California Pizza Kitchen Announces Financial Results for the Second Quarter of 2007 and Board of Directors Authorizes a $50.0 Million Stock Repurchase
LOS ANGELES--(BUSINESS WIRE)--Aug. 9, 2007--California Pizza Kitchen, Inc. (Nasdaq:CPKI) today reported revenues and net income for the second quarter ended July 1, 2007. Highlights for the second quarter of 2007 relative to the same quarter a year ago were as follows:
-- Total revenues grew 16.4% to $158.6 million
-- Comparable restaurant sales increased 5.4%
-- Net income of $6.3 million, or $0.21 per diluted share,
including $0.8 million, or $0.02 per diluted share, in early
termination costs related to one unopened CPK/ASAP location.
Diluted share calculations were adjusted for the three-for-two
stock split effective June 19, 2007.
Rick Rosenfield and Larry Flax, co-CEOs of California Pizza Kitchen, Inc., stated, "We are pleased to be among the few casual dining restaurant concepts this quarter to post positive guest counts and mix shifts, while also benefiting from recent price increases. We credit CPK's commitment to menu innovation, customer service and the lifestyle component of our brand. These factors not only drove comparable restaurant sales, but positively affected restaurant level margins by 20 basis points year over year. In addition, we leveraged 40 basis points in general and administrative costs in a challenging environment, while delivering operating results in line with our previously-guided range."
Average weekly sales for the Company's 170 full service restaurants increased 4.8% to $68,535 for the second quarter of 2007 compared to $65,427 for the same quarter last year.
In the second quarter of 2007, the Company added two full service restaurants in Coral Gables, Florida and New York City. The Company's franchise partner, HMSHost, also opened a CPK/ASAP location in Oakland Airport while an international franchise partner, Golden Pillars (H.K.) Ltd, opened a full service restaurant in Hong Kong, China.
For the third quarter of 2007, the Company intends to add six full service and one international franchise restaurant. These openings, together with a comparable restaurant sales increase of 2.0%-3.0% and an estimated $0.19 per diluted share charge primarily associated with store closure costs for four CPK/ASAPs, are expected to result in third quarter earnings per diluted share of $0.03-$0.04. The Company also provided earnings guidance of $0.58-$0.62 per diluted share for the 2007 fiscal year, adjusted for the three-for-two stock split effective June 19, 2007.
A summary of earnings estimates for the 2007 fiscal year is outlined in the table below:
Comparable
Restaurant
Sales Estimate
Range
---------------
Revised Fiscal Year 2007 Earnings Estimate Range 2.0% 3.0%
------------------------------------------------------ ------- -------
Non-GAAP Net Income per Diluted Share Estimate
Before Additional Charges $ 0.83 $ 0.87
Estimated Federal Minimum Wage Increase (0.01) (0.01)
Estimated Cheese Cost Increase (0.02) (0.02)
Estimated Interest Expense Increase Associated
with Stock Repurchase (0.01) (0.01)
------- -------
Total Additional Charges (0.04) (0.04)
------- -------
------------------------------------------------------ ------- -------
Subtotal before CPK/ASAP Closure Costs 0.79 0.83
------------------------------------------------------ ------- -------
Q2 Closure Costs for One CPK/ASAP (0.02) (0.02)
Q3 Estimated Closure Costs for Four CPK/ASAPs (0.19) (0.19)
------- -------
------------------------------------------------------ ------- -------
GAAP Net Income per Diluted Share Estimate $ 0.58 $ 0.62
------------------------------------------------------ ------- -------
Stock Repurchase Authorization
California Pizza Kitchen announced today that its Board of Directors authorized the repurchase of up to $50.0 million of common stock over the next two years. Such repurchases will be made from time to time in open market transactions and through privately negotiated transactions. Additionally, the repurchase program will operate under parameters established by the Board of Directors and as market conditions permit.
This authorization follows two similar repurchase programs authorized over the last three years that totaled $50.0 million. The Company recently completed its latest authorization on August 2, 2007. Since August 2004 the Company has repurchased 2,604,706 shares of common stock for total consideration of approximately $48.5 million, or an average of $18.61 per share.
The Company will hold a conference call today at approximately 5:00 pm ET to discuss second quarter results and full year 2007 estimates. A webcast of the conference call can be accessed at www.cpk.com.
California Pizza Kitchen, Inc., founded in 1985, is a leading casual dining chain. The Company's full service restaurants feature an imaginative line of hearth-baked pizzas, including the original BBQ Chicken Pizza, and a broad selection of distinctive pastas, salads, soups, appetizers and sandwiches. The average guest check is approximately $13.30. As of August 9, 2007 the Company operates, licenses or franchises 215 restaurants, of which 184 are company-owned and 31 operate under franchise or license agreements. The Company also has a licensing agreement with Kraft Pizza Company, which manufactures and distributes a line of California Pizza Kitchen premium frozen pizzas.
This release includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include projections of earnings, revenue or other financial items, statements of the plans, strategies and objectives of management for future operations, statements concerning proposed new products or developments, statements regarding future economic conditions or performance, statements of belief and statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words "may," "will," "estimate," "intend," "continue," "believe," "expect," "anticipate" and similar words.
Investors are cautioned that forward-looking statements are not guarantees of future performance and, therefore, undue reliance should not be placed on them. Our actual results may and will likely differ materially from the expectations referred to herein. Among the key factors that may have a direct bearing on our operating results, performance and financial condition are changing consumer preferences and demands, the execution of our expansion strategy, the continued availability of qualified employees and our management team, the maintenance of reasonable food and supply costs, our relationships with our distributors and numerous other matters discussed in the Company's filings with the Securities and Exchange Commission. California Pizza Kitchen undertakes no obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
Selected Unaudited Consolidated Financial and Operating Data
(Dollars in thousands, except for per share and operating data)
Quarter Ended Six Months Ended
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
--------- --------- --------- ---------
Statement of Income:
Revenues:
Restaurant sales $156,592 $134,604 $304,436 $263,122
Royalties from Kraft licensing
agreement 1,073 785 1,786 1,321
Domestic franchise revenues 664 571 1,186 1,076
International franchise
revenues 252 208 540 347
--------- --------- --------- ---------
Total revenues 158,581 136,168 307,948 265,866
Costs and expenses:
Food, beverage and paper
supplies 38,426 33,090 74,802 65,258
Labor (1) 56,912 49,272 113,111 96,899
Direct operating and occupancy 30,773 26,214 59,468 51,508
--------- --------- --------- ---------
Cost of sales 126,111 108,576 247,381 213,665
General and administrative (2) 12,206 11,035 24,997 21,390
Depreciation and amortization 9,022 7,070 17,563 14,041
Pre-opening costs 852 800 2,203 1,433
Store closure costs 768 - 768 -
--------- --------- --------- ---------
Total costs and expenses 148,959 127,481 292,912 250,529
Operating income 9,622 8,687 15,036 15,337
Other income:
Interest income 91 287 178 512
--------- --------- --------- ---------
Total other income 91 287 178 512
--------- --------- --------- ---------
Income before income tax
provision 9,713 8,974 15,214 15,849
Income tax provision 3,393 2,961 5,297 5,230
--------- --------- --------- ---------
Net income $ 6,320 $ 6,013 $ 9,917 $ 10,619
========= ========= ========= =========
Net income per common share:
Basic $ 0.22 $ 0.20 $ 0.34 $ 0.36
Diluted $ 0.21 $ 0.20 $ 0.33 $ 0.35
Shares used in computing net
income per common share (in
thousands) (3):
Basic 29,129 29,414 29,127 29,467
Diluted 30,236 30,099 30,163 30,198
Operating Data:
Restaurants open at end of
period 213 193 213 193
Company-owned full service
restaurants open at end of
period 170 155 170 155
Average weekly company-owned
full service restaurant sales $ 68,535 $ 65,427 $ 67,232 $ 64,365
18-month comparable company-
owned restaurant sales
increase 5.4% 4.8% 5.1% 5.6%
----------------------------------------------------------------------
(1) Labor expense for the three and six months ended July 1, 2007
includes approximately $201,000 and $420,000 of stock-based
compensation, respectively, compared to $274,000 and $504,000 in the
three and six months ended July 2, 2006, respectively.
(2) General and administrative expense for the three and six months
ended July 1, 2007 includes approximately $1.5 million and $3.5
million of stock-based compensation, respectively, compared to $1.2
million and $2.5 million in the three and six months ended July 2,
2006, respectively.
(3) Includes effect of 3-for-2 stock split effective June 19, 2007.
Quarter Ended Six Months Ended
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
---------- -------- --------- -------
Statement of Income Percentages
(1):
Revenues:
Restaurant sales 98.7% 98.9% 98.9% 99.0%
Royalties from Kraft licensing
agreement 0.7% 0.6% 0.6% 0.5%
Domestic franchise revenues 0.4% 0.4% 0.3% 0.4%
International franchise revenues 0.2% 0.1% 0.2% 0.1%
---------- -------- --------- -------
Total revenues 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Food, beverage and paper
supplies 24.5% 24.6% 24.6% 24.8%
Labor (2) 36.3% 36.6% 37.2% 36.8%
Direct operating and occupancy 19.7% 19.5% 19.5% 19.6%
---------- -------- --------- -------
Cost of sales 80.5% 80.7% 81.3% 81.2%
General and administrative (3) 7.7% 8.1% 8.1% 8.0%
Depreciation and amortization 5.7% 5.2% 5.7% 5.3%
Pre-opening costs 0.5% 0.6% 0.7% 0.5%
Store closure costs 0.5% 0.0% 0.2% 0.0%
---------- -------- --------- -------
Total costs and expenses 93.9% 93.6% 95.1% 94.2%
Operating income 6.1% 6.4% 4.9% 5.8%
Other income:
Interest income 0.1% 0.2% 0.1% 0.2%
---------- -------- --------- -------
Total other income 0.1% 0.2% 0.1% 0.2%
---------- -------- --------- -------
Income before income tax
provision 6.1% 6.6% 4.9% 6.0%
Income tax provision 2.1% 2.2% 1.7% 2.0%
---------- -------- --------- -------
Net income 4.0% 4.4% 3.2% 4.0%
========== ======== ========= =======
(1) Percentages are expressed as a percentage of total revenues,
except for cost of sales which is expressed as a percentage of
restaurant sales.
(2) Labor percentage includes approximately 10 and 20 basis points of
stock-based compensation in the three and six months ended July 1,
2007, respectively, compared to 20 basis points in each of the three
and six months ended July 2, 2006.
(3) General and administrative percentage includes approximately 90
and 110 basis points of stock-based compensation in the three and six
months ended July 1, 2007, respectively, compared to 90 basis points
in each of the three and six months ended July 2, 2006.
Selected Consolidated Balance Sheet Information
(Dollars in thousands)
Selected Consolidated Balance July 1, December 31,
Sheet Information 2007 2006
---------- ------------
Cash and cash equivalents $ 7,178 $ 8,187
Total assets 339,779 310,513
Stockholders' equity 225,888 208,343
California Pizza Kitchen, Inc.
Units Summary
Total Total
Units at Units at
--------- ----------
April 1, July 1,
Second Quarter 2007 2007 Opened Acquired Closed 2007
------------------------- --------- ------ -------- ------ ----------
Company-owned full
service domestic 168 2 - - 170
Company-owned ASAP
domestic 11 - - - 11
Company-owned LA Food
Show 1 - - - 1
Franchised domestic 16 1 - 1 16
Franchised international 14 1 - - 15
-------------------------------------------
Total 210 4 - 1 213
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