Financial Overview November 2007
MIAMI — BK posts profit jump, discloses secondary offering. On the strength of longer hours, a breakfast value menu and movie promotions, Burger King Holdings Inc. reported on Monday a 23-percent jump in its first-quarter profit over the same period a year earlier, on total revenue that rose 10 percent to $602 million.
The parent company to 11,290 franchised or corporate Burger King restaurants also recorded same-store sales surges of 5.9 percent globally and 6.6 percent in the United States and Canada. Sales were driven by the chain´s value menu as well as its more indulgent items, corporate officials said, referring respectively to the value-priced Spicy Chick´N Crisp sandwich as well as the Tendercrisp sandwich limited time offering. Late-night hours, a breakfast value menu and movie tie-ins with The Simpsons Movie and Transformers also were credited as sales drivers.
Still, the company´s stock took a hit Monday as the parent to the nation´s second-largest burger chain also announced that its majority owners would sell almost one-third of its stake in a secondary offering that could gross $712.6 million. Burger King is not selling any shares in the offering, nor will it receive any proceeds.
Private-equity firms TPG Capital, Bain Capital Partners and the Goldman Sachs Funds, which currently own about 79 million Burger King shares, are slated to offer 23 million shares of common stock and an over-allotment of up to an additional 3.45 million shares. After completion of the deal, the three private-equity firms would have reduced their ownership stake from about 58 percent to between 38 percent and 41 percent, depending on the exercise of over-allotments. Burger King had said this summer it would consider additional debt to absorb the new supply of shares, but it is unclear if that is still the case considering the tightened credit markets.
For its latest quarter ended Sept. 30, Burger King reported net income of $49 million, or 35 cents a share, compared with year-earlier results of $40 million, or 30 cents a share.
During the last 12 months, Burger King continued its expansion, opening 440 new units, including 90 in the U.S. and Canada, 260 in the company´s Europe, Middle East, Africa and Asia Pacific segment and 90 in Latin America, it reported. Burger King said that it anticipates positive net restaurant growth this fiscal year in the U.S. and Canada. It would be the first time in six years the chain would not report more closures than openings in those geographic divisions.- OAKVILLE, Ontario — TIM HORTONS INC., owner of the mostly franchised chain of 3,110 doughnut specialty quick-service restaurants, on Friday reported a 30-percent year-over year jump in third-quarter profit on an 18.6-percent increase in revenue to the equivalent of about $494.5 million U.S. dollars. Tim Hortons said revenues were aided by same-store sales
increases of 7.5 percent in Canada and 4.5 percent in the United States. The majority of Tim Hortons´ operations are in the company´s home market of Canada, and about 352 corporate or franchised locations are in the United States. Most of the quarter´s same-store sales improvement was driven by traffic gains, the company said, as year-to-year menu price increases totaled 2.7 percent in Canada and 0.3 percent in the United States. For the quarter ended Sept. 30, Tim Hortons earned about $67.9 million compared with about $52.2 million a year ago. In the latest quarter, the company´s U.S. segment posted a loss, however, of about $300,000, which it said reflected its continued investment in developing various markets.
- MINNEAPOLIS — BUFFALO WILD WINGS INC. reported
a 21-percent spike in third-quarter net income to $4.3 million,
or 24 cents per share, versus $3.5 million, or 20 cents per
share, a year earlier. However, the increase for the three months
ended Sept. 30 fell short of analysts´ averaged prediction of a
26-cent-per-share profit, as calculated by Thomson Financial,
with some now blaming higher commodity costs that would
persist in the fourth quarter. Buffalo Wild Wings, operator or
franchisor of 465 sports-theme chicken wings restaurants, forecast
that its annual targets of 15-percent unit growth, 20-percent
revenue growth and 25-percent earnings growth will be
met. Third-quarter revenue jumped 20.5 percent to $82.4 million
as same-store sales rose 8.3 percent at corporate restaurants
and 5.9 percent at franchised units. President and CEO
SALLY SMITH said the company expects 27 more locations
to open before the end of the year. However, she predicted a
delay until next year of the completion ofs its acquisition of
nine franchised restaurants in Las Vegas, announced in May.
- DENVER — Higher customer traffic and the addition of 28 more branches helped CHIPOTLE MEXICAN GRILL, now comprising 670 namesake burrito restaurants, boost third-quarter revenue by nearly 36 percent, yielding a nearly 75-percent
leap in net profit for the three months ended Sept. 30. Corporate revenue was $286.4 million and net income was $20.6 million,
or 62 cents per diluted share. Executives of the Denver-based fast-casual chain said same-store sales at Chipotle locations
open more than 13 months rose 12.4 percent over results of last year´s third quarter. The company expects same-store sales to
also rise by a low-double-digit increment for the fourth quarter.
DUBLIN, Ohio — WENDY´S INTERNATIONAL INC. on Thursday reported a steep drop in third-quarter net income, blaming expenses for its ongoing strategic review and restructuring and an unfavorable comparison with year-ago profits from the now-spun-off TIM HORTONS chain. Still, the operator or franchisor of 6,600 Wendy´s restaurants posted a 55 percent jump in income from continuing operations for the quarter and said it expects to hit the higher end of its annual per-share earnings target of between $1.09 and $1.23. That range excludes restructuring charges and board expenses for a
strategic review that began in April and focuses on a possible recapitalization or sale of the company. Net income for the
third quarter ended Sept. 30 was $29.9 million, or 34 cents per share, versus year-earlier profit of $69.2 million, or 58 cents
per share. Excluding charges related to the strategic review and excluding the profits booked from Tim Hortons a year ago,
Wendy´s posted a profit of $38.6 million, or 44 cents a share, compared with $24.9 million, or 21 cents a share, a year ago.- SCOTTSDALE, Ariz. — P.F. CHANG´S CHINA BISTRO INC. reported a 20-percent plunge in third-quarter net income that the company blamed on declines in same-store sales and rising costs. The Scottsdale-based company, which operates the namesake full-service restaurants as well as the fast-casual PEI
WEI ASIAN DINER chain, also revised downward its full-year earnings forecast to $1.19 per share from $1.34 per share. P.F. Chang´s said the revised projection reflected lower revenue growth from anticipated same-store sales declines at both chains and ongoing cost trends including increased operating expenses. In addition, lower-than-expected sales at new Pei Wei stores would negatively affect profit for the year, the company reported. P.F. Chang´s, typically a star in the industry, reported the same double-whammy of weaker sales and higher costs that many bellwethers in the restaurant sector also have reported for their fiscal third quarters. In addition to the 162-unit P.F. Chang´s
China Bistro and 137-unit Pei Wei chains, the company also has the single-unit TANEKO JAPANESE TAVERN in Scottsdale.
- RICHMOND HEIGHTS, Mo. — PANERA BREAD CO. reported a 10-percent jump in third-quarter net income to $11.9 million on a 33-percent jump in revenue to $273.2 million, compared with year-ago results. Margin pressure, however, led the company to predict nil year-to-year growth in profit for the current
fourth quarter. The chain´s margins were squeezed by higher food costs and more sales from salads, which were less profitable than sandwiches or soups, the company said. The operator and franchisor also said profits have been dampened by the outsourcing of some baking operations and stepped-up staffing at lunch. The margin crunch, paired with nearly flat same-store sales throughout October, led Panera to project no year-to-year growth growth in the current quarter´s profit, and possibly a slight dip. Panera added 19 company stores and 16 franchise outlets during the third quarter,
bringing the systemwide tally to 1,168 bakery- cafes brand. Same-store sales rose 1 percent for the 133-unit namesake brand.
- CALABASAS HILLS, Calif. — The CHEESECAKE
FACTORY INC. on Tuesday reported a 2.2-percent increase in
net earnings for the third quarter ended Oct. 2, despite slower
traffic and a dip in average weekly sales of about 1.1 percent. Net
income was $18.5 million, or 26 cents per diluted share, compared
with $18.1 million, or 23 cents per diluted share, in the
same period last year. Revenues were up 15.4 percent to $375.5
million, compared with $325.3 million a year ago. Blended
same-store sales increased 1.2 percent during the quarter, largely
as a result of the 4.8-percent increase in same-store sales for
the 10-unit GRAND LUX CAFE brand. Same-store sales rose
1 percent for the 133-unit namesake brand.
- GLENDALE, Calif. — Expenses related to its pending $2.3 billion acquisition of APPLEBEE´S INTERNATIONAL INC. left IHOP CORP. with a loss of $11.6 million for the third quarter ended Sept. 30, the Glendale-based company reported Tuesday. The 69-cent-per-share shortfall compares with a net
profit of $11.3 million, or 62 cents per share, for the same period a year ago. Operating income before special charges
increased 10 percent, the company said. Revenues for the quarter rose 3.8 percent year over year to $91.4 million. Same-store sales increased 2 percent on the strength of a higher average check, which countered a decline in traffic, IHOP said. The quarterly results reflected a $35.6 million non-cash expense stemming from an interest rate swap transaction that had previously been disclosed by the company. IHOP agreed on July 16 to acquire Applebee´s for $25.50 per share, pending an approval by the casual-dining company´s shareholders in a vote slated for Oct. 30. IHOP, which operates or franchises 1,328 restaurants worldwide, said it expects the deal to close by Nov. 29.
- DALLAS — Citing "significant progress" in finding a buyer for
its ROMANO´S MACARONI GRILL brand, BRINKER INTERNATIONAL INC. said it has moved beyond the exploration stage of a possible sale, to pursuing a divestiture within the next nine months. That disclosure was made in Brinker´s report Tuesday that net income for the first quarter ended Sept. 27 fell by 21.1 percent from the same period of fiscal 2007 to $37.6 million on charges from discontinued operations. Revenues for the quarter rose 3 percent year over year to $895.1 million, said the company, whose other brands include CHILI´S BAR & GRILL, ON THE BORDER MEXICAN GRILL & CANTINA and MAGGIANO´S LITTLE ITALY. Brinker indicated that same-store sales for Chili´s and Maggiano´s were basically flat for the quarter, while comparable sales for On the Border fell 5.3 percent. In the prior year´s first quarter, Chili´s same-store sales fell 2.3 percent, Maggiano´s slipped 1.5 percent
and On the Border´s declined 2.2 percent.
- ANN ARBOR, Mich. — Citing a "challenging domestic environment" and higher interest expenses from larger debt levels, DOMINO´S PIZZA INC. on Tuesday posted a 55.2 percent drop in third-quarter net income and a 1.6 percent dip in domestic systemwide same-store sales. The sales result reflects a 2 percent drop at U.S. franchised locations and a 0.8 percent uptick at U.S. corporate units. The blended same-store dip marked a return to negativity that had ended when Domino´s snapped string of five quarters of declining results with a 2.1 percent same-store sales gain in the second quarter. Several analysts now predict that Domino´s won´t sustain a turnaround until next year. Domino´s international fleet scored a same-store sales jump of 8.3 percent for the third quarter, which was its highest result in nearly three year and the 55th consecutive quarter of international same-store sales growth. Domino´s net profit for the quarter ended Sept. 9 was $11 million, or 11 cents per share, versus a year earlier $24.5 million profit, or 39 cents per share. Increased interest expenses took a 13 cent-per-share bite out of the latest quarter´s net result said Domino´s, whose revenue rose 3.3 percent to $337.3 million.
- NEW YORK — YUM! BRANDS INC. and MCDONALD´S CORP. separately sold a total of $2.7 billion in investment-graderated unsecured senior notes this week to fund general corporate purposes, they said. The sales also would help fulfill promises to return a total of $19 billion to their shareholders by 2009. On Monday, Oak Brook, Ill. based McDonald´s sold $1.5 billion in debt under two deals. The debt was issued in two pieces: $650 million in 5.8 percent medium term notes due 2017 and $850 million in 6.3-percent medium term notes due 2037. Louisville, Ky.-based Yum, parent of the KFC, Pizza Hut and Taco Bell brands, is expected to complete by Wednesday a $1.2 billion note offering in two pieces: $600 million due 2017 and $600 million due 2037.
- OKLAHOMA CITY — SONIC CORP., operator or franchisor of more than 3,300 namesake drive-ins, said Monday that fourthquarter net income fell 14 percent from year-earlier results to $22 million for the three months ended Aug. 31, from $25.5 million in the prior fourth quarter. Sonic blamed interest expenses from share repurchases and other financing that was completed last October. Interest expenses totaled $11.3 million, up from $2 million a year earlier. However, fourth-quarter, per-share profit rose 17 percent to 34 cents, from 29 cents a year ago, attributed by the company to its financing actions. Revenue for the quarter was $224.3 million, up 13 from $198 million a year ago. Sonic´s systemwide same-store sales grew 3.1 percent for the quarter. For all of fiscal 2007, net income dipped 18 percent to $64.2 million. Annual earnings per share increased 3 percent to 91 cents. Fiscal 2007 revenue rose 11 percent to $770.5 million.
- OVERLAND PARK, Kan. — Two stockholder advisory firms issued opposing recommendations Thursday about the scheduled Oct. 30 vote here on a $2.3 billion acquisition of APPLEBEE´S INTERNATIONAL INC. by IHOP CORP. Both advisory firms compared the $25.50-per-share buyout proposal against the "stand-alone" recapitalization strategy put forth by Applebee´s management after IHOP temporarily dropped out of the bidding process. Each advisor cited — but drew a different conclusion — about a split in Applebee´s 14 person board over IHOP´s final offer, which ultimately was accepted by a 9-5 vote. GLASS LEWIS & CO. observed that Applebee´s directors had "expressed their differences of opinion" and received advice from multiple outside experts, and had not "taken the decision to sell the company lightly." Conversely, PROXY GOVERNANCE INC. of Philadelphia said that while it admired the board´s decision process and thinks Applebee´s was "well-shopped," the firm was "not convinced that the [IHOP] offer represents the best value for
shareholders." Proxy Governance said a rise in IHOP´s share price since the deal was announced suggests that Applebee´s shareholders, if they vote to approve the deal, might forego lucrative growth that could be theirs if the company remained independent.
- OAK BROOK, Ill. — MCDONALD´S CORP. reported a 27 percent jump in third-quarter earnings, compared with year-earlier results, crediting "convenience" and strong sales of coffee, breakfast, burgers and snack wraps. As the company had projected earlier, net income for the three months ended Sept. 30 was $1.07 billion, or 89 cents per share, compared with $843.3 million, or 68 cents per share, in last year´s third quarter. McDonald´s said 83 cents of the latest EPS figure came from continuing operations, with the other 6 cents coming from an after-tax on the sale of Boston Market. Revenue of $5.9 billion was up 7 percent from a year ago, but was shy the $6.04 billion that analysts had predicted. Global same-store sales increased 6.9 percent. The highest same-store sales rise occurred in McDonald´s Asia/Pacific — Middle East-Africa division, which posted a jump of 11.4 percent, the region´s best result in a decade.
- HOUSTON — LUBY´S INC., operator of 128 namesake
cafeterias, reported said net income for its fourth quarter
ended Aug. 29 had slipped 55.9 percent from year-earlier
results to $3.2 million, or 12 cents per share. It was $7.1 million,
or 26 cents per share, for the same period of the prior
year. Fourth-quarter sales dipped 0.8 percent to $98.3 million
as same-store sales fell 2 percent. Luby´s said declines in guest
traffic were partly offset by menu price increases. For the full
year, net income fell 44.5 percent to $10.9 million, or 40 cents
per share. Sales for the year slipped 1.3 percent to $320.4 million
as same-store sales fell 1.5 percent.
- OAK BROOK, Ill. — MCDONALD´S CORP. may sell up to $1 billion in debt, according to a Reuters news service item that cited an unnamed "market source familiar with the sale." The offering, which would be conducted as a two-part sale, is expected to include 10-year notes and 30-year bonds, the report said. The joint lead managers on the sale would be CITIGROUP GROUP GLOBAL MARKETS and MORGAN STANLEY, Reuters reported. McDonald´s last week reported a surge in third-quarter same-store sales, but it did not reveal plans related to a debt offering.
- OAK BROOK, Ill. — MCDONALD´S CORP., saying its third quarter per-share earnings would be well above Wall Street estimates, posted another month of strong same-store sales. Earnings for the quarter ended Sept. 30 are projected to be 89 cents a share, including 83 cents from continuing operations and a 6-cent gain from the company´s sale of Boston Market. Analysts´ consensus estimate was 77 cents. In last year´s third quarter, McDonald´s earned 68 cents per share from continuing operations. Full results are expected Oct. 19. McDonald´s said U.S. same-store sales rose 3.5 percent for September and 5.1 percent for the third quarter.
- WASHINGTON — Investment fund OLSTEIN CAPITAL MANAGEMENT LP has purchased a 9.5-percent stake in family-dining company DENNY´S CORP. and said it planned to take "an active interest" in the chain´s strategic direction, according to a securities disclosure filing Wednesday. Olstein, which purchased nearly 9 million shares of Denny´s from early August through Oct. 5 for prices ranging between $3.73 and $4.40 per share, said it believed Denny´s stock was undervalued. &Steps can and should be taken by [Denny´s] to increase [its] market valuation,& Olstein said in a filing with the U.S. Securities and Exchange Commission. Purchase, N.Y.-based Olstein plans to "continue its dialogue with and to take an active interest in [Denny´s] regarding ... strategic direction," the investment fund also said. Still, Olstein does not have any current plans or proposals for the company, it noted. Spartanburg, S.C.-based Denny´s, with 1,539 corporate or franchised locations, is the largest family-dining chain.
- MARYVILLE, Tenn. — A month after acknowledging it had "underestimated the impact" of higher gas prices and general economic factors on consumer spending, RUBY TUESDAY INC. on Wednesday reported a 48.5-percent plunge in first-quarter profit from a year earlier. Same-store sales fell 4.8 percent at corporate locations and 2.9 percent at domestic franchised restaurants. The operator or franchisor of 935 casual-dining restaurants said it intends to execute "a much stronger value and promotion strategy," starting with offerings of bargain-priced lunches. Net income for the first quarter Sept. 4 was $11.1 million, or 21 cents per share, versus a year-earlier profit of $21.6 million, or 37 cents per share.
- NEW YORK — Investment bank MORGAN STANLEY said Wednesday it had sold nearly all of its former 5.3-percent stake in chronically troubled KRISPY KREME DOUGHNUTS INC. A filing with securities regulators indicated that Morgan Stanley had shed all but 1,074 of the nearly 3.3 million Krispy Kreme shares it had owned as of February.
- LOS ANGELES — Third-quarter revenue of CALIFORNIA PIZZA KITCHEN INC. increased 13.5 percent from a year ago, aided by a same-store sales increase of 3.5 percent, the company reported Tuesday. Revenue for the quarter ended Sept. 30 totaled $162 million, compared with $142.8 million booked in the same period last year. The same-store sales increase of 3.5 percent beat earlier company expectations of a 2-percent to 3 percent gain. CPK opened six full-service restaurants during the quarter. Because of the better-than-expected top-line results, the company upped by 1 cent its projected per-share earnings for the third quarter. Earnings should now total between 4 cents and 5 cents per share, including a 19-cents-per-share charge from the previously announced closure of up to four CALIFORNIA PIZZA KITCHEN ASAP fast-casual units, the company said. Excluding that charge, CPK said it expects to earn between 23 cents and 24 cents per share, which is basically unchanged from year-ago third-quarter profit of 23 cents per share. Full quarterly results are scheduled to be released Nov. 8. Los Angeles based CPK and its franchisees and licensees operate 220 California Pizza Kitchen and ASAP units. The company also owns the single — unit LA FOOD SHOW upscale — casual concept.