Ignite Restaurant Group Inc., parent to the Joe’s Crab Shack and Brick House Tavern + Tap chains, on Tuesday filed restated financials with trimmed net income from 2006 to the current quarter.
Along with releasing earnings for its third quarter, Houston-based Ignite Restaurant Group executives said they were strengthening the company’s accounting and financial departments with key personnel and added critical processes and controls.
After going public in May, Ignite in July said it had encountered problems with lease and fixed-asset accounting going back at least five years.
On Tuesday, the company said the restatement for the period since 2006 reduced total net income by $6.4 million, adjusted earnings before interest, taxes, depreciation and amortization by 2.7 percent and restaurant-level profit by 1.4 percent. The readjustment did not impact revenues, same-store restaurant sales or free cash flows for any period, executives said in a conference call with analysts.
Ray A. Blanchette, Ignite’s president and chief executive, said, “After completing a detailed accounting review and the related historical restatement of our financials, we’ve made revisions with all of our accounting policies to bring them into full compliance with GAAP [generally accepted accounting principles], particularly around lease accounting and fixed-asset accounting.”
Jeffrey A. Rager, Ignite’s senior vice president and chief financial officer, said that as part of the accounting review and restatement “we identified weaknesses in controls” and the company has addressed those.
“We really regret that we put ourselves into this position where it became necessary to restate our financials,” Rager told analysts.
Ignite also released its earnings for third quarter, which ended Sept. 10, with net income increasing 8.4 percent, to $8.9 million, from $8.2 million in the prior-year period. Revenues in the quarter rose 14 percent, to $129.1 million, compared to $113.2 million in the same quarter last year.
Same-store sales increased 0.4 percent for the company. “Not unlike the industry trends at large, our third-quarter same-store sales decelerated," Blanchette noted.
"We’ve continued to see similar pressure on our same-store sales the first few weeks of the fourth quarter,” he added, citing general consumer economic uncertainties and strong year-ago comparisons for the lackluster same-store sales numbers.
The company is also increasing its broadcast media and has moved up the launch of its winter campaign with a new menu that was introduced Tuesday.
During the third quarter, Ignite opened two new Joe’s Crab Shack restaurants and on Oct. 9 opened the 11th for year. New units are “significantly outperforming” the systemwide average unit volumes of $3.1 million a year, Blanchette said. The company plans to open 16 new restaurants in 2013, with 14 of them new and two conversions of existing restaurants.
Blanchette said a new five-year, $100 million credit facility, a process that began in June and was delayed by the accounting review and restatement, would provide a projected $3.5 million in annual savings. That replaced $74.5 million of term loan debt and a $25 million unused revolving credit facility.
At the end of the quarter, Ignite had 129 Joe’s Crab Shacks and 16 Brick House Tavern + Tap restaurants.