Financial Overview February 2008
CALABASAS HILLS, Calif. — THE CHEESECAKE FACTORY INC. reported a 34.8–percent decline in fourth quarter earnings to $13.3 million Tuesday while slashing its plans for new restaurant openings and divulging a 0.4–percent dip in same–store sales for the quarter, though revenue rose 13 percent to $406.3 million. The company also said it will raise menu prices 1.5 percent. Plans now call for seven to nine openings this year, down from the 17 Cheesecake Factory forecast as recently as Oct. 23. Last year the company opened 21 new units. - LOUISVILLE, Ky. — YUM BRANDS INC. reported flat fourth–quarter earnings Monday with still–sluggish U.S. sales suppressing strong international results, especially a KFC driven 42–percent system sales jump in mainland China and a 17–percent same–store increase there over the prior fourth quarter. Yum said U.S. Taco Bell sales improved for the last three months of 2007 to a flat year–over–year result after declining for the first nine months of the year. Same–store sales for the blended U.S. system, including KFC and Pizza Hut, rose 1 percent for the quarter, but domestic operating profit fell 1 percent to $196 million as restaurant margins declined 1.4 percent on steep food cost inflation. Yum posted quarterly net earnings of $231 million, down $1 million from the fourth quarter of 2006, on an 8–percent increase in total revenue to $3.26 billion. Corporate profit was hampered by rising costs, particularly a 12–percent, or $97 million, spike for food and paper at all Yum owned restaurants and a 16–percent, or $65 million, increase in general and administrative costs. Full–year net earnings rose 10 percent to $909 million on a 9–percent increase in corporate revenue to $10.4 billion. Yum, its franchisees and licensees operate more than 35,000 restaurants worldwide.
- DUBLIN, Ohio — WENDY´S INTERNATIONAL INC. on Monday said its fourth-quarter profit more than quadrupled to $14.1 million, or 16 cents a share, compared with $3 million, or 3 cents a share, in the prior fourth quarter, when charges were taken for the spinoffs of Tim Hortons and Baja Fresh Mexican Grill. Still, profits fell short of analysts´ consensus forecast of 23 cents per share. Revenues were virtually flat at $596 million. For all of 2007, Wendy´s earned $87.9 billion, or 97 cents a share, versus $94.3 million, or 82 cents a share, in 2006.
- LOS ANGELES — CALIFORNIA PIZZA KITCHEN INC. has reached an agreement with BANK OF AMERICA N.A. to enable an accelerated stock repurchase program totaling $46.3 million and to increase CPK´s credit facility to a maximum of $100 million. The company, which is operator or franchisor of about 230 restaurants, said the moves would help it return capital to shareholders, leverage its balance sheet and reduce the overall cost of capital. The stock repurchase agreement, to be funded through cash and the company´s credit facility, is part of a $50 million stock buyback program authorized in August. CPK has 28.9 million shares outstanding, the company reported Friday. The amended credit facility with Bank of America was lifted to $100 million from $75 million, CPK said. As of Dec. 30, the company had total borrowings and outstanding letters of credit totaling $27.1 million. CPK said it expects to secure a newer revolving credit facility in the amount of $150 million to replace the current facility.
- MIAMI — Defying the economic slump that has affected even segment leader McDonald´s, BURGER KING HOLDINGS reported a 29–percent increase in second–quarter profit to $49 million on revenues that jumped 10 percent to $613 million. The No. 2 chain posted a global same–store sales gain of 4.5 percent and a domestic same–store sales jump of 4.2 percent for the Decemberended quarter, versus year–before results for that period. BK´s report came days after McDonald´s posted flat domestic samestore sales for December and a 3.3–percent increase for the quarter, with at least one analyst estimating that same–store traffic had dipped for the month, versus year–ago volumes. Burger King credited its performance to its Whopper, new Homestyle Melts and a SpongeBob SquarePants promotion. The operator or franchisor of about 11,300 BK units also cited its value menu and advertising.
INDIANAPOLIS — STEAK N SHAKE CO.´s stock price tumbled Friday, a day after the company reported a loss of $1.2 million, or 4 cents per share, for its latest quarter, ended Dec. 19, versus a profit of $4.2 million, or 15 cents per share, a year earlier. Revenues for the latest quarter were $136.4 million, down 7.4 percent from $147.3 million a year earlier. Same–store sales at corporate units fell 9.5 percent for the quarter, compared with a decline of 1.7 percent for the same period a year earlier. ALAN GILMAN, Steak n Shake´s chairman and interim president and CEO, blamed the first quarter´s disappointing results on bad December weather, a deteriorating consumer economic environment, challenges in store–level execution and intense promotional activity from competitors. He said initiatives aimed at improving same–store sales would include the launch of a new breakfast menu in March, stepped–up media advertising in major markets and more promotions around the chain´s signature Steakburger sandwiches. The new breakfast lineup will feature handheld sandwiches and upgraded Seattle´s Best coffee, Gilman said. Indianapolis based Steak n Shake operates 435 restaurants and franchises 62 branches to others.- LOUISVILLE, Ky. — YUM! BRANDS INC. has authorized the repurchase of $1.25 billion in corporate stock over the next 12 months, the second such authorization in four months by the parent of the Taco Bell, Pizza Hut and KFC brands. The stock is to be repurchased as part of Yum´s overall plan to buy back up to $4 billion of its shares during the next two years, reducing the public float and thus boosting earnings per share. In October, Yum authorized a $1.25 billion buyback, of which about $450 million remains to be spent. Since Yum began its repurchase program in 1999, it has bought back about 250 million shares for about $5.4 billion at an average price of $21.73 per share. The company said the share–repurchase program has reduced its average diluted share count by 9 percent over the past two years. Investors in Yum, whose global system of corporate and franchised restaurants has more than 35,000 outlets, own about 508.6 million shares, with a total market value of about $18.97 billion.
- NEW YORK — Investors led by RAMIUS CAPITAL GROUP LLC have trimmed their holdings in 128–unit cafeteria operator LUBY´S INC. of Houston from 7.5 percent of its stock to 4.5 percent, just days after Ramius lost a proxy battle by failing to win seats on Luby´s board of directors. According to regulatory filings Wednesday, the activist investors now own about 1.3 million shares of Luby´s. As of Jan. 17, Ramius held 2.1 million Luby´s shares. The New York–based hedge fund had nominated four executives to Luby´s 10–member board after criticizing it for failing to build shareholder value. However, Luby´s separate slate of incumbent directors all won reelection at the company´s shareholder meeting Jan. 15. Ramius, which sought a sale of Luby´s or saleleaseback deals on its properties, also accused Luby´s CEO CHRISTOPHER PAPPAS and COO HARRIS PAPPAS of a conflict stemming from their leadership of Pappas Restaurant Group. The brothers are Luby´s two largest shareholders.
- DALLAS — BRINKER INTERNATIONAL INC., parent of CHILI´S GRILL & BAR and other casual–dining brands, on Wednesday reported a 23–percent jump in second–quarter net profit, mainly on a gain from the $29.2 million sale of 76 Chili´s units to franchisee ERJ DINING IV LLC. For the quarter, ended Dec. 26, net income was $54.5 million, or 52 cents per share, versus $44.2 million, or 35 cents per share, a year earlier. Excluding income from discontinued operations, including the Romano´s Macaroni Grill chain, which Brinker intends to sell, earnings per share were 44 cents for the quarter. Brinker said cost of sales and restaurant expenses both grew as a percentage of revenue as labor and commodity costs rose and the company´s top–line fell. Total revenues for the quarter declined 4 percent to $868.2 million, from $899.6 million a year earlier, as same–store sales slipped 2.4 percent at Chili´s and 4.3 percent at On The Border Mexican Grill & Cantina. Same–store sales at Maggiano´s Little Italy rose 1.7 percent. As of Dec. 26, Brinker and its franchisees had 1,419 Chili´s, 245 Macaroni Grills, 167 On the Borders and 41 Maggiano´s.
- EAGAN, Minn. — BUFFETS HOLDINGS INC., operator of five buffet or steakhouse chains, has filed for Chapter 11 bankruptcy protection. The company, owned by private–equity firm CAXTON–ISEMAN CAPITAL LLC, said it plans to keep all 626 restaurants within its 39–state system open during a financial reorganization. Its brands are OLD COUNTRY BUFFET, HOMETOWN BUFFET, RYAN´S, FIRE MOUNTAIN and TAHOE JOE´S FAMOUS STEAKHOUSE. Sixteen restaurants are franchised to other operators. Buffets has secured a $385 million debtor–in–possession financing facility from several institutions, subject to court approval. The remaining balance of Buffets´ $640 million pre–petition credit facility and the $300 million 12.5 percent senior notes, due Nov. 1, 2014, remain as outstanding obligations. Buffets CEO MIKE ANDREWS said the company would strive to enhance profitability by reviewing underperforming locations, among other things.
- LEBANON, Tenn. — Taking advantage of a stock price near its annual low, CBRL GROUP INC. on Tuesday authorized an expansion of its stock repurchase program. The company, which operates 570 CRACKER BARREL OLD COUNTRY STORE restaurants and gift shops, said it would purchase periodically on the open market an additional 625,000 shares. CBRL said it already had repurchased 1 million shares in the current quarter for a total of about $34.1 million, or an average share price of $34.12. The company had about 23.8 million shares outstanding, as of its latest quarterly report.
- GREENWOOD VILLAGE, Colo. — In a departure from the grim news coming out of casual dining, RED ROBIN GOURMET BURGERS INC. on Wednesday raised its earning guidance for 2007 after notching a 2.7–percent year–overyear increase in same–store sales for the fourth quarter. During the 12–week quarter ended Dec. 30, guest traffic dipped 1.5 percent at company units but was offset by a 4.2–percent rise in the average check. For the prior fourth quarter, Red Robin posted a 0.2–percent uptick in same–store sales, with check increases offsetting a 3 percent drop in customer counts. Same–store sales for fiscal 2007 rose 2.4 percent. Revenues for the full year were $763.4 million, a 23.4–percent annual increase. Red Robin forecast 2007 earnings of $1.74 to $1.78 per share, up from its prior guidance of $1.70 to $1.74 per share. The company operates 250 restaurants and franchises another 134 branches. On Thursday, Red Robin said it would pay a total of $8.1 million in two deals to buy three franchised units in Indiana and one in New Jersey that had combined sales last year of $10.7 million.
- OAK BROOK, Ill. — Shares of MCDONALD´S CORP. sustained their largest single–day drop in more than four years Friday, falling $3.85, or 6.6 percent, to close at $54.32 after a franchisee survey indicated that same–store sales for December may have grown at their slowest rate in years. The survey, by foodservice securities analyst MARK KALINOWSKI, indicated that 31 McDonald´s franchisees operating 195 of the chain´s restaurants had notched only a 1.8–percent year–to–year rise in sales for December at branches open at least 13 months. That pace was said to be the lowest in the six–year history of the survey. The company´s share price dipped nearly 8 percent at one point as restaurant stocks in general fell broadly on fears that a softening economy could hurt even strong, value–pricing chains.
- CARPINTERIA, Calif. — CKE RESTAURANTS INC., parent of the CARL´S JR. and HARDEE´S brands, has credited strong sales of premium hamburgers for a 1.2–percent increase in blended same–store sales for December. ANDREW PUZDER, CKE´s president and chief executive, on Wednesday cited the Portobello Mushroom Six Dollar Burger at Carl´s Jr. and the Philly Cheese Steak Thickburger at Hardee´s, which he said sold well despite competition from discounted double cheeseburgers being promoted by McDonald´s, Wendy´s and Burger King. For the four weeks ended Dec. 31, Carl´s Jr.´s same–store sales rose 2.7 percent, compared with a 5.6–percent increase in the same period last year. Hardee´s saw a drop of 0.6 percent in same–store sales, versus a 9.3–percent increase a year earlier. Puzder said icy weather in the Midwest hurt sales at Hardee´s last month. CKE also said Wednesday that it had authorized an expansion of its 44–monthold stock repurchase program by an additional $50 million, increasing the authorization to $400 million. CKE and its franchisees operate 1,121 Carl´s Jr. and 1,915 Hardee´s restaurants.
- DALLAS — BRINKER INTERNATIONAL INC., operator or franchisor of 1,827 restaurants, including 1,383–unit Chili´s Grill and Bar, said Monday that a 2.1–percent drop in blended, corporate same–store sales would lead to a per–share earnings drop of as much as 9 percent for the second quarter ended Dec. 26. The company said it expected to post earnings of between 30 cents and 31 cents per share from continuing operations, compared with earnings of 33 cents per share from continuing operations in the second quarter of last year. The company´s report of full quarterly results is scheduled for Jan. 23. The reduced earnings were blamed on same–store sales decreases of 2.4 percent at Chili´s and 4.3 percent at the On the Border chain. Same–store sales rose 1.7 percent at Maggiano´s Little Italy. Because Brinker has slated for sale the 241–unit Romano´s Macaroni Grill, the company no longer reports results for that chain.