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Imvescor Restaurant Group Inc. (IRG)
Market: CDN Consolidated
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Oct 20, 2014, 4:56 PM EDT
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IMVESCOR RESTAURANT GROUP REPORTS FOR FOURTH QUARTER AND YEAR-END 2010 FINANCIAL RESULTS, AND CHANGES TO THE BOARD OF DIRECTORS

MONCTON, NB, Jan. 28 /CNW Telbec/ - Imvescor Restaurant Group Inc. ("IRG" or the "Company") (TSX: IRG), reported financial results today for the 13 weeks ending October 31, 2010 (or "fourth quarter"), and for the 53 weeks ending October 31, 2010 (or "fiscal year"). The 2009 results are the 17 weeks ("interim period") and 43 weeks ended October 25, 2009 respectively and are therefore not directly comparable.

Dividend Declared

The Board of Directors has approved a dividend of $0.075 per share payable February 28, 2011 to shareholders of record on February 14, 2011. The dividend is an eligible dividend for income tax purposes.

Fourth Quarter Highlights

  • Total system sales increased by 0.1% for the fourth quarter compared to the period last year and decreased by 1.8% for the fiscal year.

  • Same store sales declined by 2.0% in the fourth quarter and by 2.5% for the fiscal year.

  • IRG lost $2.120 per share in the fourth quarter, due to a $22.9 million non-cash impairment of goodwill and other intangible assets. Prior to the non-cash impairment charge, earnings per share were $0.305 for the fourth quarter and $0.493 for the fiscal year.

  • IRG repaid $0.9 million in long-term debt during the fourth quarter and $3.4 million for the fiscal year.

  • Subsequent to the end of the fiscal year, the Company renewed the $15 million loan with GE Canada Equipment Financing G.P. ("GE") which was due in December 2011.

  • During the preparation of the consolidated financial statements for the 53 weeks ending October 31, 2010, an overstatement of future income taxes and goodwill related to the Plan of Arrangement was identified for the 43 weeks and 17 weeks ending October 25, 2009. In addition the tax treatment previously accorded to certain transactions between the PDM Limited Partnership and the previous Fund had not been allocated appropriately in calculating the purchase price allocation. This restatement gives effect to the adjustment of goodwill and the future income tax liability, as well as the effect on opening shareholders' equity and on the provision for income taxes for the 43 weeks ended October 25, 2009. The 2009 figures have been restated in the consolidated financial statements for the 53 weeks ended October 31, 2010. This non-cash adjustment has no impact on net cash flow or cash balances previously reported

"2010 has been a challenging year with difficult economic conditions," said William Lane, Interim Chief Executive Officer. "The Company will continue to focus on increasing revenues and attracting new franchisees, while new store openings and renovations are expected to increase our system sales. The restaurant industry in Canada has struggled in 2010 as reported by the Canadian Restaurant Foodservices Association (CRFA).  According to the CRFA most restaurants experienced guest count declines in 2010 on top of the declines that had been experienced in 2009. Our restaurants offer great value to Canadians and remain well positioned to benefit as consumers disposable income and confidence increases. We are very pleased that we were successful in securing the $15 million loan renewal with GE which provides comfort and short and long term benefits to all stakeholders."

Fourth Quarter 2010 Financial and Operating Results
(Please see "Information on Basis of Comparison" following the Outlook section of this release)

For the 53 weeks ended October 31, 2010, the Company opened 1 Pizza Delight, 2 Mikes, 4 Scores, 1 Baton Rouge and closed 1 Pizza Delight and 3 Mikes while renovating 8 Pizza Delights and 8 Mikes. Subsequent to October 31, 2010, 1 Pizza Delight, 1 Scores, and 1 Mikes were opened while 1 Pizza Delight and 1 Mikes were closed.

The following table provides selected financial information for the 13 week and 53 week periods ending October 31, 2010, along with results for the prior year, which were calculated for the 17 weeks and 43 weeks ended October 25, 2009.

(in thousands of dollars except per
share / fund unit items)
2010
(13 weeks
ended
 October 31,
2010)
2009
(17 weeks
ended
 October 25,
2009)
2010
(53 weeks
ended
 October 31,
2010)
2009
(43 weeks
ended
 October 25,
2009)
         
System sales 101,465 137,976 413,176 341,256
Royalties, franchise fees and other related revenue 9,918 1,626 39,424 1,626
Gross profit on sales 1,238 153 5,388 153
Advertising and administrative expenses 7,375 1,411 33,024 1,598
Impairment of Imvescor rights and other assets (5,300) - (5,300) (1,823)
Impairment of goodwill (17,598) - (17,598) -
Net earnings (20,020) 11,344 (18,245) (18,177)
Basic earnings per share / fund unit (2.120) 1.519 (1.932) (2.245)
Diluted earnings per share / fund unit (2.120) 1.550 (1.932) (2.245)

IRG derives its revenues primarily from royalties based on system sales from each of its four brands: Pizza Delight™, Mikes™, Scores™ and Baton Rouge™.

Total system sales for the 13 weeks ended October 31, 2010 were $101.4 million, as compared to $137.3 million for the interim 17 weeks in 2009. For the 53 week period ended October 31, 2010 total system sales were $413.2 million as compared to $341.3 million for the 43 week period ended October 25, 2009. Because of the change in the Company's fiscal period-end in 2009, these are not directly comparable.

Royalties, advertising fees and related revenue for the fourth quarter were $9.9 million and $39.4 million for the 53 weeks ended October 31, 2010 as compared to $1.6 million for both comparable periods in fiscal 2009. The significant increase in revenue is a result of the new corporate structure.

Same store sales ("SSS") were down 2.0% during the fourth quarter. SSS at Pizza Delight were +0.9%; Mikes SSS were -1.2%; Scores SSS were -8.2%; and Baton Rouge SSS grew +2.4% for the fourth quarter. For the 53 weeks ended October 31, 2010, SSS were down 2.5%. Even though the decreases in 2010 are mainly attributed to the ongoing challenging economic conditions, the Company remains focused on improving its performance in 2011.

Net earnings for the Company for the fourth quarter ending October 31, 2010 were a loss of $20.0 million or $2.120 per fully diluted share. The net loss included a $17.6 million non-cash impairment of goodwill and a $5.3 million non-cash impairment of IRG's rights and other assets.  Net earnings before taxes and the non-cash impairment were $2.1 million for the fourth quarter.

Total long-term debt at October 31, 2010 decreased to $43.7 million as compared to $47.0 million at October 25, 2009, a result of principal payments. Debt repayment remains a priority of the Company.

The Company has set the refinancing of the Convertible Debentures as a priority for  2011 as a key step to conclude the long term financial restructuring. The Convertible Debentures are due in December, 2011 and if not refinanced would have a substantial dilution effect on IRG shareholders.

CHANGES TO THE BOARD COMPOSITION

IRG also announced today that the Honorable Herb Breau and Mr. Gilles Pépin have resigned as directors, effective today. The remaining directors accepted the resignations and have filled the vacancies created through the appointment of Mr. Pierre-Yves Julien, President & CEO of Medavie Blue Cross and by Monique Imbeault, Executive Vice President of General Financial Corporation Ltd. ("GFC"). Mr Julien will serve as an independent director while Monique Imbeault will be a non-independent director since GFC is an insider of IRG, being the holder of approximately 28% of the issued and outstanding common shares of IRG. Both Mr. Julien and Mrs. Imbeault will serve as directors until the next annual general meeting of IRG.

"I would like to express our sincere gratitude to Mr. Breau and Mr Pépin for their work on the Board this past year," said Gabriel Sacratini, Chairman of the Board.

Outlook

The Company believes that its restaurant brands provide quality food and good value to consumers in the mid-scale category which helps maintain sales as the general economic conditions continue to be a challenge.

The Company intends to continue its focus on growing existing restaurant sales and expanding the number of franchised restaurants in Ontario, Quebec, Atlantic Canada, and Alberta. This will be accomplished through a combination of building design, menu enhancement, brand awareness and regular renovations to modernize the existing restaurants.

Management expects same store sales growth from renovations to the Mikes and Pizza Delight restaurants in its current markets while the new concepts will provide a solid platform in the markets where the Company plans to expand. Management plans on aggressively renovating its existing restaurants to these new concepts over the next few years.

The Company will continue to seek opportunities to open new restaurants. One Baton Rouge restaurant, four Scores restaurants, two Mikes restaurants and one Pizza Delight restaurant were opened in the 2010 fiscal period.

Information on Basis of Comparison

Under the Plan of Arrangement approved by unitholders on September 4, 2009, PDM Royalty Income Fund acquired (by way of merger) the privately held Imvescor Inc. and other private entities.  The surviving entity, named Investor Restaurant Group, is now a corporation rather than an income trust.  It began operations on October 10, 2009.

The new corporation, Imvescor Restaurant Group, is a publicly traded company and is therefore required to compare its financial results with its predecessor, PDM Royalty Income Fund. However, PDM had a completely different legal and operating structure from IRG today.  As an income trust, PDM was structured to receive and distribute royalties. It had virtually none of the overhead expenses that are typical of an operating company like IRG.  As an operating company, the financial results of IRG are therefore not directly comparable with those of PDM and the presentation of results as required for proper disclosure does not in this case provide the normal comparisons that would enable readers to easily understand the year-over-year business activities.

This situation will endure until IRG has cycled a full fiscal year.  Normal year-over-year comparisons will begin in the first quarter of 2011, at which time there will be a historical basis of comparison.  IRG continues to focus on key elements of its business, which include system sales, same store sales, number of restaurants, cash flow, debt repayment, and earnings per share.

About Imvescor Restaurant Group

Headquartered in Moncton, New Brunswick, Imvescor Restaurant Group owns franchised and corporate stores throughout Canada, under four brands:  Pizza Delight® operates primarily in Atlantic Canada, where it dominates the family/mid-scale segment.  Mikes® and Scores® restaurants operate primarily in Quebec in the family and casual dining segments and the take-out and delivery segments.  Baton Rouge® operates in the Province of Quebec, Ontario, and Alberta in the casual dining segment.

Forward-Looking Statements

Certain information regarding Imvescor Restaurant Group contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond the Company's control, and that future events and results may vary substantially from what the Company currently foresees. The Company assumes no obligation to update such forward-looking statements, except as required by applicable securities laws. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.

Mélanie Joly
514 845-3558     
William R. Lane, CMA
Interim Chief Executive Officer and President,
Executive Vice-President & Chief Financial Officer
Imvescor Restaurant Group Inc.
http://www.imvescor.ca
506-853-0990

For more information about our brands:

Mikes®:    http://www.mikes.ca
Pizza Delight®: http://www.pizzadelight.com
Bâton Rouge®:       http://www.batonrougerestaurants.com
Scores®:    http://www.scores.ca

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