Rubio's Restaurants, Inc. (NASDAQ: RUBO), a leader in the growing
Fast Casual segment of the restaurant industry with its premium
Fresh Mexican Grill concept, and Mill Road Capital, L.P., a
Connecticut-based private investment firm, announced today a
definitive merger agreement under which an entity controlled by
Mill Road Capital will acquire all the outstanding shares of
Rubio's Restaurants in 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.
The Special Committee of the Board of Directors of Rubio's has
unanimously recommended this transaction and the transaction has
been unanimously approved by Rubio's board of directors. 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. 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.
Loren Pannier, Chairman of the Special Committee of Rubio's
Board of Directors, said, "After careful consideration of a full
range of strategic alternatives, we are pleased to have reached
this agreement with Mill Road Capital, which creates substantial
value for our stockholders. This transaction represents a premium
of 14% over the closing share price of Rubio's common stock on May
7, 2010 of $7.66, a premium of approximately 17% over the closing
price of $7.41 on October 29, 2009, the last trading day before we
announced that we were exploring strategic alternatives, and a
premium of approximately 45% over the closing price of $6.00 on
October 14, 2009, the last trading day prior to the announcement of
an unsolicited indication of interest by Alex Meruelo, his
affiliates and Levine Leichtman Capital Partners IV, L.P. to
acquire Rubio's."
Daniel Pittard, President and CEO of Rubio's, said, "Mill Road
Capital's desire to add Rubio's to its portfolio underscores our
strategy within Fast Casual, which continues to be the fastest
growing segment of the restaurant industry. Mill Road brings an
extensive knowledge of the Fast Casual segment. I am confident that
this combination will create opportunities for our employees and
positions us well for the future."
Scott Scharfman, Managing Director of Mill Road Capital added,
"Rubio's is a long-established institution in its core western
markets with a consistent track record of providing delicious
Baja-inspired food to its large base of loyal customers. As a long
term shareholder, Mill Road Capital is delighted to have the
opportunity to increase its investment in the great institution
that Ralph Rubio created 27 years ago and to work with Dan Pittard
and his talented team in executing their strategic plan and
building an even greater Rubio's."
Cowen and Company and DLA Piper LLP (US) served as advisors to
Rubio's in this transaction. Foley Hoag LLP served as advisor to
Mill Road Capital in this transaction.
Financial Results for the First Quarter of
2010
Rubio's also reported financial results for the first quarter
ended March 28, 2010.
First Quarter 2010 Financial
Highlights
Revenues in the first quarter of 2010 totaled $46.7 million, an
increase of 1% from $46.3 million reported in the same year-ago
quarter.
Net income was $367,000 or $0.04 per basic and diluted share in
the first quarter of 2010 versus net income of $245,000 or $0.02
per basic and diluted share in the same year-ago quarter. The first
quarter of 2010 included non-recurring expenses associated with the
ongoing evaluation of strategic alternatives of $170,000 or a
tax-effected $(0.01) per share. Net income before non-recurring
expenses associated with the ongoing evaluation of strategic
alternatives was $485,000 or $0.05 per diluted share in the first
quarter of 2010.
Adjusted EBITDA (a non-GAAP measure as defined below) was $3.3
million or $0.32 per diluted share in the first quarter of 2010,
versus $3.2 million or $0.32 per diluted share in the same year-ago
period. Excluding the aforementioned $170,000 in non-recurring
expenses, adjusted EBITDA was $3.5 million or $0.34 per diluted
share, up 7% from the same year-ago period.
Cash and cash equivalents at March 28, 2010 totaled $8.3
million, down 13% from $9.5 million at the end of 2009.
First Quarter 2010 Operating
Highlights
Comparable store sales (stores operating for more than 15
months) decreased 1.8% in the first quarter of 2010 versus a
comparable store sales increase of 1.9% in the same quarter last
year. In the first quarter of 2010, the impact of decreased
transaction volume more than offset an increase in the average
check per customer.
Average unit volume was slightly less than $1.0 million, which
was virtually unchanged from the same year-ago quarter.
Restaurant operating margin (a non-GAAP measure as defined
below) was 16.6%, as compared to 15.7% in the same year-ago
quarter.
In the first quarter of 2010, as a percentage of restaurant
sales, cost of sales decreased by 150 basis points, restaurant
labor cost increased by 60 basis points, and restaurant occupancy
and other costs rose by 10 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 rent and common area maintenance charges,
which was partially offset by lower unit operating expenses,
including repairs and service contracts.
General and administrative expenses for the first quarter of
2010 were $4.6 million, as compared to $4.1 million in the same
year-ago quarter. As a percentage of sales, general and
administrative expenses increased to 9.8% from 8.9% for the same
period last year. The quarter-over-quarter increase was due to
increased incentive compensation resulting from the record adjusted
EBITDA performance, and legal and professional fees associated with
the ongoing process of evaluating strategic alternatives. As a
percentage of sales, general and administrative expenses before
non-recurring expenses mentioned above were 9.5% for the first
quarter of 2010.
Rubio's opened three restaurants in the first quarter of 2010,
as compared to four in the same period a year-ago. Pre-opening
expenses were $94,000, a decrease of 45% from $171,000 in the same
quarter last year.
Management Commentary
"Improved restaurant operating margins of 16.6% resulted in
record adjusted EBITDA for a first quarter and drove net income
growth of 50 percent," said Dan Pittard, Rubio's president and CEO.
"This was achieved despite comparable store sales negatively
impacted by periods of above average rainfall, in addition to the
ongoing unemployment challenges in the markets we serve."
Rubio's CFO Frank Henigman commented: "We ended the first
quarter with $8.3 million in cash and no debt, positioning us well
from a liquidity standpoint as we entered the second quarter which,
along with the third, have historically been the two strongest
quarters in our fiscal year. Additionally, in May we renewed our $5
million revolving credit facility with Pacific Western Bank under
favorable terms."
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 income (loss) 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-week quarters of 2009 and 2010 are indicated as follows:
For the Thirteen
Weeks Ended
-----------------
Q1 2010 Q1 2009
-------- --------
Net income 367 245
Income tax expense 162 150
Interest expense (income) and investment (income), net 30 33
Loss on disposal/sale of property 108 85
Depreciation and amortization 2,416 2,496
Share-based compensation 210 226
-------- --------
ADJUSTED EBITDA $ 3,293 $ 3,235
======== ========
The differences between adjusted EBITDA including costs incurred
for the evaluation of strategic alternatives and GAAP net income
for the 13-week quarter ended March 28, 2010 are indicated as
follows:
For the Thirteen
Weeks Ended
-----------------
Q1 2010 Q1 2009
-------- --------
Net income 367 245
Income tax expense 162 150
Interest expense (income) and investment (income), net 30 33
Loss on disposal/sale of property 108 85
Depreciation and amortization 2,416 2,496
Share-based compensation 210 226
Evaluation of strategic alternatives 170 -
-------- --------
ADJUSTED EBITDA including costs for evaluation of
strategic alternatives $ 3,463 $ 3,235
======== ========
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 hold a conference call to discuss the acquisition
and financial results for the first quarter of 2010 today at 8:30
a.m. Eastern time (5:30 a.m. Pacific time).
The conference call will be broadcast simultaneously and
available for replay via the investor section of the company's Web
site at www.rubios.com. If you have any difficulty connecting with
the conference broadcast, please contact the Liolios Group at
949-574-3860.
Forward-Looking Statements
This press release contains certain forward-looking statements
about Rubio's that 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. Many of the
factors that will determine the outcome of the merger are beyond
Rubio's ability to control or predict. Rubio's undertakes no
obligation to revise or update any forward-looking statements, or
to make any other forward-looking statements, whether as a result
of new information, future events or otherwise.
Some of the information in this press release or the related
conference call may contain forward-looking statements regarding
future events or the future financial performance of the company.
Please note that any statements that may be considered
forward-looking are based on projections; that any projections
involve judgment, and that individual judgments may vary. Moreover,
these projections are based only on limited information available
to us now, which is subject to change. 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 class
action lawsuits filed in California 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. 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.
Additional Information and Where to Find
It
All parties desiring details regarding the transaction are urged
to review the definitive agreement when it is available on the
SEC's website at http://www.sec.gov. In connection with the
proposed transaction, Rubio's will file with the SEC a proxy
statement, and Rubio's plans to file with the SEC other documents
regarding the proposed transaction. INVESTORS AND
SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER
FILED DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Shareholders will be able to obtain a
free-of-charge copy of the proxy statement and other relevant
documents (when available) filed with the SEC from the SEC's
website at http://www.sec.gov. Shareholders will also be able to
obtain a free-of-charge copy of the proxy statement and other
relevant documents (when available) 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.rubios.com. 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 merger. Information regarding
Rubio's directors and executive officers is contained in Rubio's
Form 10-K filed with the SEC on March 26, 2010, as amended by the
Form 10-K/A filed with the SEC on April 26, 2010. Additional
information regarding the interests of such potential participants
will be included in the proxy statement and the other relevant
documents filed with the SEC (when available).
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.
About Mill Road Capital
Mill Road Capital is a Connecticut based investment firm founded
by a core group of former professionals of The Blackstone Group.
Mill Road focuses exclusively on investing in outstanding small
publicly traded companies. Mill Road invests on behalf of a
prominent international group of limited partners including state
pension funds, foundations, endowments and insurance companies.
Mill Road's investors committed their capital for 10 years,
allowing a very long investment horizon. Mill Road has flexible
capital with the ability to purchase shares in the open market, buy
large block positions from existing shareholders, provide capital
for growth or acquisition opportunities, or partner with management
and sponsor going-private transactions. More information can be
found at http://millroadcapital.com.
RUBIO'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
For the Thirteen Weeks Ended
------------------------------------
March 28, 2010 March 29, 2009
----------------- -----------------
RESTAURANT SALES $ 46,708 $ 46,308
FRANCHISE AND LICENSING REVENUES 25 29
----------------- -----------------
TOTAL REVENUES 46,733 46,337
COST OF SALES 11,861 12,473
RESTAURANT LABOR 15,667 15,252
RESTAURANT OCCUPANCY AND OTHER 11,433 11,295
GENERAL AND ADMINISTRATIVE EXPENSES 4,595 4,137
DEPRECIATION AND AMORTIZATION 2,416 2,496
PRE-OPENING EXPENSES 94 171
LOSS ON DISPOSAL/SALE OF PROPERTY 108 85
----------------- -----------------
OPERATING INCOME 559 428
INTEREST (EXPENSE) INCOME AND
INVESTMENT INCOME, NET (30) (33)
----------------- -----------------
INCOME BEFORE INCOME TAXES 529 395
INCOME TAX EXPENSE 162 150
----------------- -----------------
NET INCOME $ 367 $ 245
================= =================
BASIC EARNINGS DATA
EPS $ 0.04 $ 0.02
================= =================
AVERAGE SHARES OUTSTANDING 10,103 9,956
================= =================
DILUTED EARNINGS DATA
EPS $ 0.04 $ 0.02
================= =================
AVERAGE SHARES OUTSTANDING 10,332 10,024
================= =================
RUBIO'S RESTAURANTS, INC.
OPERATING RESULTS AS A PERCENTAGE OF TOTAL REVENUES
(unaudited)
Percentage of Total Revenues
For the Thirteen Weeks Ended
------------------------------------
March 28, 2010 March 29, 2009
----------------- -----------------
TOTAL REVENUES 100.0% 100.0%
COST OF SALES (1) 25.4% 26.9%
RESTAURANT LABOR (1) 33.5% 32.9%
RESTAURANT OCCUPANCY AND OTHER (1) 24.5% 24.4%
GENERAL AND ADMINISTRATIVE EXPENSES 9.8% 8.9%
DEPRECIATION AND AMORTIZATION 5.2% 5.4%
PRE-OPENING EXPENSES 0.2% 0.4%
LOSS ON DISPOSAL/SALE OF PROPERTY 0.2% 0.2%
OPERATING INCOME 1.2% 0.9%
INTEREST (EXPENSE) INCOME AND
INVESTMENT INCOME, NET -0.1% -0.1%
INCOME BEFORE INCOME TAXES 1.1% 0.9%
INCOME TAX EXPENSE 0.3% 0.3%
NET INCOME 0.8% 0.5%
(1) As a percentage of restaurant sales
RUBIO'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
----------------- -----------------
March 28, 2010 December 27, 2009
----------------- -----------------
CASH AND SHORT-TERM INVESTMENTS $ 8,285 $ 9,544
OTHER CURRENT ASSETS 8,806 9,505
PROPERTY - NET 43,060 43,086
OTHER ASSETS 13,000 12,566
----------------- -----------------
TOTAL ASSETS $ 73,151 $ 74,701
================= =================
CURRENT LIABILITIES $ 18,725 $ 20,947
OTHER LIABILITIES 6,693 6,599
STOCKHOLDERS' EQUITY 47,733 47,155
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 73,151 $ 74,701
================= =================
Rubio's Restaurants Contact Company Contact: Frank Henigman
Rubio's Restaurants, Inc. Tel 760-929-8226 Email Contact or
Investor Relations: Liolios Group, Inc. Scott Liolios or Cody Slach
Tel 949-574-3860 Email Contact Mill Road Capital Contact Scott
Scharfman Mill Road Capital Tel 203-987-3504
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