Red Robin Reports Great Earnings, But On Closer Inspection, Maybe Not So Great

Last week, Red Robin Gourmet Burgers (RRGB) reported great earnings. The company beat earnings expectations by 16 cents a share, and the stock jumped 7.6%. But David Phillips at 10-Q Detective has read the fine print:

1. 2006 was a 53-week fiscal year. In fiscal 2006, the fifty-third week added $14.4 million to restaurant sales and $0.11 to diluted earnings per share.
2. Earnings benefited, too, from a 3.0% drop in its effective tax rate to 30.6% for 2006. The decrease was primarily due to more favorable tax credits and state apportionment factors resulting from a shift in income to states with lower tax rates—aggregate state income tax rate fell 1.9% to 2.6% in fiscal 2006. This creative accounting boosted income about 6 cents per share. Management anticipates that its 2007 effective tax rate will be approximately 32 percent.
3. In 2006, Red Robin reduced the expected life of its outstanding option grants more than 50% to 2.6 years! By cutting the time it thinks its ‘team members’ will hold options, the burger maker was able to trim compensation costs.
We estimate that the three aforementioned factors added at least 22 cents to Red Robin’s bottom line in 2007.

Oh.
To quote Emily Litella, “nevermind.”

Posted by on March 5th, 2007 at 3:12 pm


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