Rubio's Restaurants, Inc. (RUBO), a Mexican restaurant chain operator, Monday reported a higher profit for the first quarter, compared to last year, helped by slight improvement in revenues and lower cost of sales. Further, the company said it entered into a definitive deal to be acquired by Connecticut-based private investment firm Mill Road Capital, L.P., for $8.70 per share, a premium of 14% over the Rubio's closing share price on Friday.
For the quarter, Rubio's net income increased to $367 thousand from $245 thousand for the comparable quarter a year ago. On a per-share basis, earnings doubled to $0.04 from $0.02 last year.
The recent quarter had non-recurring expenses associated with the ongoing evaluation of strategic alternatives of $0.01 per share. Excluding this charge, net income was $485 thousand or $0.05 per share.
Carlsbad, California-headquartered Rubio's total quarterly revenues slightly improved to $46.73 million from $46.34 million last year. Restaurant sales were $46.71 million compared to $46.31 million last year. Comparable store sales decreased 1.8% compared to an increase of 1.9% in the same quarter last year.
During the quarter, cost of sales decreased to $11.86 million from $12.47 million last year, due mainly to lower ingredient costs as well as tighter food cost management.
As a percentage of sales, restaurant labor cost increased by 60 basis points, primarily due to increased workers' compensation cost, while restaurant occupancy and other costs rose by 10 basis points, mainly due to higher rent and common area maintenance charges. Operating income was higher at $559 thousand compared to $428 thousand last year.
Rubio's opened three restaurants during the quarter. Pre-opening expenses decreased 45% over last year to $94 thousand.
Under the terms of the acquisition deal, an entity controlled by Mill Road Capital will acquire all outstanding shares of Rubio's Restaurants for $8.70 per share in a cash merger transaction. This offer values Rubio's at a net transaction value of about $91 million.
Loren Pannier, Chairman of the Special Committee of Rubio's Board of Directors, said, "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."
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 company said that, Ralph Rubio, Dan Pittard and Rosewood Capital, who collectively own approximately 24% of the outstanding shares of Rubio's, have committed to vote in favor of the proposed merger transaction. Mill Road Capital, L.P. currently owns approximately 4.9% of the outstanding shares.
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.
RUBO is currently trading at $8.46, up $0.80 or 10.44% on a volume of 0.12 million shares on the Nasdaq.
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