VICORP Restaurants, Inc. Announces Third Quarter 2007 Results

The increase in the net revenues resulted from a 13.1% increase in manufacturing sales to third parties as well as sales at the 11 new restaurants, net of closures, opened since the end of the third quarter of 2006. Comparable restaurant sales for the third quarter of 2007 declined 3.2% versus the previous year's third quarter. Comparable restaurant sales for Village Inn and Bakers Square decreased 2.3% and 4.0%, respectively. The same unit restaurant sales declines were directly a result of lower guest entrée counts in both concepts during the quarter, driven by numerous factors, including increased competition within the markets in which the concepts operate and increased cost-consciousness within the mid-scale family dining segment. The net loss for the third quarter of 2007 was $5.7 million versus net loss of $0.6 million in the comparable period of 2006. Adjusted earnings before interest, taxes, depreciation, and amortization ('Adjusted EBITDA' - as calculated in the accompanying Consolidated Statements of Adjusted EBITDA and Adjusted EBITDAR and discussed further below under the caption entitled 'Factors Affecting Comparability and Non-GAAP Financial Information') for the third quarter of 2007 was $5.9 million versus $11.3 million for the third quarter of 2006.

Operating profit was $1.0 million in the third quarter of 2007 versus operating profit of $5.4 million in the third quarter of 2006, principally due to lower restaurant operating profit. Food cost as a percentage of restaurant sales was higher at 26.9% in the third quarter of 2007 versus 25.0% in the comparable period of 2006, primarily due to commodity cost increases, including the cost of eggs and vegetables throughout the quarter, as well as due to the impact of certain food quality upgrades and new product initiatives introduced at Bakers Square throughout 2007 to-date. Excluding the impact of the upgrades and new products, base food commodity costs increased approximately 6.2% in the third quarter of 2007 over the comparable quarter of 2006. Labor costs as a percentage of restaurant sales increased to 35.2% in 2007 versus 33.4% in the comparable quarter of 2006, principally due to negative leverage associated with fixed labor components during a quarter of same store sales decline and certain state minimum wage increases. Other operating expenses increased by 0.6 pts as a percentage of restaurant sales primarily due to increased occupancy expenses in the third quarter of 2007, due to the negative leverage associated with normal increases in occupancy costs relative to the decline in comparable restaurant sales, as well as higher percentage occupancy costs associated with the immature newly opened restaurants and the impact of lease accounting changes on certain restaurants due to the changes in depreciable life effected in the third quarter of 2006.

During the third quarter of 2007, the Company opened one new Village Inn restaurant in an existing market which brings the total year-to-date openings to nine Village Inn restaurants. No additional new restaurant openings are planned for the current fiscal year. Year-to-date, capital expenditures were $8.0 million. Capital expenditures for fiscal 2007 across all expenditure areas currently are projected at approximately $11 million.

Year-to-date net revenues through the third quarter of 2007 were $336.0 million, an increase of 3.8% over the $323.7 million reported in 2006, primarily due to the 43.0% year-to-date increase in manufacturing sales to third parties, as well as incremental sales at the 11 net newly opened restaurants since the end of the third quarter of fiscal 2006. Comparable restaurant sales for fiscal 2007 declined 3.5% versus fiscal 2006. Comparable restaurant sales for Village Inn decreased 2.3%, while Bakers Square comparable restaurant sales decreased 4.7%. Net loss for the year-to-date through the third quarter 2007 was $14.2 million versus $1.8 million in the comparable period in 2006. Adjusted EBITDA was $22.1 million for year-to-date 2007, versus $35.0 million for year-to-date 2006.

A further decline in trailing Adjusted EBITDA could limit the Company's access to borrowings for working capital and capital expenditure funds under the Company's senior secured credit facility. Additionally, as the Company is required to maintain agreed upon levels of trailing Adjusted EBITDA, declines in Adjusted EBITDA increase the risk of a future breach of the Company's obligations under its senior secured credit facility.



Logos, product and company names mentioned are the property of their respective owners.

Reader Comments:

Be the first to leave a comment for this article

Tweet