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-- Total revenues for the 13-week period ended July 1, 2006, were $11,695,000, a record second quarter for the company and an increase of 8.9% over total revenues for the 13-week period ended July 2, 2005. Restaurant sales increased by 6.8% to $9,686,000 from $9,072,000 in the year-earlier period due primarily to the net addition of five company-operated restaurants and the divestiture of four lower-volume company-operated restaurants since July 2, 2005. Royalty and advertising fees rose by approximately 19% over the year-earlier period due to a net increase of 13 franchised restaurants since July 2, 2005.
Franchise and area development fees increased to $204,000 from $146,000 in the year-earlier period. The company opened five new franchised restaurants during the 13-week period ended July 1, 2006, compared with seven in the year-earlier period. The company cancelled three area development agreements during the second quarter of 2006 due to lack of development and recognized approximately $103,000 in area development fees as a result of these cancellations. These area development agreements represented commitments to develop 42 stores over the next six years, including a 37-store development agreement with Black Angus Burgers, Inc. The development agreement with Black Angus Burgers was originally executed in May 2002 and was for 40 stores.
-- The company also reported record second quarter net income for the 13-week period ended July 1, 2006. Net income for the 13-week period ended July 1, 2006, increased $172,000, or 42.6%, to $576,000, or $0.11 per diluted share, from $404,000, or $0.08 per diluted share, in the year-earlier period. The improvement in net income is primarily due to increased royalty fees from the net growth of 13 franchised locations since the July 2, 2005. The cancelled area development fees described above also had a positive impact on net income of approximately $67,000 (tax effected) for the 13-week period ended July 1, 2006.
-- For the second quarter of 2006, same-store sales for company-operated restaurants increased 0.4% from the comparable period in 2005, and same-store sales for franchised restaurants increased 1.8% for the same period. Year-to-date same-store sales for 2006 increased 1.6% for company-operated restaurants and increased 2.0% for franchised restaurants versus the comparable period in 2005.
-- Total revenues for the 26-week period ended July 1, 2006, totaled $22,336,000 compared with $20,414,000 in the prior-year period. Net income for the 26-week period ended July 1, 2006, was $793,000, or $0.15 per diluted share, compared with $241,000, or $0.05 per diluted share, in the prior-year period. Net income for the 26-week period ended July 2, 2005, included a non-cash charge of approximately $358,000 (net of a tax benefit of $153,000) relating to the extension of the exercise date of certain stock options in January 2005.
-- Unit activity for the quarter included the opening of five franchised stores and the closing of three franchised stores. As of July 1, 2006, the company's restaurant system comprised 174 units, including 42 company-operated stores and 132 franchised stores. Expansion plans for the remainder of 2006 include the opening of two company-operated stores and 12 to 15 franchised stores.
Back Yard Burgers operates and franchises quick-service restaurants in 21 states, primarily in markets throughout the Southeast region of the United States. The restaurants specialize in charbroiled, freshly prepared, great-tasting food. As its name implies, Back Yard Burgers strives to offer the same high-quality ingredients and special care typified by outdoor grilling in the backyard. Its menu features made-to-order gourmet Black Angus hamburgers and chicken sandwiches - charbroiled over an open flame, fresh salads, chili and other specialty items, including hand-dipped milkshakes, fresh-made lemonade and fresh-baked cobblers.
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