Financial Overview — April 2009
CHICAGO – In its 2008 Chain Restaurant Merger & Acquisition report, Chicago-based bank J.H. CHAPMAN GROUP LLC said the number of announced transactions last year grew 3.6 percent from 2007, to 116 deals. The largest group of transactions, or 40 deals, occurred between franchisors and franchisees. Many transactions had tones of distress, the research showed, as 21 announcements came from restaurant companies in financial difficulty, up 31 percent from 2007. Just 20 deals involving an operator purchasing another concept were announced last year, down 44 percent from 36 such deals in 2007. TRIARC’s purchase of WENDY’S, the largest such deal in 2008, was valued at more than $2 billion. A total of 81 deals were marked as divestitures in 2008, up from 72 in 2007, J.H. Chapman’s data shows. Equity funds continued their interest in the restaurant sector, recording 38 announced transactions, a 12-percent increase from 2007. Deals included KOHLBERG & CO.’s purchase of CENTERPLATE INC. J.H. Chapman Group officials predicted 2009 merger-and-acquisition activity will be based more on distressed situations and that capital will begin loosening up by year’s end or early 2010.
DEERFIELD, Ill. — COSI INC. will not be put up for sale, its board of directors said late Tuesday. The parent of the namesake fast-casual sandwich chain last fall had formed a special committee of directors and hired financial advisers to review various strategic alternatives. However, the company said Tuesday the review had ended and that Cosi would remain a public company. Cosi, which operates 97 stores and franchises 48 others, has suffered net losses for two years in a row. For its latest fiscal year ended Dec. 29, Cosi posted a net loss of $16.2 million, or 40 cents per share, compared with a net loss of $20.7 million, or 53 cents per share in 2007. Its 2008 revenue rose 0.8 percent to $135.6 million.- CARPINTERIA , Calif. — Continuing a string of negative monthly sales trends, the 1,195-unit CARL’S JR. chain posted a 7-percent drop in same-store sales for the four weeks ended March 23, a result of the weak California economy, discounting by competitors, and a tough year-earlier comparison, parent company CKE Restaurants Inc. said Wednesday. New products introduced this month are expected to help boost sales, including Carl’s Jr.’s new Kentucky Bourbon Burger and the Jumbo Chili Dogs. Carl’s Jr. same-store sales decline was compared with a year-earlier increase of 6 percent, which CKE said was the most difficult sales comparison of the year. The chain has posted declining same-store sales trends each month so far this year. Sister brand HARDEE’S, with 1,908 units, reported a same-store sales increase of 3.1 percent for the four weeks ended March 23, compared with a decline of
2.1 percent in the same month a year earlier.
- COSTA MESA, Calif. — EL POLLO LOCO INC., parent company to the 413-unit grilled chicken chain, said it faces an uphill battle this year against slower traffic, which it blamed on higher unemployment and industry discounting. Additional menu price increases may be used to protect El Pollo Loco’s margins, the company said. El Pollo Loco said it would focus on designing a less costly restaurant prototype, developing new menu items and promoting value-centric offerings. For the year ended Dec. 31, the company recorded a net loss of $39.5 million, compared with a year-earlier net loss of $4.0 million. The company’s bottom line in 2008 included a goodwill impairment of $24.5 million and impairment against domestic trademarks of $17.6 million. The year also included a $10.7 million expense for settlement of a legal battle over development rights with the El Pollo Loco operation in Mexico. Fiscal 2008 revenues rose 7.1 percent to $298.9 million.
- CARPINTERIA, Calif. – Aggressive cost management and a focus on premium menu items helped CKE Restaurants Inc. realize fourth quarter net income that was nearly 26 times higher than the amount reported a year ago, officials said this week. For the fourth quarter ended Jan. 31, net income for the parent of the Carl’s Jr. and Hardee’s brands was $2.6 million, compared with $98,000 in 2008. Quarterly revenues fell about 3 percent to $327.4 million. For the year, profits climbed nearly 19 percent to $37 million, compared to the prior year. Revenues for the year dropped 3 percent to $1.48 billion. Same-store sales at company-owned Carl’s Jr. units were up 2.1 percent for the year, while they climbed 1.2 percent at Hardee’s, the Carpinteria-based company indicated. It operates or franchises 1,195 Carl's Jr. restaurants and 1,908 Hardee's outlets.
- HOUSTON — MEXICAN RESTAURANTS INC., which operates 79 restaurants under such names as Casa Ole and Monterey’s Tex-Mex Cafe, swung to a loss in its fourth quarter on heavy impairment charges, the company said Tuesday. For the fourth quarter ended Dec. 28, the company reported a net loss of $3.9 million, or $1.20 per share, compared with profit of $199,686, or 6 cents a share, in the year-ago quarter. The latest quarter included a $5.1 million goodwill impairment charge, which resulted in a $1.3 million tax benefit, the company said. Fourth quarter revenue rose 3.4 percent, to $20.5 million. Same-store sales for the quarter increased 2.3 percent. For the full year, Mexican Restaurants recorded a net loss of about $4 million, or $1.22 a share. In 2007, the company earned $348,774, or 10 cents a share.Annual revenue dipped 0.3 percent to $81.9 million. Same-store sales rose 1.5 percent at company-owned units and 1.2 percent at franchised stores.
- OKLAHOMA CITY — Drive-in operator SONIC CORP. said that profit fell 6.5 percent in its February-ended second quarter, as it saw same-store sales and revenue decline. The parent to the chain of more than 3,500 drive-ins said net income in the quarter totaled $8.7 million, down from $9.3 million in the same quarter last year. Latest-quarter earnings per share totaled 14 cents, and reflected a 6-cents-per-share gain from a discounted purchase of $25 million in corporate senior notes. Earnings per share in the second quarter of last year totaled 15 cents. Latest-quarter revenue fell 3.2 percent to $169.0 million, reflecting a systemwide same-store sales decline of 3.6 percent. Same-store sales at corporate restaurants fell 6 percent. During the quarter, 27 new drive-ins were opened and 12 relocations or rebuilds were completed. Sonic’s chairman and chief executive, CLIFFORD HUDSON, said menu refinements such as the chain’s new “Everyday Value Menu” have helped to stem traffic decreases. The menu was introduced late last year and features items for $1. During the second half of the fiscal year, Sonic will benefit from added promotions for premium-quality products, in addition to the value offerings, as well as easing commodity costs, he said.
- NEWTON, Mass. — UFOOD RESTAURANT GROUP INC., the parent to about 12 UFood Grills, closed on a $2.8 million private placement stock offering to help fund the chain’s growth and operations, the company said Friday. The company completed last month the brand switch from KnowFat! Lifestyle Grill to UFood Grill with the conversion of its Boston-area corporate locations. The chain, founded by veteran restaurateur GEORGE NADDAFF, is a fast-casual brand that focuses on healthful ingredients and cooking. It highlights the “UBerry” tart soft-serve yogurt, a freshly baked “Falafel Roll-Up” and nutrient-rich “Smuuthies” made with real whole fruit and berries. The operator and franchisor, which trades on the Over-the-Counter Bulletin Board, posted a net loss of $6.8 million for the nine months ended Sept. 28, on revenues of $4.5 million, according to the most recent financial filings. For the same nine months a year earlier, the company netted a loss of $3.9 million, on revenues of $3.9 million.
- ORLANDO, Fla. – DARDEN RESTAURANTS INC., a leading casual-dining operator, joined segment competitors in reporting negative same-store sales at its five major brands in the latest quarter, and blamed the economy, bad weather and an unfavorable calendar shift. The weak sales, along with integration costs from the company’s 2007 acquisition of Rare Hospitality and losses from discontinued operations, led to a nearly 15-percent drop in net earnings for the company’s fiscal third quarter ended Feb. 22. Domestic same-store sales fell 1.4 percent at Olive Garden, 4.6 percent at Red Lobster, 5.4 percent at LongHorn Steakhouse, 19.0 percent at The Capital Grille and 8.8 percent at Bahama Breeze. Until this latest quarter, Darden’s Olive Garden and Red Lobster, along with Buffalo Wild Wings, were the only three casual-dining brands tracked by Nation’s Restaurants News that had posted positive same-store sales. Darden’s results beat Wall Street expectations, and Darden boosted its full-year sales and profit guidance, saying it expects earnings from continuing operations to rise between 1 percent and 4 percent on revenue growth of between 9 percent and 9.5 percent.
- WOODLAND HILLS, Calif. – GRILL CONCEPT INC.’s stockholders Tuesday ratified a previously announced plan to delist the company's stock from the Nasdaq exchange as early as today. Officials of the Woodland Hills company that owns, manages or licenses 32 restaurants, including Daily Grill and Grill on the Alley, said the move would save an estimated $766,000 a year in public reporting costs. After delisting, GCI expects its shares will be quoted on the Pink Sheets Electronic OTC Markets.
- EMERYVILLE, Calif. — JAMBA INC., for the fourth quarter ended Dec. 30, reported a net loss of $41.2 million, including impairment and store lease termination charges of about $21.7 million. In 2007’s fourth quarter, Jamba’s net loss was $150 million, mainly because of $200.6 million in charges for trademark impairment. For the 12 weeks ended Dec. 30, same-store sales at corporate locations fell 12.0 percent. The 729-unit chain has 511 corporate and 218 franchised locations. Revenue for the latest quarter increased 2.8 percent to $56.1 million. For the full year ended Dec. 30, Jamba reported a net loss of $150 million, compared with a year-earlier loss of $113.3 million. Fiscal 2008 revenue rose 8.1 percent to $342.9 million. Same-store sales at corporate stores fell 8.1 percent. The company said it was continuing its previously announced “Blend” turnaround plan, which includes expense reduction of about $25 million, service and menu initiatives and the licensing of more consumer products.
- HOUSTON — LANDRY’S RESTAURANTS INC. swung to a fourth-quarter profit from a year-earlier net loss on gains from insurance proceeds that helped offset sluggish sales at the casual-dining and gaming company. For the quarter ended Dec. 31, Landry’s earned $4.6 million, or 30 cents per share, compared with a net loss of $6.6 million, or 41 cents per share, in the same quarter a year earlier. Latest-quarter results included $11.5 million in after-tax proceeds from insurance claims covering Hurricane Ike, which hit the Houston area in September 2008. The storm shuttered numerous Landry’s operated restaurants, all of which have since reopened. Latest-quarter corporate revenue fell 8.7 percent to $253.7 million. Same-store sales for Landry’s restaurants fell 4.7 percent. The Houston-based company spent much of last year attempting to close on a buyout by its founder and chief executive Tilman Fertitta. The deal fell through amid financing troubles, and in February Landry’s entered into a $215.6 million amended credit agreement and issued $295.5 million in senior secured notes to repay $400 million of the company’s formerly outstanding senior notes. The company said it would focus this year on conserving cash to repay debt obligations, which total about $862 million.
- INDIANAPOLIS — Shares in the 490-unit STEAK N SHAKE CO. soared Thursday after the company reported positive customer traffic and sales trends for its current second quarter, a possible indication of a turnaround at the long struggling brand. Steak n Shake said same-store sales were up 1.8 percent while traffic was up 6.2 percent so far for the quarter, which began Dec. 18 and ends April 8. Last August, the company named activist investor SARDAR BIGLARI as its chief executive and said it would begin a restructuring program that would include closing underperforming units, reducing corporate spending, shortening hours of operation and reducing corporate-restaurant development. For its first quarter ended Dec. 17, 2008, Steak n Shake reported a net loss of $3.4 million, or 12 cents a share, on revenue that fell 3.5 percent to $131.7 million. Same-store sales for the quarter slipped 1.4 percent while guest traffic was down 0.9 percent.
- ATLANTA — WENDY’S/ARBY’S GROUP INC. said Thursday it amended the company’s credit facility, adding Wendy’s as a co-borrower to Arby’s debt, to increase financial flexibility. The amended credit agreement includes a senior secured term loan, due in July 2012, under which $393 million is outstanding. A $100 million senior secured revolving credit facility that expires in July 2011 also is included. Wendy’s/Arby’s was formed late last year when Arby’s parent Triarc Cos. Inc. purchased Wendy’s parent Wendy’s International Inc. As the company said when reporting its first results as a combined company, Wendy’s/Arby’s would use the combined financials of the two chains, totaling more than 10,000 restaurants, to amend credit terms.
- CHICAGO — MORTON’S RESTAURANT GROUP INC. said it expects a first-quarter same-store sales decline of between 20 percent and 22 percent, as the fine-dining steakhouse operator faces declining guest traffic amid an era of consumer cutbacks. The company, which operates 81 Morton’s steakhouses and three Italian restaurants, said the reduced sales would lead to a per-share net loss for the current quarter of between 6 cents and 10 cents. In the first quarter of 2008, Morton’s posted profit of 14 cents per share.The company, like many high-end operators in the industry, has struggled to maintain guest traffic as consumers cut back spending. Morton’s has worked to entice customers with lower-priced fare and a more-relaxed atmosphere through its Bar 12-21 concept, which features smaller bar bites and drink specials. The chain also has attempted to expand catering of lunch or breakfast meetings. Nevertheless, same-store sales for the Jan. 4-ended quarter fell 12 percent. Morton’s posted a net loss of $8.1 million, or 51 cents per share, compared with a profit of $6.4 million, or 38 cents per share, in the year-ago quarter. Latest-quarter results included $10.4 million in impairment charges and $2.3 million for the settlement of wage-and-hour claims. Revenues for the quarter fell 7 percent to $93.5 million.