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Second Quarter Highlights:
-- Restaurant margins improve 120 basis points from the second quarter of 2005
-- Franchised restaurant opened in Detroit Airport
-- One Company-owned restaurant and three franchised restaurants planned for second half of 2006
-- Company announces hiring of a Director of Franchise Development
-- Company restructures bank debt and issues $7.0 million of senior subordinated notes.
Financial Summary (Unaudited)
(In thousands, except per share data)
12 Weeks Ended 28 Weeks Ended
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5/14/06 5/15/05 5/14/06 5/15/05
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Revenues $42,781 $43,025 $100,399 $100,296
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Operating Income (Loss) $655 $(1,260) $986 $284
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Income (Loss) Before Taxes $(29) $(1,799) $(522) $(979)
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Net Income (Loss) $162 $(944) $130 $(289)
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Diluted Net Income (Loss)
per Common Share $0.06 $(0.37) $0.05 $(0.11)
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Diluted Shares Outstanding 2,556 2,549 2,559 2,529
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Max & Erma's Restaurants, Inc. (Nasdaq/NMS:MAXE) today reported second quarter 2006 financial results.
Revenues for the second quarter of 2006 dipped slightly from $43.0 million for the second quarter of 2005 to $42.8 million for the second quarter of 2006. Year-to-date revenue rose less than 1% to $100.4 million for 2006 from $100.3 million for 2005. The Company reported net income of $162,000 or $0.06 per diluted share for the second quarter of 2006 as compared to a net loss of $944,000 or $(0.37) per diluted share for the second quarter of 2005. Year-to date the Company reported net income of $130,000 or $0.05 per diluted share versus a net loss of $289,000 or $(0.11) per diluted share for 2005. Net income for 2006 was negatively impacted by a $505,000 pre-tax asset impairment charge recorded in the first quarter of 2006. Net income for the second quarter of 2005 and the year-to-date period was also negatively impacted by a $1.45 million pre-tax asset impairment charge recorded in the second quarter of 2005. The charges primarily relate to the closing or write down of under-performing restaurants.
Todd Barnum, Chairman and Chief Executive Officer of Max & Erma's, said that he is pleased with the progress the Company made during the quarter. The strategy of closing under-performing restaurants, opening higher volume locations, reduced discounting and improving restaurant level execution all contributed to improved operating results. Restaurant level profit margins improved 120 basis points from the second quarter of 2005 to the second quarter of 2006. Average unit sales volumes were up from last year as sales at last year's openings were almost 15% above chain average despite a soft sales environment. Excluding the second quarter 2005 impairment charge, operating income more than tripled from the second quarter of 2005 to the second quarter of 2006.
On the franchising front, Mr. Barnum announced the second quarter opening of a franchised restaurant in the Detroit airport and the signing of single unit franchise agreements for restaurants in the Virginia Beach Doubletree Hotel and the Norfolk, Virginia Hilton Hotel. Mr. Barnum said he is also pleased to announce the recent hiring of a Director of Franchise Development. He said that this new position reports directly to our President and is an indication of our commitment to grow and support the franchise side of our business. We expect three additional franchise openings during the second half of the year.
Mr. Barnum added that during the quarter, Max & Erma's completed a restructuring of its bank debt and raised $7.0 million through the issuance of a six year, interest-only senior subordinated note. Mr. Barnum said that this restructuring reduces our annual debt service by $1.5 million, adds availability of funds and gives us the capital and flexibility to execute our plans.
Mr. Barnum also announced that Jay B. Barney, age 52, has been elected to the Company's Board of Directors. Dr. Barney is a Professor of Management and the Chase Chair for Excellence in Corporate Strategy at The Ohio State University, where he has taught since 1994. Mr. Barnum said that Dr. Barney is a great addition to the Company's Board. He brings a wide range of experience to our Board, both academic and professional through an extensive consulting practice. Dr. Barney will replace William E. Arthur, age 77, who retired from the Board after 25 years of dedicated service.
Max & Erma's currently owns and operates 78 casual dining full-service restaurants in Akron, Canton, Cincinnati, Cleveland, Columbus, Dayton, Niles and Toledo, Ohio; Indianapolis, Indiana; Ann Arbor, Detroit, Grand Rapids, and Lansing Michigan; Pittsburgh and Erie, Pennsylvania; Lexington and Louisville, Kentucky; Chicago, Illinois; Charlotte, North Carolina; Atlanta, Georgia; Virginia Beach and Norfolk, Virginia. The Company also currently franchises 23 restaurants in Chillicothe, Cincinnati, Cleveland, Columbus, Dayton, Sandusky, and Wilmington, Ohio; the Ohio Turnpike; Detroit, Michigan; St. Louis, Missouri; Green Bay, Wisconsin; Philadelphia, Pennsylvania; Edinburgh, Evansville, Seymour and South Bend, Indiana and Richmond, Virginia. The Company's common shares are traded on the NASDAQ National Market System under the symbol MAXE.
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