Published: November 18, 2009
Perkins & Marie Callender's Inc. Reports Results for the Quarter Ended October 4, 2009
MEMPHIS, Tenn., Nov 18 /PRNewswire/ -- Perkins & Marie Callender's Inc. (together with its consolidated subsidiaries, the "Company", "PMCI" or "we") is reporting today the financial results for its quarter ended October 4, 2009.
-- The Company's EBITDA (as defined below) for the forty weeks ended
October 4, 2009, was up $1.5 million over the comparable period in 2008
due principally to improved financial results at its Foxtail segment.
During the third quarter, EBITDA decreased by $0.9 million compared to
the same quarter in 2008.
-- Total revenues for the quarter declined 9.7% to $115.5 million compared
to $127.9 million for the same period in 2008 primarily due to decreases
in comparable sales at Company-operated Perkins and Marie Callender's
restaurants.
-- Food cost for the quarter declined from 29.6% of food sales to 25.7% due
primarily to lower commodity costs that impacted all segments and
improved food cost controls at our Perkins and Marie Callender's
restaurants.
-- Foxtail sales decreased by $3.5 million while segment income increased
by $2.1 million during the third quarter of 2009 due to higher sales
prices, lower commodity costs and operational improvements. This
increase is after elimination of a non-cash goodwill impairment charge
of $1.7 million in 2008.
J. Trungale, President and Chief Executive Officer of Perkins & Marie Callender's Inc., commented, "With the economy still struggling, the third quarter's results at PMCI yielded no surprises. We have remained consistent in our efforts to improve Foxtail and remain on track with that initiative. We continue to drive the long term value message for both the Perkins and Marie Callender's brands without resorting to heavy discounting as many of our competitors have opted for. And, finally, we are managing our costs efficiently across the board while continuing to focus on maintaining and improving the quality of our food and service to our guests."
Financial Results for the Third Quarter of 2009
Revenues in the third quarter of 2009 decreased 9.7% to $115.5 million from $127.9 million in the third quarter of 2008. The decrease resulted from an $8.6 million decrease in sales in the restaurant segment, a $0.4 million decrease in the franchise segment and a $3.5 million decrease in the Foxtail segment. Comparable sales for the quarter decreased by 7.5% at Company-operated Perkins restaurants and by 9.3% at Company-operated Marie Callender's restaurants.
Food cost for the third quarter of 2009 decreased to 25.7% of food sales from 29.6% in the third quarter of 2008. Restaurant segment food cost was down by 1.8% to 24.4% of food sales in the third quarter of 2009 due to lower commodity costs and improved store-level controls. In the Foxtail segment, food cost decreased to 57.9% of food sales in the third quarter of 2009 from 66.7% in the third quarter of 2008 due to higher sales prices and lower commodity costs, particularly on eggs and dairy products.
Labor and benefits costs, as a percentage of total revenues, increased by 1.8% to 34.2% in the third quarter of 2009 compared to the third quarter of 2008. A 1.7% increase in the restaurant segment resulted from the decline in comparable sales and higher medical insurance costs. Labor and benefits costs in the Foxtail segment decreased by 1.5% of segment sales compared to the third quarter of 2008 due primarily to better scheduling and operational improvements in the current year.
Operating expenses for the third quarter of 2009 were $33.2 million, or 28.7% of total revenues, compared to $34.2 million, or 26.8% of total revenues, in the third quarter of 2008. Restaurant segment operating expenses increased by 2.0% to 31.3% of restaurant sales in the third quarter of 2009 due primarily to higher advertising, maintenance and insurance costs and also due to the decrease in comparable sales relative to occupancy costs. Operating expenses in the Foxtail segment, as a percentage of segment sales, decreased by 1.2% due primarily to lower repairs and maintenance, transportation and warehouse costs.
General and administrative expenses were 8.9% of total revenues, an increase of 0.6% from the third quarter of 2008, despite a $0.3 million decrease in general and administrative spending. The increase as a percentage of revenues is primarily due to the decrease in total revenues relative to this largely fixed-cost category.
Depreciation and amortization was 4.8% and 4.5% of revenues in the third quarters of 2009 and 2008, respectively.
Interest, net was 8.9% of revenues in the third quarter of 2009, compared to 6.7% in the prior year's third quarter. The 220 basis point increase resulted mainly from an increase in the average effective interest rate on the Company's debt to 11.6% following the refinancing in September 2008, as noted below. The average effective rate was 9.8% during the third quarter of 2008. Average debt outstanding was approximately $17.5 million higher during the third quarter of 2009 compared to the third quarter of 2008.
In the third quarter of 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.
Also, 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.
Other, net increased to $0.4 million of income in 2009 compared to income of $27,000 in 2008. The 2009 income primarily represents gains on invested deferred compensation assets and income from unredeemed gift cards.
Adjusted EBITDA
The Company defines adjusted EBITDA as net income or loss before income taxes or benefits, interest expense (net), depreciation and amortization, asset impairments and closed store expenses, pre-opening expenses, management fees 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
Quarter Quarter Year-to-Date Year-to-Date
(unaudited; Ended Ended Ended Ended
in thousands) October 4, October 5, October 4, October 5,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net loss attributable
to PMCI $(11,248) (30,477) (26,882) (46,130)
Provision for
income taxes 142 (1,260) 142 (938)
Interest, net 10,260 8,568 34,005 26,871
Depreciation and
amortization 5,498 5,741 18,411 19,111
Asset impairments and
Closed store expenses 187 61 1,395 614
Goodwill impairment - 20,202 - 20,202
Loss on extinguishment of
debt - 2,952 - 2,952
Pre-opening expenses 8 14 41 339
Management fees 919 838 2,856 2,764
Other items - - (2,195) 529
--- --- ------ ---
Adjusted EBITDA $5,766 6,639 27,773 26,314
====== ===== ====== ======
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 pies and other bakery items under the name Marie Callender's Restaurant and Bakery. As of October 4, 2009, the Company owned and operated 163 Perkins restaurants and franchised 315 Perkins restaurants. The Company also owned and operated 77 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 38 Marie Callender's restaurants and one Marie Callender's Grill.
Conference Call
Perkins & Marie Callender's Inc. has scheduled a conference call for Wednesday, December 2, 2009, at 10:00 a.m. (CST) to review the third quarter 2009 earnings. The dial-in number for the conference call is (866) 207-2203 and the access code number is 40539556. A taped playback of this call will be available two hours following the call on Wednesday, December 2, 2009, through 11:00 p.m. (CST) on Wednesday, December 9, 2009. The taped playback can be accessed by dialing (800) 642-1687 and by using access code number 40539556.
Forward-Looking Statements
This press release may contain "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. These statements, written, oral or otherwise made, 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.
We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe 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 our control. These and other important factors may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors affecting these forward-looking statements include, among others, the following:
-- the current U.S. economic recession, 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; and
-- our development and expansion plans.
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. We do not undertake and specifically decline 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.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PERKINS & MARIE CALLENDER'S INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Quarter Quarter Year-to-Date Year-to-Date
Ended Ended Ended Ended
October 4, October 5, October 4, October 5,
2009 2008 2009 2008
---------- ---------- ---------- ----------
REVENUES:
Food sales $109,086 121,210 385,024 418,632
Franchise and other
revenue 6,384 6,691 21,575 22,635
----- ----- ------ ------
Total revenues 115,470 127,901 406,599 441,267
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of sales (excluding
depreciation shown below):
Food cost 28,058 35,867 101,333 123,428
Labor and benefits 39,474 41,417 135,703 144,105
Operating expenses 33,183 34,240 110,956 115,361
General and
administrative 10,313 10,612 34,531 35,727
Depreciation and
amortization 5,498 5,741 18,411 19,111
Interest, net 10,260 8,568 34,005 26,871
Asset impairments and
closed store expenses 187 61 1,395 614
Goodwill impairment - 20,202 - 20,202
Loss on extinguishment of
debt - 2,952 - 2,952
Other, net (392) (27) (3,069) (117)
---- --- ------ ----
Total costs
and expenses 126,581 159,633 433,265 488,254
------- ------- ------- -------
Loss before income
taxes (11,111) (31,732) (26,666) (46,987)
Benefit from (provision
for) income taxes (142) 1,260 (142) 938
---- ----- ---- ---
Net loss (11,253) (30,472) (26,808) (46,049)
Less: net (loss) earnings
attributable to
non-controlling interests (5) 5 74 81
--- --- --- ---
Net loss attributable to
Perkins & Marie
Callender's Inc. $(11,248) (30,477) (26,882) (46,130)
======== ======= ======= =======
PERKINS & MARIE CALLENDER'S INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par and share amounts)
October 4, December 28,
2009 2008
---- ----
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $3,525 4,613
Restricted cash 7,303 10,140
Receivables, less allowances for
doubtful accounts of $806 17,390 21,386
and $954 in 2009 and 2008, respectively
Inventories 11,406 12,300
Prepaid expenses and other current assets 4,470 2,996
----- -----
Total current assets 44,094 51,435
------ ------
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
amortization of $137,817 and $125,951
in 2009 and 2008, respectively 79,966 93,500
INVESTMENT IN UNCONSOLIDATED PARTNERSHIP 23 48
GOODWILL 9,836 9,836
INTANGIBLE ASSETS 149,036 150,847
OTHER ASSETS 16,938 17,842
------ ------
TOTAL ASSETS $299,893 323,508
======== =======
LIABILITIES AND DEFICIT
CURRENT LIABILITIES:
Accounts payable $15,775 18,295
Accrued expenses 39,309 47,040
Franchise advertising contributions 5,510 5,316
Current maturities of long-term debt and
capital lease obligations 499 382
--- ---
Total current liabilities 61,093 71,033
------ ------
LONG-TERM DEBT, less current maturities 327,478 316,534
CAPITAL LEASE OBLIGATIONS, less current
maturities 11,169 13,715
DEFERRED RENT 16,549 15,343
OTHER LIABILITIES 20,306 17,741
DEFICIT:
Common stock, $.01 par value; 100,000
shares authorized;
10,820 issued and outstanding 1 1
Additional paid-in capital 150,870 149,851
Accumulated other comprehensive income
(loss) 45 (4)
Accumulated deficit (287,803) (260,921)
-------- --------
Total PMCI stockholder's deficit (136,887) (111,073)
-------- --------
Noncontrolling interests 185 215
--- ---
Total deficit (136,702) (110,858)
-------- --------
TOTAL LIABILITIES AND DEFICIT $299,893 323,508
======== =======
PERKINS & MARIE CALLENDER'S INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Year-to-Date Year-to-Date
Ended Ended
October 4, October 5,
2009 2008
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(26,808) (46,049)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 18,411 19,111
Asset impairments 571 987
Amortization of debt discount 1,184 291
Other non-cash income and expense items (2,427) (134)
Loss (gain) on disposition of assets 824 (373)
Goodwill impairment - 20,202
Loss on extinguishment of debt - 2,952
Equity in net loss of unconsolidated
partnership 25 17
Net changes in operating assets and
liabilities 3,383 (16,043)
----- -------
Total adjustments 21,971 27,010
------ ------
Net cash used in operating activities (4,837) (19,039)
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,941) (15,596)
Proceeds from sale of assets 494 515
--- ---
Net cash used in investing activities (5,447) (15,081)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from terminated revolver - 53,000
Repayment of terminated revolver - (73,000)
Proceeds from Revolver 26,501 8,604
Repayment of Revolver (16,726) -
Proceeds from Secured Notes, net of $7,537
discount - 124,463
Repayment of term loan - (98,750)
Repayment of capital lease obligations (318) (330)
Repayment of other debt (15) (15)
Debt financing costs (142) (9,903)
Lessor financing of new restaurants - 2,286
Distributions to noncontrolling interest
holders (104) (258)
Capital contributions - 12,500
Repurchase of equity ownership units in
P&MC's Holding LLC - (277)
--- ----
Net cash provided by financing activities 9,196 18,320
----- ------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,088) (15,800)
CASH AND CASH EQUIVALENTS:
Balance, beginning of period 4,613 19,032
----- ------
Balance, end of period $3,525 3,232
====== =====
SOURCE Perkins & Marie Callender's Inc.
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