Prime Restaurants Inc. Announces Solid Growth in Q3 2011
MISSISSAUGA, ONTARIO--(Marketwire - Nov. 15, 2011) - Prime Restaurants Inc. ("PRI" or the "Company") (TSX:EAT) today reported its results for the 13 and 39 weeks ended October 2, 2011. Effective April 5, 2010 Prime Restaurants Royalty Income Fund (the "Fund") was reorganized (the "Reorganization") into a public corporation named Prime Restaurants Inc. The 39-week period ended October 4, 2010 includes the operations of the Fund for the three months ended March 31, 2010, and the 26-week period ended October 4, 2010, of PRI. As PRI's operations are substantially different from the operations of the Fund, much of the information in this press release is not directly comparable. In addition, effective January 3, 2011 the Company began incorporating International Financial Reporting Standards ("IFRS") in its reporting. For more information relating to the impact of the transition to IFRS on the Company's reported financial position, financial performance and cash flows, please refer to the Company's Management Discussion and Analysis ("MD&A") for the 13 and 39 week periods ended October 2, 2011 available on the Company's web site or at www.sedar.com.
- Solid Same Store Sales Growth ("SSSG")(1) of 2.5% through first nine months of 2011
- Strong SSSG across all brands and geographic regions
- One new pub and one new East Side Mario's opened in third quarter
- Earnings per share of $0.20 in third quarter; $0.45 per share for 39 weeks ended Oct. 2, 2011
- Quarterly dividend declared of $0.12 per Class A Share; $0.36 per share through first nine months
PRI generated a solid 2.5% increase in SSSG through the 39 week period ended October 2, 2011. SSSG for the 13 weeks ended October 3, 2011 was 2.1%. All of the Company's brands posted positive SSSG in the 13 week and 39 week periods ended October 2, 2011. For the first three quarters of 2011, East Side Mario's restaurants generated positive SSSG of 2.9%, with Casey's restaurants rising 1.3% and the pubs up 1.9%. All of PRI's geographic regions in Canada posted positive SSSG, with Ontario up 2.7%, Atlantic Canada rising 2.3%, Western Canada posting SSSG of 2.7% and Québec up 1.4% compared to the prior year.
"Our growth accelerated in the third quarter as our leading sales and marketing strategies, combined with our relentless focus on providing our guests with value and a high quality experience, resulted in sold same store sales growth across all of our brands and in all of our geographic regions," commented John Rothschild, Chief Executive Officer.
East Side Mario's management remains focused on utilizing larger format restaurants to maximize revenues, supported by a four-fold increase in television advertising during 2011 compared to 2010. New menus have been introduced and new promotions have been launched, including Canada's largest sponsorship of 8-10 year old youth soccer. Casey's restaurants continue to focus on new marketing programs launched in 2011, including e-mail and direct mail campaigns, and a new menu introduced in October that included gluten-free items aimed at meeting the specific needs of all guests. PRI's pub locations introduced a new seasonal summer menu in June emphasising its innovative quick reference code directing guests to a mobile web site suggesting recommended beer and food pairings.
During the 13 weeks ended October 2, 2011, the Company opened one new pub and one new East Side Mario's restaurant in Ontario, bringing the total number of new restaurants opened during 2011 to five. In addition one East Side Mario's restaurant was re-opened under new management in Ontario during the first quarter of 2011. Five restaurants were closed in the third quarter, including three East Side Mario's restaurants, one pub and one Casey's restaurant, bringing the total number of locations closed in 2011 to six. As at October 2, 2011 there were 138 franchised and 11 corporate-owned restaurants in Canada and five franchised restaurants in the USA.
(1) Same store sales growth is not an earnings measure recognized by IFRS and therefore may not be comparable to similar measure presented by other issuers. The Company believes this non-IFRS operating measure provides useful information to both management and investors as it is a key driver of growth in PRI's operations.
Effective April 5, 2010 the Fund was reorganized into a public corporation named Prime Restaurants Inc. The new corporate structure includes the combination of the businesses of Prime Restaurants of Canada Inc. ("PRC"), the Fund and PRC Trademarks Inc. ("TradeMarkCo"). The Fund was dissolved and unitholders and limited voting unitholders of the Fund received, for each unit and limited voting unit of the Fund, one class A limited voting share ("Class A Limited Voting Shares") of PRI.
|Entity||13 weeks ended
Oct 2, 2011
|13 weeks ended
Oct. 3, 2010
|39 weeks ended
Oct. 2, 2011
|39 weeks ended
Oct. 3, 2010
|System sales – reported by PRI restaurants||90,307||88,380||259,948||174,720|
|Costs and expenses||10,951||9,909||33,546||21,817|
|Income before the undernoted||2,329||2,253||5,557||5,038|
|Stock-based compensation expense||162||157||414||157|
|Share of (income) loss from associate||(26||)||13||(26||)||19|
|Reorganization transaction costs||-||55||-||2,436|
|Operating income (loss)||2,098||2,015||4,893||(9,591||)|
|Income (loss) before taxes||2,094||2,010||4,874||(9,604||)|
|Total comprehensive income (loss)||1,707||1,829||3,712||(12,534||)|
|Total comprehensive income (loss)|
|Owners of parent||1,701||1,825||3,699||(12,545||)|
|Basic earnings per Class A Limited Voting Share||$0.20(1||)||$0.22(1||)||$0.45(1||)||($1.55)(1||)|
|Diluted earnings per Class A Limited Voting Share||$0.20(2||)||$0.22(2||)||$0.45(2||)||($1.55)(2||)|
|Dividend paid per Class A Limited Voting Share||$0.12||$0.12||$0.36||$0.36|
|October 2,||January 2,|
(1) The basic earnings per share were calculated based on the following weighted average number of Class A Limited Voting Shares and class B limited voting shares ("Class B Limited Voting Shares") of PRI that were outstanding for the: 13 weeks ended October 2, 2011, 8,321,238; 39 weeks ended October 2, 2011, 8, 257, 079 and 13 and 39 weeks ended October 3, 2010, 8,117,571.
(2) The diluted earnings per share were calculated based on the following diluted weighted average number of Class A Limited Voting Shares of PRI for the : 13 weeks ended October 2, 2011, 8,339,399; 39 weeks ended October 2, 2011, 8,272,174; 13 weeks ended October 3, 2010, 8,124,303; and 39 weeks ended October 3, 2010, 8,119,815.
The increase in revenue reported by PRI for the 13 weeks ended October 2, 2011, which includes royalties and franchise-related income, sales from corporate-owned restaurants, and reimbursements from franchisees of restaurant development costs, was due primarily to a higher number of restaurant opening weeks and higher franchise reimbursement of restaurant development costs and the increase in SSSG in the period compared to the prior year. Prior to the Reorganization, the Fund's revenues comprised mainly of interest income on a promissory note issued by TradeMarkCo.
The increase in costs and expenses for the 13 weeks ended October 2, 2011, which include costs incurred by company-owned restaurants such as cost of sales, general and administrative expenses as well as expenses associated with managing the activities of PRI and providing services to the corporate and franchised restaurants including employees' salaries, wages and benefits and recoverable development costs incurred to build restaurants on behalf of franchisees, was due primarily to incremental costs from more Company-owned restaurants operating weeks, more employees and higher recoverable development costs incurred to build restaurants on behalf of franchisees. Prior to the Reorganization, costs and expenses reflected only the fees paid to Trustees and other expenses associated with managing the activities of the Fund.
Depreciation expense is comprised of depreciation on property, plant and equipment. Prior to the Reorganization, the Fund did not have any depreciable assets.
PRI has a Restricted Share Plan (the "Plan") that provides for the grant of Restricted Share Units ("RSUs") to officers, employees and directors of PRI and its affiliates, as well as consultants engaged by PRI or its affiliates. Stock-based compensation expense is comprised of the value of RSUs that have vested and straight-line amortization of individual tranches over their respective vesting periods. The total value of the RSUs granted was based on the market price of the Class A Limited Voting Shares on the grant date.
Interest income represents interest earned on cash balances maintained and interest earned on promissory notes from franchisees. Prior to the Reorganization, the Fund did not maintain cash balances.
Interest expense for the 13 weeks ended October 2, 2011 includes interest arising from a loan agreement that was assumed by PRI as part of the Reorganization. The proceeds from the loan were used by PRC to finance the construction and opening of a second Bier Markt location in downtown Toronto. The loan bears interest at the banker's acceptance rate plus 3.25% per annum and will mature in September 2015. Prior to the Reorganization, the Fund did not have any outstanding loans.
Non-controlling interest relates to a partnership interest formed on August 4, 2008 between PRC and a third party to open a Bier Markt location in Toronto, and the Company is entitled to 95% of the profits. A third party holds the remaining 5% investment and is reflected as a non-controlling interest on the Company's balance sheet.
On October 17, 2011 the Company announced it has entered into an acquisition agreement pursuant to which Cara Operations Limited ("Cara") has agreed, subject to certain conditions, to acquire all of the issued and outstanding shares of the Company (the "Proposed Transaction"). Shareholders are to receive a total of $7.00 per share on the effective date, consisting of $6.75 per share payable by Cara in cash and a special dividend from the Company of $0.25 per share. The Proposed transaction will be effected pursuant to a plan of arrangement under Section 182 of the Business Corporations Act (Ontario) and is expected to close on January 4, 2012.
The Proposed Transaction is subject to a number of conditions, including: (a) the completion of Cara's financing necessary to complete the Transaction, which condition Cara waived on November 14, 2011, as announced by press releases issued that day by both Cara and the Company; (b) the approval of the Company's shareholders at a special meeting; (c) the approval of the Ontario Superior Court of Justice; and (d) certain other customary conditions.
In connection with the Proposed Transaction, all of the 942,686 Class B Limited Voting Shares and 407,333 Class C Non-Voting Shares held by PRH were converted into 1,350,019 Class A Limited Voting Shares on October 25, 2011. Should the acquisition agreement be terminated, the Class B Limited Voting Shares and Class C Non-Voting Shares that were converted as a result of the Proposed Transaction will revert back to their respective class.
Further details of the Proposed Transaction are expected to be included in a proxy circular mailed to shareholders in November 2011.
PRI's financial statements and MD&A for the 13 and 39 weeks ended October 2, 2011, as well as historical financial statements and MD&As of PRC and the Fund, are available at www.primerestaurants.com and www.sedar.com.
About Prime Restaurants Inc.
PRI franchises, owns and operates one of Canada's leading networks of casual dining restaurants and pubs. With such well-respected brands as East Side Mario's, Casey's, Fionn MacCool's, D'Arcy McGee's, Paddy Flaherty's, Tir nan Óg, and Bier Markt, Prime has been delivering quality, value and a superior guest experience for more than thirty years. Prime's Class A Limited Voting Shares are listed on the Toronto Stock Exchange under the symbol "EAT".
The public communications of PRI often include written or oral forward-looking statements. Statements of this type are included in this news release, and may be included in filings with Canadian securities regulators, or in other communications. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives for 2011 and beyond, our strategies or planned future actions, and our targets or expectations for our financial performance and condition. All statements, other than statements of historical fact, contained in this news release are forward-looking statements, including, without limitation, statements regarding the future financial position and operations, business strategy, plans and objectives of or involving PRI. Readers can identify many of these statements by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" and similar words or the negative thereof. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.
By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties including those discussed in the MD&A and the Annual Information Form (the "AIF") under "Narrative Description of the Business - Risk Factors" which are available at www.sedar.com. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements
The information set forth in the MD&A and AIF identifies factors that could affect operating results and performance. We caution that the list of factors discussed in the MD&A and the AIF is not exhaustive, and that, when relying on forward-looking statements to make decisions with respect to PRI, investors and others should carefully consider the factors discussed, as well as other uncertainties and potential events, and the inherent risks and uncertainties of forward-looking statements.
The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release. Except as required by applicable securities laws, PRI does not undertake to update any forward-looking statement, whether written or oral, that may make or that may be made, from time to time.