MONCTON, NB, Sept. 14, 2011 /CNW/ - Imvescor Restaurant Group Inc. ("IRG" or the "Company") (TSX: IRG), reported financial results today for the 13 weeks ending July 31, 2011 (or "third quarter"), and for the 39 weeks ending July 31, 2011 (or "year to date"). The 2010 results are for the 40 weeks ended August 1, 2010 and are therefore not directly comparable.
Year to date, six new restaurants were opened: 3 Pizza Delights, 1 Mikes, 1 Scores and 1 Baton Rouge restaurant, while renovating 4 Pizza Delights and 6 Mikes.
The Company reported an increase in net earnings of $1.0 million for the quarter as compared to the prior year.
Earnings before interest, depreciation, income taxes and one-time costs increased $1.0 million for the quarter and year to date as compared to the prior year.
The Company reported a reduction in general, administrative and franchise support expenses of $446 thousand for the quarter and $706 thousand year to date.
Refinancing of Convertible Debentures
The Company continues its efforts in identifying a financing solution to deal with the convertible debentures which become due on December 31, 2011. Market conditions have restricted the Company's ability to obtain a financing. In June 2011, the Board of Directors retained RBC Dominion Securities Inc. as its financial advisor to assist the Company in identifying all financing or strategic alternatives available to the Company.
At this time, no agreement in respect to any transaction has been reached between the Company and a third party. There can be no assurance that a financing will be available to the Company in the amount required by the Company to repay the convertible debentures. In such event, the convertible debentures would most likely be converted. Please refer to the "Financial Position" section contained in the Company's MDA for the third quarter ended July 31, 2011 dated September 14, 2011 and the disclosure regarding the potential dilutive impact of the conversion of the convertible debentures into equity.
Restructuring of Operations
Although the Company continues to experience slight declines in total sales and same store sales, increases in retail sales combined with cost reductions and various restructuring measures have driven improvements in the Company's earnings before interest, depreciation, lease exit costs, impairment, income tax expense and discontinued operations.
The Company has made substantial progress in restructuring its operations and exiting certain underperforming locations and unfavorable lease terms. Through these measures, the Company has reduced expenses by approximately $2.0 million on an annual basis. The Company intends to use some of these savings to support additional marketing efforts and other initiatives in future periods to increase system sales. In addition, the Company will continue to reduce its food costs to franchisees in order to increase franchisee profitability. This measure is likely to reduce supply chain revenues in future periods. This investment is expected to result in the long-term health and future development of the Company's franchise system.
Earnings before interest, depreciation, lease exit costs, impairment, income tax expense and discontinued operations for the 39 weeks ended July 31, 2011 were $10.4 million as compared to $9.4 million for the 39 weeks ended August 1, 2010, an increase of $1.0 million. The increase is attributed to higher retail revenues, a reduction in advertising expenditures and a reduction in general, administrative and franchise support expenses.
Third Quarter 2011 Financial and Operating Results
The following table provides selected financial information for the 13 week and 39 week periods ending July 31, 2011, along with results for the comparative periods of the prior year, which were calculated for the 13 weeks and 40 weeks ended August 1, 2010.
|(in thousands of dollars except per share items)||
|Royalties and other revenue||9,980||9,945||29,641||29,984|
|Advertising and administrative expenses||6,219||7,259||21,763||23,548|
|EBITDA (note 1)||4,610||3,594||10,401||9,404|
|Net earnings from continuing operations||707||629||1,251||1,469|
|Net earnings (loss) from discontinued operations||206||(191)||(1,201)||(588)|
|EPS from continuing operations||0.200||0.134||0.291||0.250|
|EPS (loss) from discontinued operations||0.022||(0.020)||(0.127)||(0.062)|
|Total basic EPS||0.222||0.114||0.163||0.188|
|Total diluted EPS (note 2)||0.093||0.114||0.021||0.188|
Note 1: EBITDA includes earnings before interest income, interest on long-term debt and convertible debentures, depreciation and amortization, lease exit costs, gains, impairments and loss from discontinued operations.
Note 2: Diluted EPS for the 13 and 39 weeks ended July 31, 2011 have included the potential dilutive impact of the convertible debentures and have been calculated at 95% of the closing share price of $1.20 at July 31, 2011. In the event a financing or strategic solution is not implemented and the convertible debentures are converted into common shares, the market price of the common shares may be adversely affected and the impact of a conversion may substantially dilute the interests of existing shareholders. Future market prices of the common shares may adjust positively or negatively depending on various factors, including those described herein.
IRG derives its revenues primarily from royalties based on system sales from each of its four brands: Pizza Delight™, Mikes™, Scores™ and Bâton Rouge™.
Same store sales in the third quarter for Pizza Delight was -1.7% (2010 -1.3%), Mikes -1.5% (2010 -4.9%), Scores -2.1% (2010 -8.6%) and Baton Rouge -0.5% (2010 +7.2%) for a total of -1.4% (2010 -2.6%) for IRG.
Year to date same store sales for Pizza Delight was -0.8% (2010 -0.1%), Mikes -2.0% (2010 -3.3%), Scores -4.5% (2010 -6.7%) and Baton Rouge -1.1% (2010 +1.1%) for a total of -2.2% (2010 -2.6%) for IRG.
Total system sales for the third quarter were $104.1 million as compared to $105.1 million in 2010, a decrease of 1.0%. Total system sales for the 39 weeks ended July 31, 2011 were $302.9 million as compared to $304.5 million for the same 39 week period in 2010, a decrease of 0.5%.
Royalties, advertising fees and other revenue for the third quarter were $10.0 million and $29.6 million for the 39 weeks ended July 31, 2011 as compared to $9.9 million and $30.0 million in 2010. The Company has recorded growth in retail revenues of branded products in grocery and other retail outlets net of decreases in royalty and advertising revenues related to the decrease in sales and an overall reduction in supply chain revenues as a result of food cost reductions to franchisees to increase purchasing compliance and franchisee profitability.
General, administrative and franchise support costs for the third quarter were $4.1 million as compared to $4.6 million in 2011 and $13.8 million year to date as compared to $14.5 million for the 40 weeks ended August 1, 2010, a reduction of $446 thousand and $706 thousand respectively. The reduction is attributed to overall administrative and overhead cost reductions as well as significant savings in franchise support expenses resulting from the exiting of underperforming locations and unfavorable lease terms.
The Company recorded net income for the third quarter of $2.1 million or $0.222 per share compared to net earnings of $1.1 million or $0.114 per share for the 13 weeks ended August 1, 2010.
Year to date, net income was $1.5 million ($0.163 per share) as compared to $1.8 million ($0.188 per share) in 2010. Included in net income are restructuring costs of $789 thousand, lease exit costs of $1.2 million and costs related to the closure of the two Company-owned Scores restaurants of $1.2 million consisting of operating losses, impairment charge on assets and estimated costs to exit leases.
Total long-term debt at July 31, 2011 decreased to $40.8 million as compared to $43.7 million at October 31, 2010, a result of principal payments. Debt repayment remains a priority of the Company.
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. Bâton Rouge® operates in Quebec, Ontario, Alberta and Nova Scotia in the casual dining segment.
Cautionary Note Regarding Forward-Looking Statements
Certain information in this press release regarding the Company, including, but not limited to, the Company's business objectives, strategies and priorities, the generation of cash flows, the refinancing of the Convertible Debentures, the growth of the same store sales, and other statements that are not historical facts, are "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. Forward-looking statements can generally be identified by words such as "may", "should", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "outlook" and similar expressions. All such forward-looking statements are made pursuant to the "safe harbour" provisions of applicable securities laws. These statements are based on information currently available to the Company's management and on the current assumptions, intentions, plans, expectations and estimates of the management regarding the Company's future growth, results of operations, performance and opportunities as well as the economic environment in which it operates. Forward-looking statements involve known and unknown risks, uncertainties and other factors outside the Company's control. A number of factors could cause actual results of the Company to differ materially from the results discussed in the forward-looking statements, including, but not limited to: market conditions for financing, competitive conditions, whether related to new competitors or current competitors; change in the Company's or its competitors current pricing strategies; changes in demographic trends; changes in consumer preferences and discretionary spending patterns; changes in national and local business and economic conditions; risks associated with the closure of restaurants, costs associated with strategically exiting locations, the ability of the Company to pay dividends, the Company successfully offers new and innovative products and executes its strategies as planned; legislation and governmental regulation; changes in accounting policies, practices and standards; and the results of operations and financial condition of the Company and other factors referenced in the Company's continuous disclosure filings which are available on SEDAR at www.sedar.com. Although the forward-looking statements contained herein are based upon what the Company believes to be reasonable assumptions on the date of this press release, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. Certain assumptions underlying the forward-looking statements contained herein include assumptions related to the Company's ability to obtain financing on conditions favorable to the Company, future cash flows, market conditions, sales estimates, estimates relating to the Company's ability to settle and exit leases. Readers should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this press release and, accordingly, are subject to change after such date. Forward-looking statements are provided herein for the purpose of giving information about the Company's current strategic priorities, expectations and plans, allowing investors and others to get a better understanding of the Company's business outlook and operating environment. Readers are cautioned, however, that such information may not be appropriate for other purposes. The Company assumes no obligation to update such forward-looking statements to reflect new information, future events or otherwise, except as required by applicable securities laws. Except as otherwise indicated, forward-looking statements do not reflect the potential impact of any non-recurring or other special items or of any transactions that may be announced or that may occur after the date of this press release. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them. The Company therefore cannot describe the expected impact in a meaningful way or in the same way it presents known risks affecting the business. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.