii) a franchise restaurant new to the comparable base undergoing road construction that is materially impacting sales and (iv) the overlapping in March and April of a very successful television campaign in the DFW market in the prior year.  Our comparable store base is growing but still small and thus individual store events can cause a material impact on comparable performance.  The decrease in Pie Five average weekly sales was primarily due to the decline in comparable store sales as well as the entry into new company markets and several franchise stores that opened with particularly high volumes in the prior year.
Development Review
In the third quarter of fiscal 2016, six new Pie Five restaurants were opened, comprised of three Company-owned restaurants and three franchised restaurants, while three restaurants were closed, bringing the fiscal quarter-end total unit count to 85 restaurants.  So far in the current quarter the Company has signed one new franchise development agreement with an existing franchisee for two Pie Five restaurants.  The Company currently has franchise restaurant development commitments totaling approximately 450 Pie Five restaurants.
 

"We opened six new Pie Five Pizza restaurants in the third quarter and four new restaurants this quarter," said Gier. "We continue to build restaurants and expand our footprint. We have a strong pipeline for growth with a highly experienced group of franchise operators. We remain positive about long-term earnings growth."

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures in evaluating operating performance.  These non-GAAP financial measures should not be viewed as an alternative or substitute for its financial statements prepared in accordance with generally accepted accounting principles.  Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, pre-opening expense, costs related to impairment charges and discontinued operations.  A reconciliation of Adjusted EBITDA to net income is included with the accompanying financial statements.
Note Regarding Forward Looking Statements
Certain statements in this press release, other than historical information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created thereby. These forward-looking statements are based on current expectations that involve numerous risks, uncertainties and assumptions.  Assumptions relating to these forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions, regulatory framework and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of RAVE Restaurant Group, Inc.  Although the assumptions underlying these forward-looking statements are believed to be reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that any forward-looking statements will prove to be accurate.  In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of such information should not be regarded as a representation that the objectives and plans of RAVE Restaurant Group, Inc. will be achieved.
About RAVE Restaurant Group, Inc.
Founded in 1958, Dallas-based RAVE Restaurant Group [NASDAQ: RAVE] owns, operates and franchises more than 300 Pie Five Pizza Co. and Pizza Inn restaurants domestically and internationally. Pie Five Pizza Co. is a leader in the rapidly growing fast-casual pizza space offering made-to-order pizzas ready in under five minutes. Pizza Inn is an international chain featuring freshly made pizzas, along with salads, pastas, and desserts. For more information, please visit www.raverg.com.
 

 
 
Contact:
Jami Zimmerman
Investor Relations
RAVE Restaurant Group, Inc.
469-384-5132

 
RAVE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
  
                         
                         
                         
     
Three Months Ended
    
Nine Months Ended
  
     
March 27,
    
March 29,
    
March 27,
    
March 29,
  
   
2016
    
2015
    
2016
    
2015
  
                         
                         
REVENUES:
  
$
15,262
    
$
11,905
    
$
45,109
    
$
34,339
  
                                 
COSTS AND EXPENSES:
                                
Cost of sales
    
13,770
      
10,177
      
39,259
      
29,325
  
General and administrative expenses
    
1,885
      
1,152
      
5,148
      
3,476
  
Franchise expenses
    
924
      
849
      
2,732
      
2,314
  
Pre-opening expenses
    
115
      
195
      
851
      
367
  
Impairment of long-lived assets
    
(165
)
    
300
      
845
      
300
  
Bad debt
    
(80
)
    
36
      
151
      
128
  
Interest expense
    
1
      
3
      
4
      
112
  
Total costs and expenses
    
16,450
      
12,712
      
48,990
      
36,022
  
                                 
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES
    
(1,188
)
    
(807
)
    
(3,881
)
    
(1,683
)
Income tax expense (benefit)
    
3
      
(277
)
    
2,637
      
(559
)
LOSS FROM CONTINUING OPERATIONS
    
(1,191
)
    
(530
)
    
(6,518
)
    
(1,124
)
                                 
Loss from discontinued operations, net of taxes
    
(39
)
    
(40
)
    
(99
)
    
(110
)
NET LOSS
  
$
(1,230
)
  
$
(570
)
  
$
(6,617
)
  
$
(1,234
)
                                 
LOSS PER SHARE OF COMMON STOCK - BASIC:
                                
Loss from continuing operations
  
$
(0.12
)
  
$
(0.05
)
  
$
(0.63
)
  
$
(0.12
)
Loss from discontinued operations
    
-
      
(0.01
)
    
(0.01
)
    
(0.01
)
Net loss
  
$
(0.12
)
  
$
(0.06
)
  
$
(0.64
)
  
$
(0.13
)
                                 
LOSS PER SHARE OF COMMON STOCK - DILUTED:
                                
                                 
Loss from continuing operations
  
$
(0.12
)
  
$
(0.05
)
  
$
(0.60
)
  
$
(0.11
)
Loss from discontinued operations
    
-
      
-
      
(0.01
)
    
(0.01
)
Net loss
  
$
(0.12
)
  
$
(0.05
)
  
$
(0.61
)
  
$
(0.12
)
                                 
Weighted average common shares outstanding - basic
    
10,315
      
10,086
      
10,312
      
9,589
  
                                 
Weighted average common and
                                
potential dilutive common shares outstanding
    
10,662
      
10,693
      
10,794
      
10,107
  
 
 
 
RAVE RESTAURANT GROUP, INC.
  
CONDENSED CONSOLIDATED BALANCE SHEETS
  
(In thousands, except share amounts)
  
             
   
March 27,
    
June 28,
  
ASSETS
  
2016 (unaudited)
    
2015
  
             
CURRENT ASSETS
            
Cash and cash equivalents
  
$
1,266
      
5,958
  
Accounts receivable, less allowance for bad debts
                
accounts of $293 and $193, respectively
    
2,559
      
3,437
  
Notes receivable
    
167
      
24
  
Inventories
    
240
      
180
  
Income tax receivable
    
212
      
492
  
Deferred income tax assets
    
-
      
729
  
Prepaid expenses and other
    
496
      
872
  
Total current assets
    
4,940
      
11,692
  
                 
LONG-TERM ASSETS
                
Property, plant and equipment, net
    
14,682
      
10,020
  
Long-term notes receivable
    
140
      
119
  
Long-term deferred tax asset
    
-
      
1,864
  
Deposits and other
    
274
      
276
  
Total assets
  
$
20,036
    
$
23,971
  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                
CURRENT LIABILITIES
                
Accounts payable - trade
  
$
4,116
      
2,875
  
Accrued expenses
    
846
      
1,267
  
Deferred rent
    
164
      
155
  
Deferred revenues
    
353
      
374
  
Total current liabilities
    
5,479
      
4,671
  
                 
LONG-TERM LIABILITIES
                
Deferred rent, net of current portion
    
1,580
      
893
  
Deferred revenues, net of current portion
    
1,453
      
1,166
  
Deferred gain on sale of property
    
-
      
9
  
Other long-term liabilities
    
22
      
22
  
Total liabilities
    
8,533
      
6,761
  
                 
COMMITMENTS AND CONTINGENCIES
                
                 
SHAREHOLDERS' EQUITY
                
Common stock, $.01 par value; authorized 26,000,000
                
shares; issued 17,440,115 and 17,374,735 shares, respectively;
                
outstanding 10,320,715 and 10,255,335 shares, respectively
    
174
      
174
  
Additional paid-in capital
    
25,610
      
24,700
  
Retained earnings
    
10,355
      
16,972
  
Treasury stock at cost
    
(24,636
)
    
(24,636
)
Shares in treasury: 7,119,400
                
Total shareholders' equity
    
11,503
      
17,210
  
      
$
20,036
    
$
23,971
  
 
 
 
RAVE RESTAURANT GROUP, INC.     
  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
  
(In thousands)     
  
(Unaudited)     
  
             
     
Nine Months Ended   
  
     
March 27,
    
March 29,
  
   
2016
    
2015
  
             
CASH FLOWS FROM OPERATING ACTIVITIES:
            
             
 Net loss   $   (6,617 )    $   (1,234 ) 
Adjustments to reconcile net loss to
                
cash provided by operating activities:
                
Depreciation and amortization
    
1,955
      
1,153
  
Impairment of long-lived assets
    
845
      
300
  
Stock compensation expense
    
135
      
83
  
Deferred income taxes
    
2,593
      
(654
)
Loss on sale of assets
    
1
      
-
  
Provision for bad debt
    
151
      
128
  
Changes in operating assets and liabilities:
                
Notes and accounts receivable
    
842
      
(432
)
Inventories
    
(60
)
    
1,570
  
Accounts payable - trade
    
1,241
      
1,847
  
Accrued expenses
    
794
      
82
  
Deferred revenue
    
(97
)
    
415
  
Prepaid expenses and other
    
360
      
(620
)
Cash provided by operating activities
    
2,143
      
2,638
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Proceeds from sale of assets
    
14
      
-
  
Capital expenditures
    
(7,624
)
    
(3,818
)
Cash used in investing activities
    
(7,610
)
    
(3,818
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Net proceeds from sale of stock
    
768
      
7,317
  
Proceeds from exercise of stock options
    
7
      
426
  
Repayments of bank debt
    
-
      
(767
)
Cash provided by financing activities
    
775
      
6,976
  
                 
Net (decrease) increase in cash and cash equivalents
    
(4,692
)
    
5,796
  
Cash and cash equivalents, beginning of period
    
5,958
      
2,796
  
Cash and cash equivalents, end of period
  
$
1,266
    
$
8,592
  
 
 
 
RAVE RESTAURANT GROUP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
  
                       
                       
                       
                         
                         
   
Three Months Ended
    
Nine Months Ended
  
   
March 27,
    
March 29,
    
March 27,
    
March 29,
  
   
2016
    
2015
    
2016
    
2015
  
 Net loss
  
$
(1,230
)
  
$
(570
)
  
$
(6,617
)
  
$
(1,234
)
 Interest expense
    
1
      
3
      
4
      
112
  
 Income Taxes
    
3
      
(277
)
    
2,637
      
(559
)
 Income Taxes--Discontinued Operations
    
-
      
(20
)
    
(31
)
    
(54
)
 Depreciation and amortization
    
837
      
412
      
1,955
      
1,153
  
 EBITDA
  
$
(389
)
  
$
(452
)
  
$
(2,052
)
  
$
(582
)
 Stock compensation expense
    
45
      
30
      
135
      
83
  
 Pre-opening costs
    
115
      
195
      
851
      
367
  
 Impairment charges, non-operating store costs and discontinued operations
    
16
      
374
      
1,158
      
444
  
 Adjusted EBITDA
  
$
(213
)
  
$
147
    
$
92
    
$
312
  

RAVE RESTAURANT GROUP, INC. Reports