Financial Overview April 2007
MEMPHIS, Tenn. — PERKINS & MARIE CALLENDER'S INC., a system of about 614 restaurants under the Perkins Restaurant and Bakery and Marie Callender's Restaurant and Bakery brands, has reported a fiscal 2006 net loss that is 34.5 percent less than its prior annual loss, on revenues that surged 84.8 percent to $594.1 million. The company lost $10 million in fiscal 2006, versus $15.2 million in 2005. The improvements were attributed to the September 2005 merger of The Restaurant Co., parent of the Perkins brand, and Wilshire Restaurant Group LLC, parent of the Marie Callender's brand. Annual same-store sales rose 1.6 percent at Perkins and 0.4 percent at Marie Callender's.
SEATTLE — STARBUCKS CORP. entered into an agreement to issue up to $1 billion of unsecured commercial notes to fund general corporate purposes, which include “working capital, capital expenditures, acquisitions and share repurchases,” the company said Tuesday. No indication was given about potential targets of acquisitions enabled by the notes, which would be backed by the company's reputation as a borrower rather than by collateral. The notes will be offered on a private-placement basis, Starbucks said. Though the maturities will vary, they will not exceed 397 days from the date of issue. Starbucks' board said in a regulatory filing that it had authorized the program “to serve as an alternative source of funding for the company, but not as an increase to the company's overall debt.” Banc of America Securities LLC and Goldman, Sachs & Co. will act as dealers. JPMorgan Chase Bank N.A will act as issuing and paying agent. Starbucks and its licensees operate more than 13,000 coffeehouses worldwide.
LEBANON, Tenn. — CBRL GROUP INC., operator of 556 CRACKER BARREL OLD COUNTRY STORE restaurants and gift shops, reported a 1-percent dip in same-store restaurant sales and a 0.3-percent drop in same-store gift sales for the four weeks ended March 23. CBRL said this year's more severe winter weather impaired results by as much as 1 percent for restaurant sales and 1.5 percent for retail sales. The negative trends at CRBL, one of the first chains to report March results, do not bode well for the industry, said securities analyst Matthew DiFrisco of Thomas Weisel Partners in New York. Continuing high gas prices and higher interest rates “appear to be dampening consumer demand,” he said.
CARPINTERIA, Calif. — CKE RESTAURANTS INC., parent of the 1,929-unit Hardee's and 1,079-unit Carl's Jr. brands, has closed an amended and restated $320 million senior secured credit facility, consisting of a five-year $200 million revolving credit facility and a six-year $120 million term loan. BNP PARIBAS was the lead arranger and agent. CKE said the term loan will be used to prepay existing balances on a previous credit facility. The revolving credit line will provide general working capital and includes an $85 million letter of credit subfacility, primarily to support casualty insurance coverage, CKE added. The new credit arrangement has “more favorable borrowing terms,” reflecting lenders recognition of CKE's “efforts to improve our financial condition,” chief financial officer TED ABAJIAN said.
CARLSBAD, Calif. — RUBIO'S RESTAURANTS INC., parent to 166 Rubio's Fresh Mexican Grill units, posted a fourth-quarter net loss nearly double that of a year earlier, reflecting a $4.8 million charge for a lawsuit settlement. Revenues grew 19.8 percent to $41.3 million. For the Dec. 31-ended quarter, Rubio's lost $4.7 million, or 48 cents per share, versus a loss of $2.4 million, or 26 cents per share, a year earlier. The charge for settling the wage-and-hour class action totaled 49 cents per share. Fourthquarter same-store sales rose 4.9 percent. For the full year, Rubio's lost $3.5 million, or 36 cents per share, compared with a fiscal 2005 loss of $228,000, or 2 cents per share. Annual revenues rose 8.2 percent to $152.3 million as same-store sales grew 2 percent.
OVERLAND PARK, Kan. — Despite a 5.4 percent revenue increase driven by restaurant acquisitions and increased samestore sales, NPC INTERNATIONAL INC., operator of 873 PIZZA HUTs, reported a 97-percent drop in fourth-quarter profit on increased interest expenses and other costs related to its May 2006 acquisition by MERRILL LYNCH GLOBAL PRIVATE EQUITY. For the quarter ended Dec. 26, NPC earned $395,000, compared with $13.6 million in the prior fourth quarter. NPC's interest expense in its latest quarter more than doubled from a year earlier to $9.4 million. In addition, NPC's gain on the sale of assets declined to $171,000, versus $3.9 million a year earlier. Total sales increased 5.4 percent to $158.7 million, helped by the purchase of 39 Pizza Huts early in the quarter and a 1.1-percent same-store sales increase. For the full year, the chain's No. 1 franchisee posted a net loss of $2.7 million, versus a profit of $47.3 million for fiscal 2005. NPD's net income included $24.3 million of expenses related to the acquisition by Merrill Lynch and increased interest expense of $14.4 million associated with related financing.
PORT WASHINGTON, N.Y. — Restaurants nationwide collected about $27.8 billion in total sales in January, a 2-percent gain from the same month a year earlier, despite logging 1 percent fewer visits from consumers, according to data from research firm NPD GROUP. The sales uptick in sales, the slowest monthly rate of growth gauged by NPD in the prior five months, was attributed to increased check averages, which offset a slower rate of consumer traffic. According to consumer-reported figures from the firm's Consumer Reports on Eating Share Trends database, or CREST, chain restaurants benefited from a 2-percent increase in dollars spent despite the same volume of consumer visits, versus January 2006 levels. Independent restaurants saw a 2-percent increase in sales despite a 2-percent decline in traffic. Extrapolating from its polling, CREST asserted that casual-dining chains had a 2-percent jump in consumer visits in January, leading to a 5-percent increase in sales. QSR brands' sales grew 2 percent for the month on a flat volume of customer traffic, NPD said.
HOUSTON — MEXICAN RESTAURANTS INC., parent of the Casa Olé brand, said increased commodity and utility costs, coupled with slowed sales momentum because of “shrinking consumer discretionary spending,” led to a fourth-quarter loss and a nearly 51-percent drop in full-year earnings. For the quarter, which ended Dec. 31, the company's net loss was $1.0 million, or 30 cents per share, compared with a profit of $1.1 million, or 30 cents per share, for the same period a year earlier. Corporate revenues for the operator of 60 restaurant and franchisor or licensor of 19 others dipped 1.2 percent to $20 million. Same-store sales for the quarter declined 8 percent, compared with a year-earlier same-store sales gain of 12 percent. For fiscal 2006, Mexican Restaurants reported net income of $1.1 million, or 32 cents per share, down 50.9 percent from $2.3 million, or 63 cents per share, for 2005. Annual revenues rose 5.3 percent to $82.3 million, which the company said was driven by the opening of two restaurants, the full-year impact of one restaurant opened in fiscal 2005, and the acquisition of the two-unit Mission Burritos chain. Mexican Restaurants owns six other brands, including that of its flagship chain.
IRVINE, Calif. — EL POLLO LOCO INC., operator or franchisor of 359 fast-casual grilled-chicken restaurants, narrowed its fourth-quarter net loss to $1.2 million, from a year-earlier loss of $15.4 million stemming primarily from the EPL's November 2005 acquisition by affiliates of TRIMARAN CAPITAL LLC. Revenues for the quarter, which ended Dec. 27, increased 7.9 percent to $64.6 million. Systemwide same-store sales rose 2.3 percent. Net income for the full year was $600,000, versus fiscal 2005's net loss of $11.8 million, on a 9.6-percent increase in revenues to $259.9 million. Annual systemwide same-store sales rose 5.3 percent. For the year El Pollo Loco logged $1.8 million in costs related to a planned but abandoned initial public stock offering.
DUBLIN, Ohio — WENDY'S INTERNATIONAL INC. upped its full-year, per-share earnings guidance by 9 cents Tuesday, after it completed an almost $300 million repurchase of 9 million shares that will reduce the number of Wendy's shares outstanding by about 9 percent. Wendy's paid an average price of $31.33 per share. Citing the outstanding-share reduction, Wendy's said its annual per-share profit would range between $1.26 and $1.32, up from previous guidance of $1.17 to $1.23 per share. In fiscal 2006, Wendy's earned 37 cents per share. For the company's first quarter, Wendy's expects per-share earnings to be 11 cents to 14 cents, compared with a net loss of 5 cents per share in the first quarter of 2006. Wendy's, operator or franchisor of more than 6,000 namesake restaurants, said it planned to report first-quarter sales April 5 and first-quarter earnings April 26.
COLUMBUS, Ohio — Citing reduced operating expenses, MAX & ERMA'S INC., operator or franchisor of 101 casual-dining restaurants, posted a first-quarter profit of $749,331, or 29 cents per share, versus a net loss of $31,756, or 1 cent per share, a year earlier. The year-to-year swing to profitability came despite a 3.6- percent decline in quarterly revenues to $55.5 million. The 6.3- percent drop in total operating expenses led to a five-fold increase in operating income to $1.8 million, Max & Erma's said. However, same-store sales fell 3.7 percent, which was “basically” responsible for the quarter's revenue decline, the company said. It also blamed severe winter weather for $400,000 in lost sales.
DEERFIELD, Ill. — COSĖ INC. on Monday posted a fourthquarter net loss of $4.8 million on a 11.3-percent gain in revenues to $31.8 million, citing organic growth and reduced charges for asset impairments, compared with a year earlier. The fast-casual sandwich and salad chain lost $6.0 million for the quarter a year earlier. For the latest quarter, ended Jan. 1, Cosė earned 12 cents per share, versus 16 cents in the prior fourth quarter. The company, operator or franchisor of about 130 Cosė outlets, said same-store sales rose 0.4 percent for the quarter, during which the chain grew by 10 net openings of corporate restaurants. For the full year, Cosė lost $12.3 million, or 32 cents per share, versus a net loss of $13.1 million, or 38 cents per share, for fiscal year 2005. Annual revenues rose 8.3 percent to $126.9 million as same-store sales for the year grew 0.3 percent. Cosė said it logged its first-ever positive cash flow from operations in fiscal 2006, aided by a record 27 new restaurant openings. For fiscal 2007, Cosė expects to grow by 14 corporate units and 45 to 55 franchised branches. It expects per-share earnings for 2007 to be 8 cents to 12 cents, excluding stock-based compensation expense, on corporatestore sales of $150 million to $155 million.
HOUSTON — LANDRY'S RESTAURANTS INC. reported Friday that it was unable to meet the deadline for filing its fiscal 2006 fourth-quarter and full-year financial results with securities regulators because of a not-yet-completed review of its stock option granting policies. The company said it expects to restate its financial results back through 2001, and that aggregate non-cash charges over the 14-year period it has granted stock options could total $6 million to $8 million. Landry's did report that fourth-quarter revenue from continuing operations increased 5.6 percent to $275.7 million. Discontinued operations include the Joe's Crab Shack restaurants sold last November. Landry's currently operates about 200 restaurants under the Landry's Seafood House, Chart House, Rainforest Cafe, Saltgrass Steak House and other brands, as well as hotels, marinas, retail sites and the Golden Nugget Hotels and Casinos. Revenues from continuing operations for fiscal 2006 increased 26.4 percent to $1.1 billion, Landry's said. The jump was aided by revenues from the September 2005 acquisition of the Golden Nugget properties. Landry's said is stock option review had not uncovered “any evidence of any intentional backdating or other wrongdoing.”
LOUISVILLE, Ky. — YUM! BRANDS INC. increased by $500 million the amount of common stock it can purchase during the next 12 months under its share repurchase program, the parent of KFC, Pizza Hut and Taco Bell said Thursday. The move follows share repurchase authorizations for $500 million in September and March of last year. Yum said about $250 million in repurchase capacity remains under the September authorization. Yum began its stock buyback program in 1999, and more than 100 million shares had been repurchased through March 14 for about $3.8 billion, at a per-share average of $37.64, the company said.
ATLANTA— Helped by an extra operating week in fiscal 2006 and by sales from restaurants acquired from franchisees, AFC ENTERPRISES INC. posted a fourth-quarter profit on corporate revenues that rose 31.1 percent to $40 million. For the 13- week quarter ended Dec. 31, the parent of the 1,878 POPEYES CHICKEN & BISCUITS brand had net earnings of $5.6 million, or 19 cents per share, versus a loss of $1.5 million, or 5 cents per share, in the year-earlier quarter, which had 12 weeks. Samestore sales for the latest quarter declined 3.1 percent at domestic units. For the full year, net income fell 85 percent because of year-earlier gains from the sale of the Church's Chicken brand. Net profit for fiscal 2006 was $22.4 million, or 75 cents per share, compared with fiscal 2005 earnings of $149.6 million, or $5.14 per share. Annual revenue grew 6.8 percent to $153.0 million as domestic same-store sales rose 1.6 percent for the year.
SEATTLE — TULLY'S COFFEE CORP. said Wednesday that it plans to file for a $50 million initial public offering of its common stock. Proceeds would be used to fund expansion of its 126- unit Tully's Coffee chain and wholesale business, and for working capital and general corporate purposes. Tully's said that a registration statement is to be filed with securities regulators by the end of April. The offering's number of shares and per-share price were not stated. Tully's currently has more than 500 shareholders, which requires that it file public statements with the SEC.
MINNEAPOLIS — GRANITE CITY FOOD & BREWERY LTD. completed a $14 million private placement of its common stock to fund restaurant expansion, retire certain equipment lease debt and for general corporate purposes. The company sold about 2.6 million shares for $5.35 per share to new and existing institutional investors, the company reported. Granite City, which operates 18 casual-dining brewpub restaurants in the Midwest, said it plans to open seven new branches this year. “By funding our capital expenditure budget for 2007 with equity instead of debt, we will increase our company-level cash flow and retain more capital to meet our expansion plans,” president and chief executive STEVE WAGENHEIM said. KeyBanc Capital Markets acted as lead placement agent and Craig- Hallum Capital was co-placement agent for the offering.
GLENDALE, Calif. — IHOP CORP. subsidiaries have priced a $200 million private debt offering that will be used to repay IHOP's existing debt and to fund share repurchases, the company said Thursday. The private securitization includes $175 million in fixed-rate notes and a revolving credit facility of $25 million in variable funding notes. The fixed-rate notes will have an interest rate of 5.14 percent and an expected life of five years, the company said. The offering is expected to close on or near March 16. IHOP said the notes are being issued by indirect subsidiaries of the Glendale-based company that hold substantially all of the intellectual property and franchising assets of the IHOP system. IHOP is franchisor or operator of about 1,302 family-dining restaurants.
LAGUNA HILLS, Calif. — MELT INC., operator or franchisor of 16 MELT GELATO & CREPE CAFE locations, said Thursday it would restate financial results for the second and third quarters of 2006 to revise its accounting for franchise-fee revenue recognition and related income. The change — allowing Melt to recognize franchise fees as income only when the franchisee commences operations, rather than its previous standard of recognizing the revenue when the franchisee signed an agreement and paid a fee — would reduce Melt's fiscal 2006 revenue by $375,000 and increase its annual net loss by the same amount. Melt said the amended statements should be completed this month.
COLUMBUS, Ohio — Citing winter weather that restrained sales throughout much of the company's operating markets, BOB EVANS FARMS INC. said year-over-year same-store sales for the four weeks ended Feb. 23 declined 0.7 percent at its Bob Evans chain, but increased 2.6 percent at the company's Mimi's Cafe chain. The company's same-store sales are calculated using the 504 Bob Evans restaurants and 81 Mimi's Cafes that have been open all of fiscal years 2005 and 2006 and through February of this year. Systemwide, Bob Evans operates 591 namesake family- dining units and 109 Mimi's Cafe casual-dining restaurants.
OAK BROOK, Ill. — MCDONALD'S CORP. reported Thursday a global same-store sales gain of 5.9 percent for February, versus the same month last year, which was driven mainly by strong sales results in Asia and Europe. At U.S. McDonald's restaurants February same-store sales rose 3.1 percent — a “solid” result according to some analysts, who said it was below expectations though likely because of severe winter weather, as was cited by many other chains. McDonald's said its U.S. sales were boosted by breakfast and late-night menu selections as well as the expanded Snack Wrap offerings now available in a honey-mustard flavor. In Europe, same-store sales rose 5.9 percent for February. In the company's Asia Pacific-Middle East-Africa region, or APMEA, February same-store sales rose 12.3 percent, driven by sales in Japan and in China, where the chain benefited from the Chinese New Year, McDonald's reported. Total systemwide sales increased 9.7 percent for February, or 6.8 percent in constant currencies, which reflected constant-currency total sales gains of 3.8 percent, 6.7 percent and 15 percent in the United States, Europe and the APMEA region, respectively.
WILBRAHAM, Mass. — With a dissident stockholder publicly blasting its financial performance, FRIENDLY ICE CREAM CORP. said it would explore “strategic alternatives to enhance shareholder value” — language that often presages a sale or refinancing. The parent of the 514-unit Friendly's family-restaurant brand said it had retained GOLDMAN SACHS & CO. as a financial advisor and WEIL, GOTSHAL & MANGES LLP as a legal advisor. The disclosure came a day after Sardar Biglari, who controls 15 percent of Friendly's shares through his Lion Fund LP, urged other stockholders to vote him and Philip Cooley onto the Friendly board. The two are directors of Western Sizzlin Corp., parent of several budget steakhouse chains. The letter criticized Friendly chairman Donald Smith and the board for the company's negative cash flow, high debt and languishing stock price.
DALLAS — BRINKER INTERNATIONAL INC. said harsh winter weather chilled February sales at all its chains, resulting in a blended same-store sales decline of 4.9 percent for the four weeks ended Feb. 28. Chili's Grill & Bar had a 5.1-percent decline despite a 1-percent menu price increase. The Romano's Macaroni Grill, On the Border and Maggiano's chains recorded same-store dips of 4.1 percent, 5.5 percent and 4.1 percent, respectively.
CALABASAS HILLS, Calif. — THE CHEESECAKE FACTORY INC. increased its share repurchase authorization by 10 million shares, the company said Wednesday, bringing its total buyback plan to 12.4 million shares, or about 16 percent of shares outstanding. The operator of 123 namesake and nine GRAND LUX CAFE restaurants said it would repurchase $200 million common shares through a broker-dealer in an accelerated transaction. The buyback would be funded from cash on hand and a temporary $150 million credit facility. Cheesecake Factory then would replace it and its current $35 million credit agreement with a new revolving $200 million credit facility. Funds also will be available for other corporate purposes, which Cheesecake Factory did not detail. The company, which currently boasts no funded debt, thus would have a more leveraged structure.
WILBRAHAM, Mass. — After running billboard ads near FRIENDLY ICE CREAM CORP.'s headquarters here to enlist the company's employees in his cause, dissident shareholder SARDAR BIGLARI resumed his efforts to gain seats on the family-restaurant chain's board through appeals to fellow stockholders. Biglari, who chairs the board of Western Sizzlin' Corp., sent another letter to Friendly shareholders Tuesday, imploring them to raise the value of their holdings by voting to seat him and fellow Western Sizzlin' director PHILIP COOLEY on Friendly's board. Biglari said Friendly had been “misgoverned” by current chairman DONALD SMITH and its board of directors. Biglari dismissed allegations that he's trying to gain control of Friendly's board as “false,” yet left open that possibility, if such a change were “warranted and supported by shareholders.” In suggesting his preferred strategic direction for the chain, Biglari argued that stepped-up franchising of the once-nonfranchised chain would free the home office to focus on the development of better products, marketing and unit-level operations. Biglari also asserted that Friendly's cash flow has generally been negative since its initial public offering in 1997. “Phil and I will strenuously lobby the board to focus on cash flows to raise the intrinsic value of the company,” wrote Biglari, who holds a 15-percent stake in Friendly through his LION FUND LP. Friendly's shareholder meeting is scheduled to be held here May 9. The company and its franchisees operate about 520 Friendly's restaurants.