Perkins & Marie Callender's Inc. Reports Results for the Quarter Ended July 11, 2010

Aug 31, 2010, 18:04 ET from Perkins & Marie Callender's Inc.

MEMPHIS, Tenn., Aug. 31 /PRNewswire/ -- Perkins & Marie Callender's Inc. (together with its consolidated subsidiaries, the "Company", "PMCI" or "we") is reporting today its financial results for the second quarter ended July 11, 2010.

Highlights for the Second Quarter of 2010:

  • Perkins restaurants' comparable sales decreased by 5.1% and Marie Callender's restaurants' comparable sales decreased by 5.6% in the second quarter of 2010 compared to the second quarter of 2009.  
  • Since the beginning of 2010, five Perkins franchised restaurants have opened. In addition, one corporate and two franchised Marie Callender's restaurants have closed.

J. Trungale, President and Chief Executive Officer of Perkins & Marie Callender's Inc., commented, "While the difficult economy continues to negatively impact away-from-home dining trends, increased franchise activity since the second quarter of 2009 at Perkins is encouraging, as are overall steady sales margins and improved pie manufacturing efficiencies at Foxtail.  We will continue our efforts to hold margins and improve store level execution for the Perkins and Marie Callender's brands, while simultaneously focusing on the strategic development of both concepts."

Financial Results for the Second Quarter of 2010

Revenues in the second quarter of 2010 decreased 6.3% to $114.2 million from $121.9 million in the second quarter of 2009.  The decrease resulted from a $5.5 million decrease in sales in the restaurant segment, a $2.0 million decrease in the Foxtail segment and a $0.2 million decrease in licensing and other revenues.  Company-owned Perkins comparable restaurant sales decreased by 5.1% and Company-owned Marie Callender's comparable restaurant sales decreased by 5.6% in the second quarter of 2010 as compared to the second quarter of 2009.

Food cost for the quarter ended July 11, 2010 decreased to 25.5% of food sales from 26.3% for the quarter ended July 12, 2009.  Restaurant segment food cost was up by 0.3 percentage points to 25.5% of food sales in the quarter ended July 11, 2010, primarily due to higher dairy, coffee and seafood costs.  In the Foxtail segment, food cost decreased to 55.0% of food sales in the second quarter of 2010 from 57.6% in the second quarter of 2009, primarily due to higher sales margins and improved pie manufacturing efficiencies.

Labor and benefits costs, as a percentage of total revenues, increased by 0.4 percentage points to 34.0% in the second quarter of 2010 as compared to the prior year's second quarter.  The labor and benefits ratio increased by 0.3 percentage points in the restaurant segment due primarily to the decline in revenues, while the Foxtail segment labor and benefits expense decreased from 13.4% in the second quarter of 2009 to 12.2% in the second quarter of 2010.  This decrease was due primarily to improved production efficiencies, which resulted in lower production wages.

Operating expenses for the quarter ended July 11, 2010 were $32.5 million, or 28.5% of total revenues, compared to $32.1 million, or 26.3% of total revenues in the quarter ended July 12, 2009.  Restaurant segment operating expenses increased by 1.5 percentage points to 30.4% of restaurant sales in the second quarter of 2010, due primarily to a decline in revenues and increases in rent, real estate taxes and utilities.  Operating expenses in the Foxtail segment increased by 1.6 percentage points to 12.1% of segment food sales, due primarily to a decrease in food sales in the Foxtail segment, as operating expenses for this segment decreased by 3.2% during the second quarter of 2010.

General and administrative expenses were 9.5% of total revenues, an increase of 1.2 percentage points from the second quarter of 2009.  The percentage increase is primarily due to decreased revenues, higher incentive compensation accruals and legal costs, which were partially offset by lower audit fees.

Depreciation and amortization was 4.4% and 4.6% of revenues in the second quarters of 2010 and 2009, respectively.  

Interest, net was 9.0% of revenues in the quarter ended July 11, 2010, compared to 8.3% in the quarter ended July 12, 2009.  This expense increased due to an approximate $7.1 million increase in the average debt outstanding during the second quarter of 2010.

Adjusted EBITDA

The Company defines adjusted EBITDA as net income or loss attributable to PMCI before income taxes or benefits, interest expense (net), depreciation and amortization, asset impairments and closed store expenses, pre-opening expenses, management fees, certain non-recurring income and expense items and other income and expense items unrelated to operating performance.  The Company considers adjusted EBITDA to be an important measure of the performance of 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:


Second Quarter


Second Quarter


Year-to-Date


Year-to-Date


Ended


Ended


Ended


Ended

(in thousands)

July 11, 2010


July 12, 2009


July 11, 2010


July 12, 2009









Net loss attributable to PMCI

$             (11,153)


(5,880)


$             (25,759)


(15,634)

Provision for (benefit from) income taxes

-


-


-


-

Interest, net

10,299


10,130


23,864


23,745

Depreciation and amortization

5,059


5,557


11,965


12,913

Asset impairments and closed store expenses

440


346


2,105


1,208

Pre-opening expenses

-


33


-


33

Management fees

919


721


2,145


1,937

Other items

-


(1,377)


-


(2,195)

Adjusted EBITDA

$                 5,564


9,530


$               14,320


22,007











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 July 11, 2010, the Company owned and operated 163 Perkins restaurants and franchised 319 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 37 Marie Callender's restaurants and one Marie Callender's Grill.

Conference Call

Perkins & Marie Callender's Inc. has scheduled a conference call for Tuesday, September 7, 2010, at 10:00 a.m. (CDT) to review second quarter of 2010 earnings.  The dial-in number for the conference call is (866) 207-2203, and the conference ID number is 93324512.  A taped playback of this call will be available two hours following the call through midnight (EDT) on Tuesday, September 14, 2010.  The taped playback can be accessed by dialing (800) 642-1687 and by using access code number 93324512.

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:

  • macroeconomic 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 food, labor, raw materials, supplies and energy;
  • 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 the 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

PERKINS & MARIE CALLENDER'S INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)


Quarter


Quarter


Year-to-Date


Year-to-Date


Ended


Ended


Ended


Ended


July 11, 2010


July 12, 2009


July 11, 2010


July 12, 2009

REVENUES:












Food sales

$

107,573



115,061



254,888



275,938

Franchise and other revenue


6,580



6,815



15,070



15,191

   Total revenues


114,153



121,876



269,958



291,129

COSTS AND EXPENSES:












Cost of sales (excluding depreciation shown below):












   Food cost


27,434



30,301



64,716



73,275

   Labor and benefits


38,846



40,904



92,208



96,229

   Operating expenses


32,534



32,072



76,269



77,773

General and administrative


10,835



10,129



24,941



24,218

Depreciation and amortization


5,059



5,557



11,965



12,913

Interest, net


10,299



10,130



23,864



23,745

Asset impairments and closed store expenses


440



346



2,105



1,208

Other, net


(140)



(1,716)



(358)



(2,677)

   Total costs and expenses


125,307



127,723



295,710



306,684

Loss before income taxes


(11,154)



(5,847)



(25,752)



(15,555)

Benefit from (provision for) income taxes


-



-



-



-

Net loss  


(11,154)



(5,847)



(25,752)



(15,555)

Less: net (loss) earnings attributable to












   non-controlling interests


(1)



33



7



79

Net loss attributable to Perkins & Marie












   Callender's Inc.

$

(11,153)



(5,880)



(25,759)



(15,634)



























PERKINS & MARIE CALLENDER'S INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par and share amounts)



July 11,


December 27,




2010


2009


ASSETS


(Unaudited)




CURRENT ASSETS:






Cash and cash equivalents


$                   2,263


4,288


Restricted cash


7,462


8,110


Receivables, less allowances for doubtful accounts of $859
  and $829 in 2010 and 2009, respectively


15,141


18,125


Inventories


10,383


11,062


Prepaid expenses and other current assets


3,676


1,864


Assets held for sale, net


1,304


-


    Total current assets


40,229


43,449








PROPERTY AND EQUIPMENT, net of accumulated
  depreciation and amortization of $156,381 and
  $156,898 in 2010 and 2009, respectively


62,987


75,219


INVESTMENT IN UNCONSOLIDATED PARTNERSHIP


33


50


GOODWILL


23,100


23,100


INTANGIBLE ASSETS, net of accumulated amortization of
  $21,257 and $20,179 in 2010 and 2009, respectively


145,935


147,013


OTHER ASSETS


14,690


16,074


TOTAL ASSETS


$               286,974


304,905








LIABILITIES AND DEFICIT












CURRENT LIABILITIES:






Accounts payable


14,383


14,657


Accrued expenses


40,886


41,605


Franchise advertising contributions


5,265


4,327


Current maturities of long-term debt and capital lease
  obligations


379


503


    Total current liabilities


60,913


61,092








LONG-TERM DEBT, less current maturities


331,303


326,042


CAPITAL LEASE OBLIGATIONS, less current maturities


10,906


11,054


DEFERRED RENT


18,478


17,092


OTHER LIABILITIES


23,951


22,277


DEFERRED INCOME TAXES


45,457


45,457








DEFICIT:






Common stock, $.01 par value; 100,000 shares authorized;






    10,820 issued and outstanding


1


1


Additional paid-in capital


150,870


150,870


Accumulated other comprehensive income


47


45


Accumulated deficit


(355,092)


(329,333)


    Total PMCI stockholder's deficit


(204,174)


(178,417)


Non-controlling interests


140


308


    Total deficit


(204,034)


(178,109)


TOTAL LIABILITIES AND DEFICIT


$               286,974


304,905










PERKINS & MARIE CALLENDER'S INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)



Year-to-Date


Year-to-Date




Ended


Ended




July 11, 2010


July 12, 2009


CASH FLOWS FROM OPERATING ACTIVITIES:






Net loss


$        (25,752)


(15,555)


Adjustments to reconcile net loss to net cash provided by






(used in) operating activities:






 Depreciation and amortization


11,965


12,913


 Asset impairments


2,273


434


 Amortization of debt discount


946


829


 Other non-cash income items


(232)


(2,344)


 (Gain) loss on disposition of assets


(168)


774


 Equity in net loss of unconsolidated partnership


17


8


 Net changes in operating assets and liabilities


7,625


(493)


 Total adjustments


22,426


12,121


Net cash used in operating activities


(3,326)


(3,434)








CASH FLOWS FROM INVESTING ACTIVITIES:






Purchases of property and equipment


(2,572)


(4,316)


Proceeds from sale of assets


5


490


Net cash used in investing activities


(2,567)


(3,826)








CASH FLOWS FROM FINANCING ACTIVITIES:






Proceeds from revolving credit facilities


17,759


18,248


Repayment of revolving credit facilities


(13,444)


(12,719)


Repayment of capital lease obligations


(262)


(223)


Repayment of other debt


(10)


(10)


Debt financing costs


-


(142)


Distributions to non-controlling interest holders


(175)


(71)


Net cash provided by financing activities


3,868


5,083








NET DECREASE IN CASH AND CASH EQUIVALENTS


(2,025)


(2,177)








CASH AND CASH EQUIVALENTS:






 Balance, beginning of period


4,288


4,613


 Balance, end of period


$            2,263


2,436










SOURCE Perkins & Marie Callender's Inc.