Financial Overview — February 2009
MIAMI — BURGER KING HOLDINGS INC. blamed a stronger U.S. dollar, which led to unfavorable currency exchange rates, for much of its 10-percent drop in profit during its second quarter.The company also lowered its earnings forecast for the rest of its June-ending fiscal year. The No. 2 burger brand’s top line remained strong, with new store openings and positive same-store sales driving a 3-percent revenue gain to $634 million. Corporate restaurant sales increased 6 percent to $473 million. Same-store sales worldwide rose 2.9 percent in the quarter, and rose 1.9 percent in the United States and Canada. Burger King’s profit for the quarter ended Dec. 31 fell to $44 million, or 33 cents per share, from $49 million, or 36 cents per share, a year earlier. Unfavorable and volatile currency exchange rates for global operations negatively impacted per-share earnings by 5 cents. Burger King operates or franchises more than 11,700 restaurants worldwide.- NASHVILLE, Tenn. — Citing higher operational costs and reduced customer traffic, O’CHARLEY’S INC. Thursday reported a net loss of $68.2 million for the fourth quarter and $132.5 million for the year ended Dec. 28, compared with a $7.2 million gain a year ago. The company said the loss was partly the result of a goodwill impairment charge of $48 million relating to the 2003 purchase of NINETY NINE RESTAURANTS, $0.6 million charge relating to STONEY RIVER LEGENDARY STEAKS and $15.4 million in impairment charges. O’Charley’s Inc. also recorded a 7-percent decline in revenues for the fourth quarter, to $202.9 million from $215.2 million in the same quarter a year ago. Annual revenues were $931.2 million, down from $977.8 million in 2007. The company reported same-store sales declines of 6.1 percent at O’Charley’s Restaurants, 8.4 percent at Ninety Nine Restaurants and 18.2 percent at its Stoney River Legendary Steaks brands. In an attempt to reduce costs, officials said O’Charley’s has eliminated positions at its support centers, implemented a companywide salary freeze and redesigned its hourly benefit programs.
- COLUMBUS, Ohio — BOB EVANS FARMS INC., which operates 709 restaurants under two brands, said Wednesday it expects to swing to a loss in its fiscal third quarter on a $75.6 million impairment charge against its casual-dining Mimi’s Café brand. Quarterly same-store sales also hurt the company, with drops of 1.3 percent at the company’s Bob Evans family dining brand, and 6.8 percent at Mimi’s Cafe, the company reported. For the third quarter ended Jan. 23, Bob Evans said it expected to post an operating loss of $46.4 million and a net loss of about $51.4 million, or $1.67 per share.A year earlier, the company had recorded operating income of $32.7 million and net income of $20.0 million, or 61 cents per share. Full third-quarter results will be released Feb. 10.
- CARPINTERIA, Calif. — Cooler, wetter weather in Southern California during the fourth quarter and deep-discounting strategies by competitors contributed to a dip in same-store sales for the CARL’S JR. chain, CKE RESTAURANTS officials reported Wednesday. However, for the year ended Jan. 26, same-store sales for Carl’s Jr. and sister brand HARDEE’S were up 1.7 percent, marking the sixth consecutive year of positive sales. For the quarter ended Jan. 26, Carl’s Jr.’s comparable-store sales were down 0.6 percent, compared with a 1.4 percent increase the prior-year quarter. Hardee’s fourth-quarter same-store sales were up 1.5 percent on top of a 0.4 percent increase the prior-year quarter. Blended revenues for the quarter totaled $250.4 million for company-operated stores. By brand, revenues were $142.4 million for Carl’s Jr. and $108 million for Hardee’s. For the year, Carl’s Jr. saw same-store sales up 2.1 percent, marking the ninth consecutive year of positive results.The average unit volume for the chain was $1.5 million, a $35,000 increase per unit since the end of 2008, officials noted. Hardee’s reported an increase of 1.2 percent in same-store sales for the year, compared with the previous-year increase of 2 percent. Average unit volume for that brand was $993,000, an increase of $39,000 per unit over fiscal 2008 and the highest since CKE acquired the brand more than 10 years ago.
- LOUISVILLE, Ky. — YUM! BRANDS INC. reported Tuesday a 12-percent drop in fourth-quarter profit as one-time charges for refranchising gains and the restructuring of its U.S. business negatively impacted the company’s bottom line. Yum was also hurt by the stronger U.S. dollar, which will continue to negatively impact the company into 2009. Its international operations account for about 60 percent of corporate operating profit. Current first-quarter earnings per share are expected to fall, year-to-year, the company said. Other factors contributing to the projected earnings decline include increased commodity costs, comparisons to a particularly strong quarter in China, and delayed sales gains from U.S. efforts that aren’t anticipated to gain traction until the second half of 2009 — such as the anticipated introduction in April of KFC’s grilled chicken. For the quarter ended Dec. 27,Yum earned $204 million, or 43 cents per share, compared with year-earlier earnings of $231 million, or 44 cents per share. Charges totaled 3 cents per share and included $17 million in refranchising gains and $43 million of U.S. restructuring charges and U.S. brand reinvestments. Revenues increased 4 percent to $3.38 billion.
ATLANTA — Despite the struggling economy CHICK-FILA said Thursday that its sales in 2008 jumped more than 12 percent on new restaurant openings and same-store sales gains. The parent to the 1,425-unit quick-serve chain, which is best known for its fried and grilled chicken sandwiches, said its positive results came despite growing competition from much larger national brands like MCDONALD’S, which introduced last year a southern-style fried chicken sandwich. The chain’s systemwide sales in 2008 rose 12.2 percent from the year earlier to $2.96 billion. Same-store sales rose 4.6 percent for the year, the company said. In 2008, Chick-fil-A opened 83 new restaurants. It expects to open 76 additional locations this year, including 64 stand-alone units, two stores at mall locations and 10 licensed outlets. It also plans to renovate about 65 existing restaurants during 2009.- VANCOUVER, Wash. — Tapping into the trend of consumers dining more often at home, PAPA MURPHY’S INTERNATIONAL INC., the franchisor of more than 1,100 take-and-bake pizza locations, earlier this week said its 2008 U.S. systemwide sales totaled $585 million, a 17-percent increase from the year earlier. The jump reflected 102 new store openings and an annual same-store sales increase of 8.5 percent. The rapid expansion for the 98-percent franchised chain is in stark contrast to most restaurant brands that have reported slowed sales and reduced unit openings in 2008. Domino’s Pizza most recent U.S. same-store sales result, for its third quarter, fell 6.1 percent. Papa John’s posted a 1.7 percent domestic same-store sales increase for its latest quarter. Yum! Brands said same-store sales at Pizza Hut were most recently positive, but did not disclose a figure.
- HOUSTON — LANDRY'S RESTAURANTS INC. said Monday it expects a decline in fiscal 2008 revenues after slow sales and losses related to closures and damages from Hurricane Ike last fall. Landry’s said it expects to report $1.1 billion in total revenues for 2008, which includes $891 million from its restaurant and hospitality division and $253 million from its Golden Nugget properties. In fiscal 2007, Landry's posted $1.17 billion in revenue. Landry's said its restaurant and hospitality division, which includes more than 170 casualdining restaurants, suffered $13 million in lost revenue in 2008 after Hurricane Ike damaged restaurants in Houston and Galveston, Texas, as well as its Kemah Boardwalk property. Landry's has reopened most of its operations and said Monday that the rest should be open by Valentine's Day. Full fourth quarter and fiscal 2008 results are expected in March.
- OAK BROOK, Ill. — MCDONALD'S CORP. on Monday reported a 23-percent plunge in fourth-quarter profit, primarily due to a year-ago tax benefit, but it was able to continue its string of positive same-store sales despite a weak economy. For the Dec. 31-ended quarter, McDonald's posted net income of $985.3 million, or 87 cents per share. That compares with $1.3 billion, or $1.06 per share, a year ago, when income tax benefits boosted earnings by about 33 cents a share, the company said. Revenue for the latest quarter dipped 3 percent, to $5.6 billion. McDonald's again pointed to its chicken products, breakfast, beverages and convenience for a global same-store sales increase of 7.2 percent for the fourth quarter. Same-store sales were up 5 percent in the United States, 7.6 percent in Europe and 10 percent in the Asia/Pacific, Middle East and Africa region. McDonald’s operates or franchises more than 31,000 units worldwide.
- DALLAS — Casual-dining bellwethers BRINKER INTERNATIONAL INC. and DARDEN RESTAURANTS INC. this week will provide outlooks for the year ahead, amid a worsening picture for many chains in the segment. According to securities analyst DAVID PALMER at UBS Securities LLC, casual-dining traffic this past fall declined more at chains than at independents, with traffic dropping 3 percent at major chains and 11 percent at smaller chains compared with flat year-to-year traffic growth at independents. “Are today’s leading casual dining chains losing their relevance in the minds of consumers?” he asked in a note Wednesday. Today, Brinker will report its fiscal second quarter, which many analysts say will include continued negative same-store sales and perhaps even a downgraded outlook for the remainder of its June-ended fiscal year. Also today and Friday, Darden will host its annual investor meeting at its Orlando headquarters. Darden reaffirmed on Wednesday its full-year guidance, which includes an expected combined U.S. same-store sales decline of between 1.25 percent and 2.25 percent for Red Lobster, Olive Garden and LongHorn Steakhouse. Total sales are expected to increase between 8 percent and 10 percent from fiscal 2008, and reported earnings per share from continuing operations are expected to drop between 1 percent and 6 percent.
- CINCINNATI — FRISCH’S RESTAURANTS INC., the operator of BIG BOY and GOLDEN CORRAL restaurants, said Tuesday its second-quarter net income increased 2.2 percent, despite a dip in sales, as interest expenses and income taxes were reduced from year-earlier levels. For the quarter ended Dec. 16, earnings totaled $2.21 million, or 43 cents per share, compared with year-earlier earnings of $2.17 million, or 41 cents per share. Revenues slipped 0.2 percent in the latest quarter to $69.1 million. Same-store sales rose 0.6 percent at the company’s Big Boy outlets, but fell 2.2 percent at the Golden Corral restaurants. Frisch’s operates and franchises 115 Big Boy restaurants and 35 Golden Corral locations.
- LOS ANGELES — UWINK INC. said Friday it has completed its tender offer for odd-lot shares of its over-the-counter bulletin board stock and will file to deregister with the Securities and Exchange Commission around Jan. 30. The company previously said the move to take the company private would save about $190,000 annually in fees tied to public reporting mandates. UWink operates three technology-focused restaurants and was founded by Chuck E. Cheese’s creator NOLAN BUSHNELL. Company officials also have said they plan to spin off uWink’s technology licensing division. The tender offer ended Jan. 15 with about 97 shareholders tendering approximately 3,485 shares. UWink has about 12.7 million shares outstanding and has traded under $1 since June 2008.The company said it undertook the tender offer to reduce the number of smaller shareholders. Shareholders of uWink owning 99 or fewer shares who sold their stock through the offer will be paid $0.50 per share and receive an incentive payment of $20.
- CARPINTERIA, Calif.— CKE RESTAURANTS INC. said Thursday it had capped off its nearly two-year HARDEE’S refranchising program with the sale of 11 restaurants in Missouri. Since April 2007, CKE has sold 238 Hardee’s units and secured commitments for 115 new franchise restaurants for those markets, the company said. CKE now owns 477 Hardee’s restaurants out of a system of 1,913 locations and 415 Carl’s Jr. restaurants out of a total of 1,194 units. The 11 Hardee’s most recently refranchised were bought by Carl’s Jr. franchisee Rising Stars LLC.
- SPARTANBURG, S.C. — Despite a year when traffic fell 6.9 percent from the year before, DENNY’S CORP. said Thursday its 2008 income will increase substantially because of refranchising efforts and paying down debt. Denny’s expects to meet or exceed its $20 million target for full-year adjusted income before taxes, which is a 90-percent increase from the prior year, the company said. The operator or franchisor of 1,541 familydining restaurants cited food cost management, lower depreciation expenses from asset sales and lower interest expense from debt reduction. In 2008, Denny’s sold 79 restaurants to franchisees, making the system 80-percent franchised, compared with 66-percent franchised prior to the company’s restaurant sales efforts that began in 2007. Denny’s did not disclose how much debt it paid down in 2008, but in the September-ended third quarter it had paid down about $70 million. For the full year ended Dec. 31, revenues are expected to total $184 million, down from $220 million in the prior year, mainly because of the sale of corporate restaurants. Fiscal 2008 systemwide same-store sales fell 3.7 percent and reflected a traffic decline at corporate restaurants of 6.9 percent and a 5.9-percent increase in the average check. For the latest fourth quarter, systemwide same-store sales fell 6.1 percent.
- HOUSTON — LANDRY’S RESTAURANTS INC. said Thursday it would amend its bank credit facility and offer secured notes to help refinance $400 million in senior debt. The $210 million amended facility will include a $50 million revolving credit agreement and a $160 million term loan. It will be arranged by Wells Fargo Foothill LLC and Jefferies Finance LLC, the company said. The senior notes will be due in 2011 and secured by Landry’s subsidiaries. The company expects gross proceeds of $270 million. Landry’s, which owns about 179 restaurants under the Rainforest Cafe, Saltgrass Steakhouse, Charley’s Crab and The Chart House, among other brands, said it plans to use proceeds to refinance outstanding debt, pay related transaction fees and for general corporate purposes. On Monday, Landry’s ended a pending going-private buyout with its chief executive, TILMAN FERTITTA, so that it could continue to work on alternative financing to refinance its debt.
- LOS ANGELES — CALIFORNIA PIZZA KITCHEN INC. said Wednesday it expected to record a fourth-quarter net loss, versus a year-earlier profit, on negative same-store sales and impairment charges on 10 of its restaurants. The operator or franchisor of 252 restaurants under the California Pizza Kitchen, CPK/ASAP and the LA Food Show Grill & Bar brands, said same-store sales for the quarter ended Dec. 28 fell 7.2 percent.Total revenues fell 0.7 percent to $161.7 million. Based on those sales, as well as impairment charges that it did not detail for three ASAP locations and seven full-service restaurants, the company will post a loss of between 22 cents per share and 25 cents per share. A year earlier, California Pizza Kitchen posted earnings of 17 cents per share. Full fourth-quarter results will be released Feb. 12.
- MIAMI — BENIHANA INC. cited slowed consumer spending for negative same-store sales across all three of its Japanese brands. For the third quarter ended Jan. 4, Benihana also reported that total restaurant sales slipped 3.7 percent to $66.8 million. Blended same-store sales were down 11.1 percent, which reflected declines of 10.9 percent at Benihana's namesake teppanyaki chain, 9.1 percent at RA Sushi Bar and 14.6 percent at Haru sushi restaurants. Benihana is scheduled to release full third-quarter results in February. The Miamibased company operates 94 restaurants nationwide, including 63 Benihanas, 22 RA Sushi Bars and nine Haru sushi restaurants. Another 20 Benihana units are franchise operated in the United States, Latin America and the Caribbean.
- HEATHROW, Fla. — RUTH’S HOSPITALITY GROUP INC. on Monday reported a steep drop in fourth quarter same-store sales at its namesake steakhouse chain and said it was in danger of violating one of its lending covenants. The company, which operates or franchises more than 150 restaurants under the Ruth’s Chris Steak House, Mitchell’s Fish Market, Mitchell’s Steakhouse and Cameron’s Steakhouse brands, said that sales at company-owned restaurants for the fourth quarter ended Dec. 28 were $96.9 million, up 14.2 percent from the year-earlier quarter. Same-store sales at company-owned Ruth’s Chris Steak House units fell 18.5 percent for the quarter, versus a prior-year 5.6-percent decrease. Ruth's Hospitality said it had $160.2 million of debt outstanding at the end of its fourth quarter.
- HUNTINGTON BEACH, Calif. — BJ’S RESTAURANTS INC. said Thursday that lower-than-expected commodity costs for the year ahead will help the company keep menu pricing down at its 82 casual-dining restaurants. BJ’s expects its commodity costs to rise in 2009 by about 3 percent, lower than the previous estimate of between 5 percent and 6 percent. BJ’s expects to open between nine and 11 new restaurants this year, down from 14 openings in 2008. BJ’s finished 2008 with a 16.5-percent increase in its fourth-quarter revenue to $99.3 million. Same-store sales fell 0.7 percent. For the full fiscal year, revenues increased 18 percent to $374.1 million and same-store sales fell 0.3 percent.