MEMPHIS, Tenn., Nov. 19 TN-PerkinsMarie-Q3
MEMPHIS, Tenn., Nov. 19 /PRNewswire/ -- Perkins & Marie Callender's Inc.
(together with its consolidated subsidiaries, the "Company" or "we") is
reporting today the financial results for its third quarter ended October 5,
2008.
Highlights for the third quarter of 2008 as compared to the third quarter
of 2007 were:
-- Total revenues were down 2.6% to $127.9 million in the third quarter of
2008, primarily due to decreases in comparable sales at Perkins and
Marie Callender's restaurants, partially offset by the operations of
six new Company-operated Perkins restaurants. Since the third quarter
of 2007, the Company has opened six new Perkins restaurants and
acquired one Perkins restaurant from a franchisee.
-- One Perkins franchised restaurant opened during the third quarter of
2008 and two Perkins franchised restaurants were closed during the
third quarter of 2008.
-- Perkins restaurants' comparable sales decreased by 3.7% and Marie
Callender's restaurants' comparable sales decreased by 8.6% in the
third quarter of 2008 as compared to the third quarter of 2007. These
declines in comparable sales resulted primarily from a decrease in
comparable guest counts at both concepts.
-- We refinanced our existing term loan and revolver with $132.0 million
of secured notes and a new $26.0 million revolver. The related debt
agreements governing the secured notes and the new revolver contain
minimal financial maintenance covenants. In connection with the
refinancing, the Company received $12.5 million in contributions from
its parent and affiliates.
J. Trungale, President and Chief Executive Officer of Perkins & Marie
Callender's Inc., commented, "Economic conditions during the third quarter
2008 presented unprecedented challenges to the restaurant industry as a whole,
including Perkins & Marie Callender's Inc. Despite this, we successfully
refinanced our secured debt, which we believe speaks to the inherent strength
of our brands. Foxtail continues to be in a recovery mode. We are diligently
improving its systems and management strength in order to improve its
manufacturing processes and financial results. Finally, in light of current
economic conditions, we have implemented value-driven initiatives across both
the Perkins and Marie Callender's brands in order to attract customers by
offering less expensive menu items and alternatives. Although the economy has
clearly impacted overall guest count, we remain steadfast in our long term
commitment to high service levels and quality."
Third Quarter of 2008 Financial Results
Revenues in the third quarter of 2008 decreased 2.6% to $127.9 million
from $131.3 million in the third quarter of 2007. The decrease resulted from
a $4.0 million decrease in sales in the restaurant segment and a $0.6 million
decrease in sales in the franchise segment, partially offset by a $1.2 million
increase in sales in the Foxtail segment.
Food cost for the third quarter of 2008 increased to 29.6% of food sales
from 28.5% in the third quarter of 2007. Restaurant segment food cost was
down by 0.3% to 26.2% of food sales in the third quarter of 2008 as the impact
of higher commodity costs were fully offset by menu price increases and
improved store-level controls. In the Foxtail segment, food cost increased to
66.7% of food sales in the third quarter of 2008 from 60.8% in the third
quarter of 2007, due primarily to higher dairy and flour prices.
Labor and benefits costs, as a percentage of total revenues, decreased by
0.1% to 32.4% in the third quarter of 2008 compared to the third quarter of
2007. In the third quarter of 2008, a 0.2% decrease in the restaurant segment
resulting from lower employee medical insurance costs was partially offset by
increases resulting from higher seasonal contract labor costs in the Foxtail
segment.
Operating expenses for the third quarter of 2008 were $34.2 million, or
26.8% of total revenues, compared to $34.7 million, or 26.4% of total revenues
in the third quarter of 2007. Restaurant segment operating expenses increased
by 0.5% to 29.3% of restaurant sales in the third quarter of 2008 due
primarily to increased utilities costs. Operating expenses in the Foxtail
segment increased by $0.3 million or 1.1% to 12.6% of segment food sales due
primarily to higher custodial service costs resulting from a 2008 outsourcing
arrangement and from higher repair and maintenance costs.
General and administrative expenses were 8.3% of total revenues, an
increase of 1.7% from the third quarter of 2007. The increase is due
primarily to higher marketing costs at Foxtail and increased consulting costs.
Depreciation and amortization was 4.5% and 4.6% of revenues in the third
quarters of 2008 and 2007, respectively.
Interest, net was 6.7% of revenues in the third quarter of 2008, compared
to 5.5% in the prior year's third quarter. The 1.2% increase resulted mainly
from an increase in the average effective interest rate on the Company's debt
to 11.9% from 10.3% during the third quarter of 2008 compared to the third
quarter of 2007, and an approximate $8.4 million increase in the average debt
outstanding during the third quarter of 2008 compared to the third quarter of
2007.
On September 24, 2008, the Company issued $132.0 million of 14% senior
secured notes and entered into a new $26.0 million revolving credit facility,
in connection with the refinancing of its then existing $100.0 million term
loan and $40.0 million revolver. The pre-existing credit agreement terminated
upon the consummation of the refinancing. In connection with this
transaction, we recognized a loss of $3.0 million, representing the write-off
of previously deferred financing costs related to the terminated credit
agreement.
As of October 5, 2008, we recorded a non-cash goodwill impairment charge
of $20.2 million, comprised of $18.5 million to our franchise segment and $1.7
million to our Foxtail segment. We also reviewed all identifiable intangible
assets, and, based on the results of our interim review, no additional
impairment charges were considered necessary.
Adjusted EBITDA
The Company defines adjusted EBITDA as net income or loss before income
taxes or benefits, interest expense (net), depreciation and amortization,
transaction costs, asset impairments and closed store expenses, goodwill
impairment, loss on extinguishment of debt and other income and expense items
unrelated to operating performance. The Company considers adjusted EBITDA to
be an important measure of performance from core operations because adjusted
EBITDA excludes various income and expense items that are not indicative of
the Company's operating performance. The Company believes that adjusted
EBITDA is useful to investors in evaluating the Company's ability to incur and
service debt, make capital expenditures and meet working capital requirements.
The Company also believes that adjusted EBITDA is useful to investors in
evaluating the Company's operating performance compared to that of other
companies in the same industry, as the calculation of adjusted EBITDA
eliminates the effects of financing, income taxes and the accounting effects
of capital spending, all of which may vary from one company to another for
reasons unrelated to overall operating performance. The Company's calculation
of adjusted EBITDA is not necessarily comparable to that of other similarly
titled measures reported by other companies. Adjusted EBITDA is not a
presentation made in accordance with U.S. generally accepted accounting
principles and accordingly should not be considered as an alternative to, or
more meaningful than, earnings from operations, cash flows from operations or
other traditional indications of a company's operating performance or
liquidity. The following table provides a reconciliation of net loss to
adjusted EBITDA:
Third Third Year-to- Year-to-
Quarter Quarter Date Date
Ended Ended Ended Ended
Oct. 5, Oct. 7, Oct. 5,Oct. 7,
(unaudited; in thousands)2008 2007 2008 2007
Net loss $(30,477) (4,345) (46,130) (9,817)
Benefit from income taxes (1,260) 109 (938) 109
Interest, net8,568 7,189 26,87123,887
Depreciation and amortization5,741 6,051 19,11118,941
Transaction costs - 261- 1,013
Asset impairments and closed
store expenses 61 472614 481
Goodwill impairment 20,202 - 20,202 -
Loss on extinguishment of debt 2,952 -2,952 -
Pre-opening expenses14 751339 1,185
Management fees838 825 2,764 2,751
Other items- 358529 709
Adjusted EBITDA $6,63911,671 26,31439,259
About the Company
Perkins & Marie Callender's Inc. operates two restaurant concepts: (1)
full-service family dining restaurants, which serve a wide variety of high
quality, moderately-priced breakfast, lunch and dinner entrees, under the name
Perkins Restaurant and Bakery, and (2) mid-priced, casual-dining restaurants
specializing in the sale of pie and other bakery items under the name Marie
Callender's Restaurant and Bakery. As of October 5, 2008, the Company owned
and operated 164 Perkins restaurants and franchised 317 Perkins restaurants.
The Company also owned and operated 76 Marie Callender's restaurants, two
Callender's Grill restaurants, an East Side Mario's restaurant and 12 Marie
Callender's restaurants under partnership agreements. Franchisees owned and
operated 41 Marie Callender's restaurants and one Marie Callender's Grill.
Conference Call
Perkins & Marie Callender's Inc. has scheduled a conference call for
Monday, November 24, 2008, at 10:00 a.m. (CST) to review the third quarter
2008 earnings. The dial-in number for the conference call is (866) 207-2203
and the access code number is 72645258. A taped playback of this call will be
available two hours following the call on Monday, November 24, 2008, through
midnight (CST) on Monday, December 1, 2008. The taped playback can be
accessed by dialing (800) 642-1687 and by using access code number 72645258.
Forward-Looking Statements
This press release contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
These statements may be identified by the use of forward-looking terminology
such as "anticipate," "believe," "continue," "could," "estimate," "expect,"
"intend," "may," "might," "plan," "potential," "predict," "should," or "will,"
or the negative thereof or other variations thereon or comparable terminology.
Perkins & Marie Callender's Inc. has based these forward-looking
statements on its current expectations, assumptions, estimates and
projections. While the Company believes these expectations, assumptions,
estimates and projections are reasonable, such forward-looking statements are
only predictions and involve known and unknown risks and uncertainties, many
of which are beyond its control. Some of the key factors that could cause its
actual results, performance or achievements to differ materially from any
future results, performance or achievements expressed or implied by these
forward-looking statements include the following:
-- general economic conditions, consumer preferences and demographic
patterns, either nationally or in particular regions in which we
operate;
-- our substantial indebtedness;
-- our liquidity and capital resources;
-- competitive pressures and trends in the restaurant industry;
-- prevailing prices and availability of energy, raw materials, food,
supplies and labor;
-- a failure to obtain timely deliveries from our suppliers or other
supplier issues;
-- our ability to successfully implement our business strategy;
-- relationships with franchisees and financial health of franchisees;
-- legal proceedings and regulatory matters;
-- our development and expansion plans; and
-- other factors highlighted from time to time in our filings made
pursuant to the Exchange Act with the Securities and Exchange
Commission.
Given these risks and uncertainties, you are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking statements
included in this press release are made only as of the date hereof. Actual
results of Perkins & Marie Callender's Inc. could differ materially from those
contained in the forward-looking statements. Perkins & Marie Callender's
Inc. does not undertake and specifically declines any obligation to update any
such statements or to publicly announce the results of any revisions to any of
such statements to reflect future events or developments.
PERKINS & MARIE CALLENDER'S INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Third ThirdYear-to- Year-to-
QuarterQuarter Date Date
Ended Ended Ended Ended
Oct. 5,Oct. 7, Oct. 5, Oct. 7,
2008 2007 2008 2007
REVENUES:
Food sales $121,210 124,031 418,632 415,621
Franchise and other revenue 6,691 7,28122,63524,087
Total revenues 127,901 131,312 441,267 439,708
COSTS AND EXPENSES:
Cost of sales (excluding
depreciation shown below):
Food cost35,86735,379 123,428 116,387
Labor and benefits 41,41742,700 144,105 143,069
Operating expenses 34,24034,693 115,361 111,377
General and administrative 10,612 8,67535,72733,575
Transaction costs - 261 - 1,013
Depreciation and amortization 5,741 6,05119,11118,941
Interest, net 8,568 7,18926,87123,887
Asset impairments and closed
store expenses 61 472 614 481
Goodwill impairment 20,202 -20,202 -
Loss on extinguishment of debt2,952 - 2,952 -
Other, net (27) (37) (117) 277
Total costs and expenses159,633 135,383 488,254 449,007
Loss before income taxes and
minority interests (31,732) (4,071) (46,987) (9,299)
Benefit from (provision for)
income taxes 1,260 (109) 938 (109)
Minority interests (5) (165) (81) (409)
NET LOSS $(30,477) (4,345) (46,130) (9,817)
PERKINS & MARIE CALLENDER'S INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par and share amounts)
October 5, December 30,
20082007
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $3,232 19,032
Restricted cash 7,594 10,098
Receivables, less allowances for
doubtful accounts of $800 and
$1,542 in 2008 and 2007,
respectively 19,479 17,221
Inventories 15,676 13,239
Prepaid expenses and other current
assets 6,007 5,732
Total current assets 51,988 65,322
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
amortization of $121,990 and
$109,441 in 2008 and 2007,
respectively 96,594 99,311
INVESTMENT IN UNCONSOLIDATED
PARTNERSHIP36 53
GOODWILL 9,836 30,038
INTANGIBLE ASSETS, net of accumulated
amortization of $19,393 and
$17,494 in 2008 and 2007,
respectively 151,417 153,316
DEFERRED INCOME TAXES 535 242
OTHER ASSETS19,283 14,660
TOTAL ASSETS $329,689 362,942
LIABILITIES AND STOCKHOLDER'S INVESTMENT
CURRENT LIABILITIES:
Accounts payable $24,065 25,559
Accrued expenses 37,678 52,621
Accrued income taxes 80 -
Franchise advertising contributions 5,675 5,940
Current maturities of long-term debt
and capital lease obligations379 9,464
Total current liabilities 67,877 93,584
CAPITAL LEASE OBLIGATIONS, less
current maturities 13,801 11,987
LONG-TERM DEBT, less current
maturities321,601 298,009
DEFERRED RENT 14,921 13,467
OTHER LIABILITIES 15,247 15,520
MINORITY INTERESTS IN CONSOLIDATED
PARTNERSHIPS 156 333
STOCKHOLDER'S INVESTMENT:
Common stock, $.01 par value; 100,000
shares authorized; 10,820 issued and
outstanding 1 1
Additional paid-in capital 150,146 137,923
Accumulated other comprehensive
income 37 86
Accumulated deficit (254,098) (207,968)
Total stockholder's investment (103,914)(69,958)
TOTAL LIABILITIES AND STOCKHOLDER'S
INVESTMENT $329,689 362,942
PERKINS & MARIE CALLENDER'S INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Year-to-Date Year-to-Date
EndedEnded
October 5, 2008 October 7, 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(46,130) (9,817)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 19,111 18,941
Asset impairment costs 987 638
Amortization of debt discount291 248
Other non-cash income and expense
items (134)629
Gain on disposition of assets (373) (157)
Goodwill impairment 20,202 -
Loss on extinguishment of debt 2,952 -
Minority interests81 409
Equity in net loss of
unconsolidated partnership 17 90
Net changes in operating assets and
liabilities (16,043)(12,364)
Total adjustments 27,091 8,434
Net cash used in operating activities (19,039) (1,383)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment(15,596)(22,554)
Proceeds from sale of assets 515 3
Net cash used in investing activities (15,081)(22,551)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of)
terminated revolver, net (20,000) 15,300
Proceeds from New Revolver 8,604 -
Proceeds from Secured Notes, net of
$7,537 discount 124,463 -
Repayment of Term Loan (98,750) (750)
Repayment of capital lease
obligations (330) (549)
Proceeds from (repayment of) other
debt (15) 1,925
Debt financing costs(9,903) -
Lessor financing of new restaurants 2,286 2,915
Distributions to minority partners(258) (228)
Contributions from parent and
affiliates 12,500 1,792
Repurchase of equity ownership units
in P&MC Holding LLC (277) -
Net cash provided by financing
activities 18,320 20,405
NET DECREASE IN CASH AND CASH
EQUIVALENTS (15,800) (3,529)
CASH AND CASH EQUIVALENTS:
Balance, beginning of period 19,032 9,069
Balance, end of period$3,232 5,540
SOURCE Perkins & Marie Callender's Inc.
