Perkins & Marie Callender's Inc. Reports Results for the Second Quarter Ended July 13, 2008

MEMPHIS, Tenn., Aug. 28 // PRNewswire // -- Perkins & Marie Callender's Inc. (together with its consolidated subsidiaries, the "Company" or "we") is reporting today the financial results for its second quarter ended July 13, 2008.

Highlights for the second quarter of 2008 as compared to the second quarter of 2007 were:

  • Total revenues were up 0.7% to $131.0 million in the second quarter of 2008, primarily due to the operation of eleven new Company-operated Perkins restaurants. Since the second quarter of 2007, the Company has opened eight new Perkins restaurants and acquired three Perkins restaurants from franchisees.
  • One Company-operated Perkins restaurant opened during the second quarter of 2008; no Company-operated Perkins restaurants were closed. One Perkins franchised restaurant and one Company-operated Marie Callender's restaurant were closed during the second quarter of 2008.
  • Perkins restaurants' comparable sales decreased by 1.9% and Marie Callender's restaurants' comparable sales decreased by 3.9% in the second quarter of 2008 as compared to the second quarter of 2007. These declines in comparable sales resulted primarily from a decrease in comparable guest counts at both concepts.

J. Trungale, President and Chief Executive Officer of Perkins & Marie Callender's Inc., commented, "During the second quarter of 2008, top line sales for both Perkins & Marie Callender's continued to be impacted by the difficult economic environment and shifts in consumer spending habits. It has been a delicate balancing act taking price increases on both brands while maintaining a strong price/value ratio, managing food costs and continuing to offer a favorable guest experience. Our management team at Foxtail Foods has diligently addressed a broad range of issues including pricing, productivity, increasing efficiencies and standardization of accounting systems and departmental functions. We are focused on doing what we do best, stressing our rich heritage, looking at products and ways to advantageously present them, positioning ourselves competitively and maintaining positive approval ratings."

Second Quarter of 2008 Financial Results

Revenues in the second quarter of 2008 increased 0.7% to $131.0 million from $130.1 million in the second quarter of 2007. The increase was primarily due to a $1.5 million increase in sales in the restaurant segment offset by a $0.2 million decrease in sales in the Foxtail segment and a $0.5 million decrease in the franchise segment.

Food cost for the second quarter of 2008 increased to 30.0% of food sales from 27.5% in the second quarter of 2007. Restaurant segment food cost was up by 0.9% to 27.3% of food sales in the second quarter of 2008 as higher commodity costs were partially offset by menu price increases. In the Foxtail segment, food cost increased to 72.9% of food sales in the second quarter of 2008 from 56.5% in the second quarter of 2007 due primarily to higher commodity costs.

Labor and benefits costs, as a percentage of total revenues, increased by 0.7% to 33.0% in the second quarter of 2008 compared to the second quarter of 2007. In the second quarter of 2008, a 0.7% increase in the restaurant segment resulting from increases in average wage rates was partially offset by decreases resulting from headcount reductions in the Foxtail segment.

Operating expenses for the second quarter of 2008 were $34.2 million, or 26.1% of total revenues, compared to $32.6 million, or 25.0% of total revenues in the second quarter of 2007. Restaurant segment operating expenses increased by 0.7% to 27.8% of restaurant sales in the second quarter of 2008 due primarily to increased advertising, utilities, general liability insurance and rent expense. Operating expenses in the Foxtail segment increased by $0.4 million or 2.9% to 13.9% of segment food sales due primarily to higher repair and maintenance and freight costs.

General and administrative expenses were 7.7% of total revenues, a decrease of 0.5% from the second quarter of 2007. The decrease is due primarily to a reduction in legal costs and vacation expense.

Depreciation and amortization was 4.4% of revenues in the second quarters of both 2008 and 2007.

Interest, net was 6.1% of revenues in the second quarter of 2008 compared to 5.5% in the prior year's second quarter. The 0.6% increase resulted mainly from an increase in the interest rate margins on the Company's Term Loan and Revolver and from an approximate $6.8 million increase in the average debt outstanding during the second quarter of 2008 compared to the second quarter of 2007.

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 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:


Second Second Year-to- Year-to-
Quarter Quarter Date Date
Ended Ended Ended Ended
July 13, July 15, July 13, July 15,
(unaudited; in thousands) 2008 2007 2008 2007
Net loss $(8,065) (2,723) (15,653) (5,472)
Provision for income taxes 141 - 322 -
Interest, net 8,026 7,217 18,303 16,698
Depreciation and amortization 5,764 5,769 13,370 12,890
Transaction costs - 568 - 752
Asset impairments and closed store
expenses 477 (146) 553 9
Pre-opening expenses 164 271 325 434
Management fees 825 825 1,926 1,926
Other items 17 370 529 351
Adjusted EBITDA $7,349 12,151 19,675 27,588

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 July 13, 2008, the Company owned and operated 164 Perkins' restaurants and franchised 318 Perkins' restaurants. The Company also owned and operated 77 Marie Callender's restaurants, one Callender's Grill, the 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 Wednesday, September 3, 2008, at 10:00 a.m. (CT) to review the second quarter of 2008 earnings. The dial-in number for the conference call is (866) 207-2203 and the access code number is 59911422. A taped playback of this call will be available two hours following the call on Wednesday, September 3, 2008, through midnight (CT) on Tuesday, September 9, 2008. The taped playback can be accessed by dialing (800) 642-1687 and by using access code number 59911422.

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. 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 and demographic patterns;
  • our substantial indebtedness and our ability to comply with thecovenants in our debt instruments;
  • competitive pressures and trends in the restaurant industry;
  • prevailing prices and availability of food, supplies and labor;
  • relationships with franchisees and financial health of franchisees;
  • our ability to integrate acquisitions;
  • our development and expansion plans; and
  • statements covering our business strategy.


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. 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)

Second Second Year-to- Year-to-
Quarter Quarter Date Date
Ended Ended Ended Ended
July 13, July 15, July 13, July 15,
2008 2007 2008 2007
REVENUES:
Food sales $123,953 122,702 297,421 291,590
Franchise and other revenue 7,013 7,408 15,945 16,806
Total revenues 130,966 130,110 313,366 308,396
COSTS AND EXPENSES:
Cost of sales (excluding
depreciation shown below):
Food cost 37,159 33,685 87,561 81,008
Labor and benefits 43,199 42,048 102,688 100,369
Operating expenses 34,168 32,590 81,121 76,684
General and administrative 10,098 10,676 25,115 24,900
Transaction costs - 568 - 752
Depreciation and amortization 5,764 5,769 13,370 12,890
Interest, net 8,026 7,217 18,303 16,698
Asset impairments and closed store
expenses 477 (146) 553 9
Other, net (31) 344 (90) 314
Total costs and expenses 138,860 132,751 328,621 313,624
Loss before income taxes and
minority interests (7,894) (2,641) (15,255) (5,228)
Provision for income taxes (141) - (322) -
Minority interests (30) (82) (76) (244)
NET LOSS $(8,065) (2,723) (15,653) (5,472)



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

July 13, December 30,
2008 2007
ASSETS (Unaudited)

CURRENT ASSETS:
Cash and cash equivalents $2,846 19,032
Restricted cash 8,757 10,098
Receivables, less allowances for
doubtful accounts of $732 and
$1,542 in 2008 and 2007, respectively 17,550 17,221
Inventories 14,151 13,239
Prepaid expenses and other current assets 5,887 5,732
Total current assets 49,191 65,322

PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of $119,427
and $109,441 in 2008 and 2007, respectively 98,451 99,311
INVESTMENT IN UNCONSOLIDATED PARTNERSHIP 43 53
GOODWILL 30,038 30,038
INTANGIBLE ASSETS, net of accumulated
amortization of $18,824 and $17,494 in
2008 and 2007, respectively 151,986 153,316
DEFERRED INCOME TAXES 226 242
OTHER ASSETS 14,107 14,660
TOTAL ASSETS $344,042 362,942

LIABILITIES AND STOCKHOLDER'S INVESTMENT

CURRENT LIABILITIES:
Accounts payable $25,721 25,559
Accrued expenses 50,125 52,621
Accrued income taxes 235 -
Franchise advertising contributions 6,509 5,940
Current maturities of long-term debt
and capital lease obligations 1,386 9,464
Total current liabilities 83,976 93,584

CAPITAL LEASE OBLIGATIONS, less
current maturities 13,882 11,987
LONG-TERM DEBT, less current
maturities 301,626 298,009
DEFERRED RENT 14,467 13,467
OTHER LIABILITIES 15,710 15,520

MINORITY INTERESTS IN CONSOLIDATED
PARTNERSHIPS 185 333

STOCKHOLDER'S INVESTMENT:
Common stock, $.01 par value; 100,000
shares authorized;
10,820 issued and outstanding 1 1
Additional paid-in capital 137,738 137,923
Accumulated other comprehensive income 78 86
Accumulated deficit (223,621) (207,968)
Total stockholder's investment (85,804) (69,958)
TOTAL LIABILITIES AND STOCKHOLDER'S
INVESTMENT $344,042 362,942



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

Year-to-Date Year-to-Date
Ended Ended
July 13, 2008 July 15, 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,653) (5,472)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 13,370 12,890
Asset impairment costs 517 394
Amortization of debt discount 178 173
Other non-cash income and expense items (180) 309
Loss (gain) on disposition of assets 36 (385)
Minority interests 76 244
Equity in net loss of
unconsolidated partnership 10 35
Net changes in operating assets and
liabilities 1,107 (12,055)
Total adjustments 15,114 1,605
Net cash used in operating activities (539) (3,867)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (11,666) (11,190)
Proceeds from sale of assets - 3
Net cash used in investing activities (11,666) (11,187)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) revolver, net (3,800) 10,500
Repayment of capital lease obligations (242) (403)
Repayment of other long-term debt (760) (510)
Debt amendment costs (1,056) -
Lessor financing of new restaurants 2,286 -
Distributions to minority partners (224) (200)
Repurchase of equity ownership units (185) -
Net cash (used in) provided by
financing activities (3,981) 9,387

NET DECREASE IN CASH AND CASH EQUIVALENTS (16,186) (5,667)

CASH AND CASH EQUIVALENTS:
Balance, beginning of period 19,032 9,069
Balance, end of period $2,846 3,402



SOURCE Perkins & Marie Callender's Inc.

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