Total revenues for the quarter declined 9.7% to $115.5 million
Perkins & Marie Callender's Inc. is reporting today the financial results for its quarter ended October 4, 2009.
• The Company's EBITDA (as defined below) for the forty weeks ended October 4, 2009, was up $1.5 million over the comparable period in 2008 due principally to improved financial results at its Foxtail segment. During the third quarter, EBITDA decreased by $0.9 million compared to the same quarter in 2008.
• Total revenues for the quarter declined 9.7% to $115.5 million compared to $127.9 million for the same period in 2008 primarily due to decreases in comparable sales at Company-operated Perkins and Marie Callender's restaurants.
• Food cost for the quarter declined from 29.6% of food sales to 25.7% due primarily to lower commodity costs that impacted all segments and improved food cost controls at our Perkins and Marie Callender's restaurants.
• Foxtail sales decreased by $3.5 million while segment income increased by $2.1 million during the third quarter of 2009 due to higher sales prices, lower commodity costs and operational improvements. This increase is after elimination of a non-cash goodwill impairment charge of $1.7 million in 2008.
J. Trungale, President and Chief Executive Officer of Perkins & Marie Callender's Inc., commented, "With the economy still struggling, the third quarter's results at PMCI yielded no surprises. We have remained consistent in our efforts to improve Foxtail and remain on track with that initiative. We continue to drive the long term value message for both the Perkins and Marie Callender's brands without resorting to heavy discounting as many of our competitors have opted for. And, finally, we are managing our costs efficiently across the board while continuing to focus on maintaining and improving the quality of our food and service to our guests."
Financial Results for the Third Quarter of 2009
Revenues in the third quarter of 2009 decreased 9.7% to $115.5 million from $127.9 million in the third quarter of 2008. The decrease resulted from an $8.6 million decrease in sales in the restaurant segment, a $0.4 million decrease in the franchise segment and a $3.5 million decrease in the Foxtail segment. Comparable sales for the quarter decreased by 7.5% at Company-operated Perkins restaurants and by 9.3% at Company-operated Marie Callender's restaurants.
Food cost for the third quarter of 2009 decreased to 25.7% of food sales from 29.6% in the third quarter of 2008. Restaurant segment food cost was down by 1.8% to 24.4% of food sales in the third quarter of 2009 due to lower commodity costs and improved store-level controls. In the Foxtail segment, food cost decreased to 57.9% of food sales in the third quarter of 2009 from 66.7% in the third quarter of 2008 due to higher sales prices and lower commodity costs, particularly on eggs and dairy products.
Labor and benefits costs, as a percentage of total revenues, increased by 1.8% to 34.2% in the third quarter of 2009 compared to the third quarter of 2008. A 1.7% increase in the restaurant segment resulted from the decline in comparable sales and higher medical insurance costs. Labor and benefits costs in the Foxtail segment decreased by 1.5% of segment sales compared to the third quarter of 2008 due primarily to better scheduling and operational improvements in the current year.
Operating expenses for the third quarter of 2009 were $33.2 million, or 28.7% of total revenues, compared to $34.2 million, or 26.8% of total revenues, in the third quarter of 2008. Restaurant segment operating expenses increased by 2.0% to 31.3% of restaurant sales in the third quarter of 2009 due primarily to higher advertising, maintenance and insurance costs and also due to the decrease in comparable sales relative to occupancy costs. Operating expenses in the Foxtail segment, as a percentage of segment sales, decreased by 1.2% due primarily to lower repairs and maintenance, transportation and warehouse costs.
General and administrative expenses were 8.9% of total revenues, an increase of 0.6% from the third quarter of 2008, despite a $0.3 million decrease in general and administrative spending. The increase as a percentage of revenues is primarily due to the decrease in total revenues relative to this largely fixed-cost category.
Depreciation and amortization was 4.8% and 4.5% of revenues in the third quarters of 2009 and 2008, respectively.
Interest, net was 8.9% of revenues in the third quarter of 2009, compared to 6.7% in the prior year's third quarter. The 220 basis point increase resulted mainly from an increase in the average effective interest rate on the Company's debt to 11.6% following the refinancing in September 2008, as noted below. The average effective rate was 9.8% during the third quarter of 2008. Average debt outstanding was approximately $17.5 million higher during the third quarter of 2009 compared to the third quarter of 2008.
In the third quarter of 2008, we recorded a non-cash goodwill impairment charge of $20.2 million, comprised of $18.5 million to our franchise segment and $1.7 million to our Foxtail segment.
Also, on September 24, 2008, the Company issued $132.0 million of 14% senior secured notes and entered into a new $26.0 million revolving credit facility, in connection with the refinancing of its then existing $100.0 million term loan and $40.0 million revolver. The pre-existing credit agreement terminated upon the consummation of the refinancing. In connection with this transaction, we recognized a loss of $3.0 million, representing the write-off of previously deferred financing costs related to the terminated credit agreement.
Other, net increased to $0.4 million of income in 2009 compared to income of $27,000 in 2008. The 2009 income primarily represents gains on invested deferred compensation assets and income from unredeemed gift cards.
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