Financial Overview March 2007
NEW YORK — In its largest one-day decline since late September 2001, the DOW JONES INDUSTRIAL AVERAGE fell 416 points, or 3.3 percent, Tuesday, and the restaurant sector declined along with it in late-afternoon trading. The NATION'S RESTAURANT NEWS INDEX of about 80 public restaurant companies declined by more than 40 points. The Nasdaq and S&P 500 indexes also fell Tuesday. The Dow's plunge wiped out all of that index's gains so far this year. The drop in U.S. markets was sparked by a sell off of shares in China, leading to the Shanghai market's largest decline in history and a trading frenzy worldwide, and by weaker-than-expected domestic economic data. For example, a government report said orders for durable goods like washing machines, airplanes and semiconductors declined more than expected in January.
LEBANON, Tenn. — CBRL GROUP INC., operator of 551 Cracker Barrel Old Country Store restaurants and gift shops, said same-store restaurant sales for the four weeks ended Feb. 23 dipped 1.3 percent from results of the comparable period a year ago. Same-store gift shop sales rose 1.5 percent, CBRL said. Same-store restaurant sales were restrained by 2 percentage points, while retail sales were curbed by as much as 3.5 points, as a result of winter weather that was more severe this year, CBRL indicated.
NEW YORK — Prominent activist investor DANIEL S. LOEB and the fund he manages, THIRD POINT LLC, based here, disclosed its acquisition of a 7-percent stake in IHOP CORP., parent to the mostly franchised, 1,302-unit family-dining brand. Though Third Point did not disclose “any plans or proposals’ for IHOP in a Feb. 13 filing with regulators, the hedge fund is known for taking activist positions with its investments. Securities analyst Bryan Elliot at Raymond James & Associates Inc. predicted in a research note that any restructuring at IHOP “would focus on adding leverage to the company's balance sheet with proceeds funding a tender offer or a large one-time dividend.’ IHOP said earlier this month it planned to close a $200 million private placement of notes to fund debt paydowns and share repurchases.
CHICAGO — MORTON'S RESTAURANT GROUP INC., operator of 74 namesake steakhouses and four Italian restaurants, swung to a fourth-quarter profit of $5.6 million, or 33 cents per share, from a net loss of $3.8 million, or 38 cents per share, a year earlier. Revenues for the latest quarter, ended Dec. 31, increased 8.7 percent to $90.9 million. Same-store sales rose 6.7 percent at Morton's units and fell 2.7 percent at the Bertolini's brand, the company said. Morton's credited its “highly popular’ Bar 12-21 — a bar area that features a “Bar Bites’ and liquor menu — for helping to drive sales. The company said it will expand Bar 12-21 from its current 20 locations to an additional 15-plus units this year. Adjusting for one-time charges related to Morton's February 2006 initial public offering, the separation agreement with former chief executive Allen Bernstein and other items, Morton's fourthquarter profit increased 9.4 percent to $5.8 million, or 34 cents per share, from earnings of $5.3 million, or 31 cents per share, a year earlier. For the full year, Morton's booked a net loss of $13.6 million, or 84 cents per share, versus a net loss of $4.2 million, or 42 cents per share a year earlier. On an adjusted basis, Morton's earned $14 million, or 82 cents per share, for fiscal 2006, compared with pro forma profit of $11.6 million, or 68 cents per share, for fiscal 2005. Revenues rose 7.1 percent to $322 million.
GREENWOOD VILLAGE, Colo. — RED ROBIN GOURMET BURGERS INC., operator or franchisor of 347 casual-dining restaurants, posted a 59.4-percent, year-over-year increase in fourth-quarter profit on an extra operating week that helped boost revenues 40.6 percent to $163.8 million. The company earned $8.8 million, or 53 cents per share, for the 13 weeks ended Dec. 31. Same-store sales increased 0.2 percent at corporate restaurants, driven by a 3.2-percent increase in the average check, which offset a 3-percent drop in traffic, the company said. Samestore sales at franchised units in the United States and Canada rose 1.5 percent and 5.1 percent, respectively. For the full year, profit rose to $29.4 million, or $1.75 per share, from $27.4 million, or $1.64 per share, a year earlier.
HEATHROW, Fla. — RUTH'S CHRIS STEAK HOUSE INC., operator or franchisor of more than 100 namesake restaurants, posted fourth-quarter profit that was more than double year-earlier results on increased revenues and a one-time gain in gift-card-related income. For the 14 weeks ended Dec. 31, the company has unadjusted earnings of $10.7 million, or 46 cents per share, compared with $4.3 million, or 18 cents per share, posted in the prior year's 13- week fourth quarter. Corporate revenues for the latest quarter rose 51.4 percent to $88 million. Same-store sales increased 7.4 percent at corporate restaurants on a comparable 13-week to 13-week basis, the company said. Ruth's Chris booked $4 million in other income in the latest quarter, up from $400,000 a year earlier, related to gift card “breakage,’ or card value purchased but not redeemed. Adjusting for hurricane-related costs and proceeds and a change in the company's capital structure following its 2005 IPO, Ruth's Chris said net income for the latest quarter was $8.9 million, or 38 cents per share, versus $4.7 million, or 20 cents per share, a year earlier. For the full year, on an as-reported basis, Ruth's Chris earned $23.8 million, or $1.02 per share, versus 2005 earnings of $10.9 million, or 39 cents per share. Fiscal 2006 revenues rose 28.2 percent to $271.5 million.
TAMPA, Fla. — OSI RESTAURANT PARTNERS INC. posted a 20.3-percent year-over-year decline in fourth-quarter net income as higher costs, especially for labor, offset the company's 9.1-percent revenue gain. In disclosing what possibly will be the company's last quarterly report before its pending $3.63 billion going-private buyout, expected to close in April, OSI said it earned $21.8 million, or 29 cents per share, for the three months ended Dec. 31. A year earlier, the company posted profit of $27.4 million, or 36 cents per share for that quarter. Latest-quarter revenues totaled $1.01 billion. Same-store sales were flat from a year earlier at OSI's flagship Outback Steakhouse chain, but fell 2.5 percent at Carrabba's Italian Grill and 0.2 percent at Bonefish Grill, while rising 3.5 percent at Fleming's Prime Steakhouse & Wine Bar and 0.2 percent at Roy's. After adjusting for its new Partner Equity Program, which replaces the issuance of stock options with a deferred compensation program, and after the accounting change for stock-based compensation, OSI would have posted per-share earnings of 37 cents in its fiscal 2006 fourth quarter, the company said. For the year, OSI's net income was $100.2 million, or $1.31 per share, down from $146.7 million, or $1.92 per share, in fiscal 2005. Full- year revenues rose 9.1 percent to $3.94 billion.
SAN DIEGO — The value of JACK IN THE BOX INC. shares rose 10 percent in trading Wednesday after the company reported that first-quarter net income had jumped 48.1-percent from a year earlier on increased sales and improved restaurant operating margins. For the quarter, ended Jan. 21, Jack in the Box earned $37.4 million, or $1.03 per share, versus $25.2 million, or 70 cents per share, a year earlier. Revenues rose 5.3 percent to $856.7 million for the quarter. Same-store sales at Jack in the Box-owned restaurants increased 5.6 percent. Systemwide same-store sales at the company's Qdoba Mexican grill division increased 4.1 percent. The company is operator or franchisor of more than 2,000 Jack in the Box fast-food restaurants, more than 300 Qdoba fast-casual restaurants and about 50 Quick Stuff convenience store locations.
LOUISVILLE, Ky. — TEXAS ROADHOUSE INC., operator or franchisor of 251 namesake dinnerhouses, recorded a 24.3- percent surge in fourth-quarter profit from a year earlier, on revenues that jumped 29.7 percent to $152.6 million with higher same-store sales and the opening of 10 units. For the 13 weeks ended Dec. 26, Texas Roadhouse earned $7.8 million, or 10 cents per share, versus $6.3 million, or 9 cents per share, in the prior fourth quarter. Fourth quarter same-store sales increased 3.3 at corporate restaurants and 3.5 percent at franchised branches.
COLUMBUS, Ohio — BOB EVANS FARMS INC., operator of 590 Bob Evans restaurants and 109 Mimi's Cafe dinnerhouses, posted a 33.8-percent year-to-year jump in third-quarter net income on a 5.1-percent revenue gain to $419.9 million. Net income for the quarter ended Jan. 26 was $18.7 million, or 51 cents per share, versus $14 million, or 39 cents per share, a year earlier. At the Bob Evans restaurant chain, same-store sales increased 2.1 percent. At Mimi's Cafe, same-store sales rose 2.6 percent. Bob Evans also operates a food products manufacturing and distribution business that contributed $72.8 million to third-quarter revenues.
PORTLAND, Ore. — MCCORMICK & SCHMICK'S SEAFOOD RESTAURANTS INC. recorded net income of $4.8 million, or 33 cents per share, for its fourth quarter ended Dec. 30, up from profit of $4.5 million, or 31 cents per share, in the yearearlier quarter. Revenues rose 2.8 percent to $84.3 million, driven by a same-store sales gain of 2 percent and sales from the opening of three new restaurants during the quarter. For the year, McCormick & Schmick's earned $13.3 million, or 92 cents per share, versus profit of $11 million, or 78 cents per share, in fiscal 2005. Annual revenues increased 10.6 percent to $308.3 million as same-store sales rose 3 percent. The company said it expects 2007 revenues to total between $362 million and $366 million, including expected results from six Boathouse Restaurants in Canada it is set to acquire as early as next month. Currently, the company's system includes 66 corporate restaurants.
SCOTTSDALE, Ariz. — KONA GRILL INC., operator of 14 namesake casual-dining grill and sushi restaurants, posted a fourth-quarter net loss of $1.1 million, or 19 cents per share, versus a profit of $52,000, or 1 cent per share, a year earlier. Revenues for the three months ended Dec. 31 increased 41.8 percent to $14.8 million, driven by the opening of two new restaurants in the quarter and three earlier in the year. However, new outlets boosted pre-opening costs to nearly $1 million in the quarter, from $65,000 a year earlier. Same-store sales rose 1.3 percent. For the full year, Kona Grill posted a net loss of $2.7 million, or 47 cents per share, versus a net loss of $383,000, or 13 cents per share, in 2005. Revenues for 2006 increased 37.7 percent to $50.7 million as same-store sales rose 4 percent. The company said it expects to open six new restaurants in the current fiscal year and to post annual revenues of $73 million to $75 million.
NEW YORK — PERSHING SQUARE CAPITAL MANAGE-MENT LP, the activist hedge fund founded by WILLIAM ACKMAN, disclosed Feb. 14 that it had increased its equity in MCDONALD'S CORP. to a 1.5-percent stake, leading to speculation that the fund is gearing up to pressure McDonald's to sell underperforming restaurants to franchisees or to do a leveraged recapitalization to boost its stock value. In a regulatory filing that outlined end-of-year holdings, Pershing said it owns about 18.5 million McDonald's common shares, worth about $830 million, making it the ninth-largest shareholder. Previously, the fund held about 300,000 shares.
LOS ANGELES — CALIFORNIA PIZZA KITCHEN INC., whose 207-restaurant system includes its namesake brand, the fast-casual CPK ASAP concept and one LA Food Show restaurant, posted a 7.3-percent increase in fourth-quarter profit as same-store sales gains and new-unit openings drove a 16.4-percent revenue surge to $146 million. For the quarter ended Dec. 31, CPK earned $3.7 million, or 19 cents per share. Same-store sales rose 6.9 percent, the company reported. For the full year, CPK earned $21 million, or $1.06 per share, versus $19.5 million, or 99 cents per share in 2005. Revenues for 2006 totaled $554.6 million, up 15.6 percent for the year.
SPARTANBURG, S.C. — DENNY'S CORP., operator or franchisor of 1,545 namesake restaurants, swung to a fourth-quarter profit of $2.3 million, or 2 cents per share, from a net loss a year earlier, on reduced operating costs and a 0.4-percent uptick in revenues to $244.4 million. Same-store sales for the quarter ended Dec. 27 grew 1.6 percent at corporate units and 2.3 percent at franchised units. In 2006, Denny's divested 86 real estate assets for gains of $56.8 million to help reduce corporate debt by more than $100 million, or by 18 percent, Denny's said. For the full year, Denny's earned $30.3 million, or 31 cents per share, versus a net loss of $7.3 million, or 8 cents per share, in fiscal 2005. Revenues rose 1.6 percent to $994 million. Same-store sales grew 2.5 percent at corporate units and 3.6 percent at franchised restaurants.
DENVER — CHIPOTLE MEXICAN GRILL INC., operator of more than 570 namesake fast-casual restaurants, more than doubled its fourth-quarter profit, compared with year-earlier results, on a 26.8-percent jump in revenues to $219.7 million. Chipotle earned $10.8 million, or 33 cents per share, compared with $4.3 million, or 16 cents per share, in the prior year's fourth quarter. For all of 2006, Chipotle posted profit of $41.4 million, $1.28 per share, versus $37.7 million, or $1.43 per share, in 2005. Total revenues last year increased 31.1 percent to $822.9 million.
ATLANTA — RARE HOSPITALITY INTERNATIONAL INC. posted a 5.2-percent drop in fourth-quarter net income to $12.2 million, or 36 cents per share, on revenues that rose 17 percent to $259.9 million. Rare is the operator or franchisor of 275 LongHorn Steakhouse restaurants, 26 Capital Grille restaurants and 31 Bugaboo Creek Steak Houses. The company is halting operation of the Bugaboo chain and has classified its as a discontinued operation. Per-share earnings from continuing operations for the quarter, ended Dec. 31, were 46 cents, up from 42 cents a year earlier. Same-store sales rose 1.5 percent at LongHorn and 8.4 percent at Capital Grille. For the full year, Rare's net income fell 23.7 percent to $39.4 million, or $1.14 per share. Its loss from discontinued operations was $10.6 million. Fiscal 2006 revenues rose 17.6 percent to $986.9 million.
SCOTTSDALE, Ariz. — P.F. CHANG'S CHINA BISTRO INC. recorded a 5.5-percent dip in fourth-quarter profit compared with year-earlier results, reflecting equity-based compensation expense and increased costs. Still, P.F. Chang's per-share, fourthquarter profit beat average Wall Street estimates and the company's fiscal 2007 earnings outlook was better than expected, sending the company's stock price to a nine-month high during trading Wednesday. For the quarter ended Dec. 31, P.F. Chang's earned $8.8 million, down from a profit of $9.3 million a year earlier. Pershare earnings totaled 34 cents for both quarters, as the number of shares outstanding was 4.3-percent lower in the latest quarter. The company, which is operator or franchisor of 260 restaurants under its namesake brand and the Pei Wei Asian Diner concept, booked accounting charges of $1.9 million in its latest quarter for stockbased compensation and preopening expenses. For the full year, P.F. Chang's earned $33.3 million, or $1.24 per share, down from year-earlier profit of $37.8 million, or $1.40 per share.
SEATTLE — ORGANIC TO GO INC., parent company of 12 namesake fast-casual cafes and a 45 retail locations selling certified organic and natural soups, salads and sandwiches, completed a reverse merger to go public Tuesday. In its first day of trading on the over-the-counter bulletin board, Organic To Go's stock price rose 41.7 percent to close at $4.25 per share. The company is now the only wholly owned subsidiary of SP HOLDINGS CORP., the public company into which Organic To Go merged. The company trades under SP Holding's ticker symbol SPHG.OB. In addition to the merger, Organic To Go completed the first phase of a $6.5 million private placement consisting of common stock and warrants, the company said. It raised $4.7 million with the balance due on or before Feb. 19. Organic To Go also had an additional $5.6 million of debt converted into equity.
LOUISVILLE, Ky. — YUM! BRANDS INC. reported a 2.6- percent increase in fourth-quarter net income on a 4-percent jump in revenues to $3.02 billion for the three months ended Dec. 30. The company said its year-over-year growth in profit and revenues was driven by its divisions abroad, especially in China, which offset weaker results in the United States, which were especially hurt by the E. coli bacterial illness outbreak in December that was linked to some Taco Bell restaurants. Yum and its franchisees operate about 34,595 restaurants worldwide under the Taco Bell, KFC, Pizza Hut, Long John Silver's and A&W brands. The E. coli outbreak contributed to a 2-percent blended samestore sales dip at U.S.-based, Yum-owned restaurants in the fourth quarter, with Taco Bell posting a 5-percent decline, Yum said. For the fourth quarter, Yum earned $232 million, or 83 cents per share, versus $226 million, or 77 cents per share, a year earlier.
RICHMOND HEIGHTS, Mo. — PANERA BREAD CO., based here, reported a 17-percent jump in fourth-quarter profit from a year earlier on a 34.4-percent surge in revenues. The company earned $18.9 million, or 59 cents per share, for the quarter ended Dec. 26, versus $16.2 million, or 51 cents per share, a year earlier. Panera's revenues totaled $232.9 million, driven by a 2-percent systemwide same-store sales increase and the opening of 52 bakery-cafes, including 26 corporate units. Net results included a 3-cents-per-share charge for the $21.1 million purchase of Paradise Bakery & Cafe, a 45-unit chain based in Scottsdale, Ariz. In addition, Panera's launch of a dinner menu hurt fourth-quarter margins, the company said. Panera Bread and its franchisees operate 1,027 namesake restaurants.
OAK BROOK, Ill. — MCDONALD'S CORP. has continued its string of positive results, reporting that global same-store sales rose 4.9 percent in January, versus the same month last year, driven by gains of 3.6 percent in the United States, 6.8 percent in Europe, and 4.3 percent in the Asia-Pacific/Middle East/Africa region. The company said Thursday that sales at U.S. units were driven by successful breakfast offerings, the Snack Wrap product line and extended operating hours. While the 3.6-percent uptick in January was the smallest U.S. same-store sales gain in four months, the comparison lapped a 9.7-percent gain a year earlier, the highest increase in more than two years. McDonald's and its franchisees operate more than 30,000 units worldwide.
ANN ARBOR, Mich. — DOMINO'S PIZZA INC. on Wednesday unveiled a recapitalization plan that calls for up to $415.5 million in stock repurchases under a modified Dutch tender auction, a tender offer for all its senior subordinated notes and the eventual closing of an asset-backed securitized facility worth $1.85 billion. The operator or franchisor of 8,238 namesake pizza delivery units would repurchase up to 13.85 million shares, or 22 percent of all shares outstanding, at a per-share price of $27.50 to $30. The offer commenced Wednesday and is to expire March 9.
DALLAS — BRINKER INTERNATIONAL INC. reported a 4.5-percent decline in systemwide same-store sales for the five weeks ended Jan. 31, versus year-earlier results. Same-store sales fell 4.9 percent at Blinker's flagship CHILI'S GRILL & BAR chain. Chili's same-store sales for the prior January had increased 7.2 percent. Brinker blamed bad weather for suppressing January sales results by about 1.1 percent, and said a change in Chili's current-year marketing calendar also hurt results. January same-store sales also fell 3.9 percent at Romano's Macaroni Grill, 5.4 percent at On the Border Mexican Grill & Cantina and 2.2 percent at Maggiano's Little Italy. Brinker and its franchisees operate about 1,712 restaurants.
OAKVILLE, Ontario — TIM HORTONS INC., parent of the mostly franchised namesake doughnut specialty chain of 3,047 outlets, posted a more than four-fold increase in fourthquarter net income from a year earlier, when its profit was hurt by impairment charges and expenses related to the company's spinoff from Wendy's International Inc. For the quarter ended Dec. 31, Tim Hortons earned U.S. $58.3 million, versus a profit of $14.1 million, a year earlier. Revenues increased 15.5 percent to $400.3 million. Fourth-quarter same-store sales rose 9.3 percent at outlets in Canada and 8.3 percent at U.S. locations, the company reported.
CALABASAS HILLS, Calif. — THE CHEESECAKE FACTORY INC. on Tuesday posted a decline in fourth-quarter income but said revenues had risen 18 percent to $360.7 million because of traffic gains at its eight-unit Grand Lux Cafe chain. Same-store sales at the company's namesake chain rose 0.4 percent but were up 7.8 percent at Grand Lux units. Corporate net profit for the quarter was $20.4 million or 26 cents a share, versus $22.6 million or 28 cents, a year earlier.
DUBLIN, Ohio — WENDY'S INTERNATIONAL INC. on Friday reported a 90-percent decline in net income for last year's fourth quarter, reflecting its spinoff of the Canadianbased Tim Hortons doughnut chain. Earnings for the December-ended quarter were $3 million, or 3 cents per share, versus $30 million, or 25 cents a share, for the fourth quarter of 2005. Revenues for the latest quarter dipped 1 percent to $596.4 million, although same-store sales for the Wendy's chain rose 3.1 percent at the company's U.S. restaurants and 2.7 percent at U.S. franchised branches, furthering a turnaround that began after same-store sales fell in 2005, the first such annual decline in 18 years. In December, corporate Wendy's posted a 6.1-percent same-store sales gain as franchisees grew their same-store sales at a 5.6-percent clip.
OVERLAND PARK, Kan. — APPLEBEE'S INTERNATIONAL INC. said domestic systemwide same-store sales declined 5.8 percent for the four weeks ended Jan. 28, versus the same period last year. The operator or franchisor of 1,936 namesake restaurants said severe winter weather impaired results by as much as 1.5 percent. January same-store sales for corporate units fell 6.6 percent, reflecting an 8-percent drop in traffic and a menu price increase of about 1.4 percent taken during the second week of the month. The declines in same-store sales and traffic were the worst monthly results for the franchisor's own restaurants since 2001, according to stock analyst John Ivankoe of J.P. Morgan Securities Inc. in New York. Same-store sales at domestic franchised restaurants decreased 5.5 percent for January.