Benihana sees first-quarter net stronger than expected

Benihana Inc. (NASDAQ: BNHNA - News and BNHN - News), operator of one of the nation's largest chains of Asian restaurants, reported income from operations before a non-cash charge for impaired long-lived assets for the fiscal fourth quarter (12 weeks) ended March 27, 2005 increased 34% to $6.5 million, from $4.9 million in the corresponding year-ago period. The Company reported that it incurred impairment charges of $2.7 million in the fiscal fourth quarter, equal to approximately $0.16 per diluted share. Allowing for the impairment charges, net income for the fiscal quarter amounted to $2.2 million, or $0.22 per diluted share, compared with approximately $2.9 million, or $0.31 per diluted share, a year ago. Earnings per diluted share for the fiscal fourth quarter ended March 27, 2005 and the corresponding year ago period are based on 10,346,000 and 9,166,000 shares, respectively, an increase of 12.9%.

Total revenues for the fiscal fourth quarter increased 8.1%, to $54.8 million. Gross profit (restaurant sales less cost of food and beverage sales) increased 10.4%, to $41.7 million, with the gross margin improving to 76.6%, from 75.1% a year ago. Fiscal fourth quarter gross profit increased 10% sequentially as well, from $37.9 million in the preceding third fiscal quarter. Restaurant operating profit ("ROP") increased approximately 24%, to $10.7 million from the corresponding year ago period, and was 22.7% higher sequentially. ROP margins year over year improved 250 basis points, to 19.7%, from 17.2%. Marketing, general and administrative expenses increased 2.1%, or approximately $80,000, but as a percentage of total revenues were reduced to 7.2% from 7.7% the fiscal fourth quarter. Litigation costs pertaining to the lawsuit brought by Benihana of Tokyo, Inc. against the Company and certain of its officers and directors for the quarter amounted to $337,000, approximately $0.02 per diluted share.

FAS 144 requires that long-lived assets be written down to fair market value when the investments in them are not recoverable from the undiscounted cash flows that are expected to be derived from them. The fiscal fourth quarter impairment charges pertained to four restaurants, which, although cash flow positive, are unlikely to return sufficient undiscounted cash flows to recover their respective investments.

"Operations in the fourth quarter achieved significant progress," said Joel A. Schwartz, President and CEO. "The teppanyaki restaurants benefited from both price increases and greater customer traffic, which speaks well for our flagship brand's continued strong popularity. RA Sushi posted impressive gains, while Haru, which experienced modest growth for the year, is expected to benefit from a new restaurant recently opened in New York City, the concept's sixth in that city. This past year we opened eight new restaurants company-wide and completed the remodeling of two teppanyaki restaurants. Six restaurants are currently under development, and thus our Company's expansion plans, which include identifying new sites for all our concept restaurants, remains on track. Our ongoing efforts to hold costs in line have been successful. With customer counts remaining strong, we are very encouraged regarding the outlook for our business."

For all of fiscal 2005, operating income before the impairment charge increased 6.7%, to $15.9 million. Net income totaled $7.8 million, or $0.77 per diluted share, including the $2.7 million impairment charges, compared with $9.0 million, or $0.98 per diluted share, in the previous year. Litigation costs pertaining to the lawsuit brought by Benihana of Tokyo, Inc. against the Company and certain of its officers and directors amounted to $2.1 million for the year ($0.13 per diluted share). Total revenue for the 13 periods ended March 27, 2005, amounted to $218.3 million, an increase of 7.6%. Restaurant gross profit for the year totaled $163.4 million, compared with $149.9 million in the previous year, with the gross margin amounting to 75.4% and 74.5%, respectively. ROP for the year increased to $36.6 million, 15.3% greater than fiscal 2004's ROP of $31.7 million.

Results benefited from solid gains in traffic, stable commodity prices and strong increases in comparable sales. As previously reported, fiscal fourth quarter comparable sales company-wide increased 7.2% and for the year were ahead 5.2%, with all concepts contributing to the yearly gain. For the fiscal fourth quarter, comparable sales at the Benihana restaurants increased 7.5%, Haru's comparable sales were off 2.6% and RA Sushi's comparable sales were up 16.2%. Comparable sales increases accounted for $3.5 million of the increase in total revenues for the fiscal fourth quarter, while new restaurant revenues were largely offset by revenues lost from closed or temporarily closed units. Comparable sales increases represented $10.1 million of the year's improvement in restaurant sales, and new restaurants added $11.6 million, offset by $6.3 million in revenues from permanently or temporarily closed units.

For the year, customer counts increased 5.8%, to 8.7 million, and in the fiscal fourth quarter rose 6.2%. The average check per person last year was up 2%, to $23.94.

During the past year, Benihana opened a new teppanyaki restaurant in Carlsbad, CA. Benihana restaurants in San Francisco, CA, and Manhasset, NY, were re-opened after undergoing extensive remodeling. Units in Kendall, FL, and on New York City's East Side were closed permanently due to lease expirations. As previously announced, a teppanyaki restaurant in Anchorage, AL, was purchased from a franchisee. RA Sushi added a unit in Las Vegas, NV, and Haru launched a new restaurant in the Gramercy Park area of New York City. Under development are teppanyaki restaurants in Miramar and Coral Gables, FL; a Haru in Philadelphia, PA; and RA Sushi units in Houston, TX, Palm Beach Gardens, FL and Huntington Beach, CA.

With strong sales momentum continuing, the Company for the current first quarter (16 weeks) of fiscal 2006, which includes the important Mother's Day holiday, anticipates comparable sales gains of 5.5% to 6.0%. Restaurant opening costs are expected to increase over a year ago. Management expects that net income for the quarter will range between $0.28 and $0.30 per diluted share compared to $0.20 in the same period a year ago.

About Benihana

Benihana, now in its 41st year and one of the nation's largest chains of Asian restaurants, currently operates 71 restaurants nationwide, including 56 Benihana teppanyaki restaurants, six Haru sushi restaurants, eight RA Sushi Bar Restaurants and one Doraku restaurant. Under development at present are six restaurants - two Benihana teppanyaki restaurants, one Haru unit and three RA Sushi restaurants. In addition, a total of 22 franchised Benihana teppanyaki restaurants are now open or under development in the U.S. and Latin America.


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