Financial Overview — April 2008
DUBLIN, Ohio WENDY´S INTERNATIONAL INC. on Thursday reported declines in same–store sales for the March 30–ended first quarter of 0.1 percent at U.S. franchised outlets and 1.6 percent at domestic corporate units. Last year Wendy´s reported first–quarter same–store gains of 3.7 percent at franchises and 3.8 percent at corporate restaurants. This year´s earlier Easter holiday suppressed year–to–year comparisons by 0.3 percent, Wendy´s said. The operator or franchisor of 6,600 namesake restaurants expects to report full first–quarter results April 25.
HOUSTON A special committee of the board of LANDRY´S RESTAURANTS INC. here has retained COWEN AND CO. as its independent financial adviser to consider a previously reported going–private buyout offer from Landry´s chairman and chief executive TILMAN J. FERTITTA. His Jan. 27 offer to acquire all Landry´s outstanding common stock for $23.50 per share in cash was valued at about $380 million, or $1.3 billion including debt. In addition to its namesake seafood chain and two Golden Nugget casino–hotels, Landry´s owns the Chart House, Rainforest Cafe and Salt Grass Steak House chains, among other concepts.- MARYVILLE, Tenn. RUBY TUESDAY INC., operator or franchisor of 942 casual–dining restaurants, reported a 59–percent plunge in third–quarter net income as declines in sales and guest traffic continued to challenge the struggling chain. For the 13 weeks ended March 4, net income slipped to $11.7 million, or 23 cents per share, from $28.7 million, or 49 cents per share, a year earlier. Quarterly revenue fell 7.1 percent to $351.2 million. Same–store sales fell 12.7 percent at corporate restaurants and 12.0 percent at domestic franchised units. The company booked expenses of 6 cents per share for the rebranding initiative that Ruby Tuesday has undertaken for about a year.
- LEBANON, Tenn. CBRL GROUP INC. on Tuesday reported a 0.8–percent increase in same–restaurant sales for the CRACKER BARREL OLD COUNTRY STORE family dining chain for the four weeks ended March 28. Mirroring February´s results for the 574–unit chain, the March gain was driven by menu price increases instead of growth in guest traffic, CBRL said. The average check rose about 3 percent compared with the four weeks ended March 30, 2007, as menu prices rose about 3.2 percent. Same–store gift shop sales at Cracker Barrel´s retail adjuncts increased 5.5 percent.
- WINSTON–SALEM, N.C. KRISPY KREME DOUGHNUTS INC. has asked its lenders to relax credit covenants that are expected to become more stringent in the current fiscal year. The operator or franchisor of 449 doughnut shops did not detail the proposed credit facility changes in its statement Tuesday, but it did say they would not halt an increased cost of credit this year. Krispy Kreme said it expected to attain the amendments but had no assurances from lenders, and that it was in compliance with all financial covenants as of the Feb. 3 end of fiscal 2008. It had a $76.1 million outstanding balance on its term loan and letters of credit totaling $20.3 million on that date, following a term loan prepayment of $10.9 million on Feb. 1.
- ROANOKE, Va. WESTERN SIZZLIN CORP. on Friday said it had agreed to buy a controlling stake in Houston–based MUSTANG CAPITAL ADVISORS LP and its general partner, MUSTANG CAPITAL MANAGEMENT LLC, from JOHN K. H. LINNARTZ. The firm manages about $55 million in assets and controls 7.4 percent of the common stock of Roanoke–based Western Sizzlin, which is franchisor or operator of 122 steak restaurants in 19 states. The stock holding will be distributed to Mustang´s limited partners before the deal closes, Western Sizzlin said. Linnartz, who will continue to manage the acquired firms, agreed to sell a 50.5–percent stake in Mustang Capital and 51 percent of the management arm in exchange for $300,000 in cash and Western Sizzlin stock worth $873,000. Western Sizzlin´s chairman is activist investor SARDAR BIGLARI, who recently won two seats on the board of Steak n Shake Co. for himself and associate Philip Cooley.
- CARPINTERIA, Calif. CKE RESTAURANTS INC., parent of the CARL´S JR. and HARDEE´S brands, on Wednesday reported a $10.2 million decline in fourth–quarter profit to $98,000 and blamed increased interest expense, higher operating costs and slowed sales during the three months ended Jan. 28. For the same period of the prior fiscal year, CKE´s net income was $10.3 million, or 15 cents per share. EPS in the latest quarter was nil. Interest expense rose to $15.6 million, from $3.9 million a year earlier, reflecting a $9.7–million write–down on the value of interest rate swap agreements. Revenue fell 3.2 percent to $338.1 million, partly on the sale of 136 corporate Hardee´s units to franchisees. Quarterly same–store sales rose 1.4 percent at Carl´s Jr. and 0.4 percent at Hardee´s, but CKE´s operating income fell $1 million from a year earlier to $15.5 million, and increased food and packaging, occupancy and labor costs were cited. CKE and its franchisees operate 1,141 Carl´s Jr. and 1,926 Hardee´s units.
- HOUSTON LUBY´S INC., which owns 122 cafeterias in Texas and other states, blamed higher operating expenses and soft customer traffic for an 85–percent drop in second–quarter profit, versus year–earlier results. For the three months ended Feb. 13, Luby´s net income was $286,000, or 1 cent per share, versus $1.9 million, or 8 cents per share, a year before. Revenue rose 0.6 percent to $72.6 million. Restaurant sales slipped to $71 million, from $72.1 million a year earlier. The remaining revenue was garnered from Luby´s contract catering services, whose sales surged to $1.7 million in the latest quarter, from $97,000 in the prior second–quarter. Same–store sales fell 1.6 percent. Luby´s said declines in guest traffic because of a sluggish economy were offset partly by higher menu prices and a more favorable menu mix.
- COSTA MESA, Calif. EL POLLO LOCO´s parent, EPL INTERMEDIATE INC., reported net losses for the fourth quarter and all of 2007, blaming economic challenges it expects to worsen this year. The operator or franchisor of 389 fast–casual grilled–chicken restaurants lost $1.6 million for the three months ended Dec. 31, versus a $1.2 million net loss a year earlier. Quarterly revenues rose 8.7 percent to $70.2 million as samestore sales grew 3 percent. For all of 2007, EPL lost $4 million, versus a net profit of $637,000 in 2006, on operating revenues that rose 7.4 percent, or $19.1 million, to $279 million. Samestore sales grew 2.7 percent for the year. Citing increased food and labor costs that were partly offset by menu price increases, CEO STEPHEN CARLEY warned that more price hikes could put margins, check averages and traffic counts at risk. We expect 2008 to be even more challenging than last year, he said.
- ORLANDO, Fla. The slumping economy caught up with DARDEN RESTAURANTS INC., parent of Red Lobster and Olive Garden, during its February–ended third quarter, with earnings from continuing operations falling 1.8 percent compared with year–earlier results. However, increased sales stemming from the acquisition of the LONGHORN STEAKHOUSE and CAPITAL GRILLE chains, along with positive sales trends at Olive Garden, propelled Darden to an 18–percent jump in net profit. But continuing operations, excluding the acquired chains and gains from the sale of the Smokey Bones chain, yielded net earnings of $115.6 million for the Feb. 24–ended quarter, versus $117.7 million a year earlier. Darden´s other casual–dining chains are Bahama Breeze and Seasons 52. The 643–unit Olive Garden was the only positive sales performer in Darden´s portfolio, producing a quarterly samestore sales increase of 5.7 percent, aided by a 10–percent spike in January. Same–store sales fell 2 percent at 678–unit Red Lobster, and were off 3.3 percent at 299–unit LongHorn. In December, versus year–earlier results, Red Lobster´s traffic was down as much as 6 percent as LongHorn´s fell as much as 7 percent.
- PRINCETON, N.J. SOVEREIGN INVESTMENT CO. has completed a $69 million sale–leaseback transaction to allow LONE STAR FUNDS to recapitalize its investment in LONE STAR STEAKHOUSE & SALOON. Sovereign bought Lone Star´s remaining 180 restaurants in 30 states and will lease them back to the Wichita, Kan.–based restaurant operator for a minimum of 15 years, the investment company said. Lone Star Steakhouse closed 26 restaurants and laid off 1,500 employees in February. The company, which also operates the Texas Land & Cattle Steak House chain, closed 44 restaurants in 2007. Lone Star Funds took Lone Star Steakhouse & Saloon private in December 2006. Sovereign also recently financed sale–leaseback transactions with private–equity firms J.S. Chapman and Sun Capital Partners.
- DEERFIELD, Ill. COSI INC., operator or franchisor of 141 namesake fast–casual restaurants, posted a net fourth–quarter loss of $6.2 million or 16 cents per share, versus a year–earlier loss of $4.8 million, or 12 cents per share, though revenues rose 7.9 percent for the three months ended Dec. 31. The company recorded about $2.7 million in asset impairment charges, and higher occupancy and commodity costs also contributed to its bottom–line deficit. Costs at corporate restaurants, as a percentage of sales, rose 1.9 percentage points from a year earlier, Cosi said.