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P.F. Chang’s Reports Third Quarter 2010 Results

2010-10-28
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    • P.F. Chang The Bistro achieved positive same store sales in the third quarter of 2010 including the benefit of positive traffic throughout the entire quarter. Average ticket at the Bistro declined during the quarter, but sequentially improved primarily due to the benefit of a one to two percent menu price increase that went into effect during the second quarter of 2010.

    P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) reported financial results for the third quarter ended October 3, 2010.

    (000 except per share data)       Q3 2010       Q3 2009       % Change
    Revenues $ 308,410       $ 290,329       6.2 %
     
    Income from continuing operations $ 10,465 $ 6,225 68.1 %
    Net income $ 10,465 $ 6,208 68.6 %
     
    Diluted income per share:
    Income from continuing operations $ 0.45 $ 0.27 66.7 %
    Net income $ 0.45 $ 0.27 66.7 %
     
    Weighted average shares - diluted 23,070 23,285 -0.9 %
     

    Highlights for the third quarter of 2010 compared to the prior year quarter include:

    • Consolidated revenues increased 6.2% to $308.4 million.
    • Comparable store sales increased 2.3% at the Bistro and 0.8% at Pei Wei.
    • Income from continuing operations increased 68.1% to $10.5 million.
    • Net income increased 68.6% to $10.5 million.
    • Income from continuing operations and net income per diluted share increased 66.7% to $0.45.

    Third quarter comparable store sales

            Fiscal 2010
    July       August       September       Total Q3
    Bistro
    Traffic effect 3.6% 2.7% 1.8% 2.8%
    Average ticket effect -0.7% -0.6% -0.2% -0.5%
    Total comparable store sales 2.9% 2.1% 1.6% 2.3%
     
    Pei Wei
    Traffic effect 0.5% -1.2% -4.3% -1.5%
    Average ticket effect 1.9% 2.2% 3.0% 2.3%
    Total comparable store sales 2.4% 1.0% -1.3% 0.8%
     

    Bistro

    The Bistro achieved positive same store sales in the third quarter of 2010 including the benefit of positive traffic throughout the entire quarter. Average ticket at the Bistro declined during the quarter, but sequentially improved primarily due to the benefit of a one to two percent menu price increase that went into effect during the second quarter of 2010.

    Pei Wei

    Pei Wei achieved positive same store sales in the third quarter of 2010. Average ticket at Pei Wei was positive for the entire quarter including incremental sales of small plate menu items and, to a lesser extent, the benefit of an approximate one percent menu price increase that went into effect during the second quarter of 2010. Traffic declined during the third quarter, including the impact of a calendar shift in limited time offer promotions.

    Comparable store sales for the third quarter of fiscal 2010 reflect results from the 13 week operating period in the current year compared to the same 13 week operating period in the prior year.

    Global Brand Development

    Global Brand Development revenues totaled $0.9 million during the third quarter of 2010 related to six international Bistro restaurants and a new line of premium frozen food entrées, all of which operate under licensing agreements as well as two Bistro restaurants operated in Hawaii under a joint venture arrangement.

    General and administrative expenses

    General and administrative expenses includes the impact of higher expense primarily resulting from an increase in the fair value of performance units (approximately $0.04 per share) and other share-based awards that are tied to the Company’s stock price (approximately $0.02 per share). Additionally, higher excise taxes were recognized in connection with a multi-year state tax audit of the Company’s partnership returns (approximately $0.02 per share).

    2010 Expectations

    The Company anticipates that fiscal 2010 consolidated revenues will increase slightly compared to fiscal 2009, including expectations of slightly higher average weekly sales at Pei Wei and slightly lower average weekly sales at the Bistro for the full year. The Company expects fiscal 2010 restaurant operating margins to be slightly lower than fiscal 2009 and consolidated diluted earnings per share for fiscal 2010 to approximate $1.95.

    The Company expects to open one new Bistro restaurant during the fourth quarter of fiscal 2010. The Company also plans to repurchase approximately $40.0 million in common shares under its current share repurchase authorization during fiscal 2010. The Company repurchased $26.2 million of its common shares through the quarter ended October 3, 2010.

    Quarterly dividend

    The Company’s Board of Directors has authorized a cash dividend payment of $0.21 per share on the Company’s outstanding common stock. The dividend is payable on November 22, 2010 to shareholders of record at the close of business on November 8, 2010. The amount of the cash dividend was computed based on 45% of the Company’s net income for the quarter ended October 3, 2010.

    2011 Development

    The Company currently expects to open three to five new Bistro restaurants and 10 to 12 new Pei Wei restaurants during fiscal 2011. In addition, the Company expects its international partners collectively to open seven to ten Bistro restaurants in international markets during fiscal 2011.

    P.F. Chang’s China Bistro, Inc. owns and operates two restaurant concepts in the Asian niche. P.F. Chang’s China Bistro features a blend of high-quality, Chinese-inspired cuisine and American hospitality in a sophisticated, contemporary bistro setting. Pei Wei Asian Diner offers a modest menu of freshly prepared pan-Asian cuisine in a relaxed, warm environment offering attentive counter service and take-out flexibility. In addition, the Company has extended the P.F. Chang’s brand to international markets and retail products both of which are operated under licensing agreements.

     

    P.F. Chang's China Bistro, Inc.
    Consolidated Statements of Operations
    (In thousands, except per share amounts)
    (Unaudited)
           
    13 Weeks Ended 39 Weeks Ended
    October 3, September 27, October 3, September 27,
    2010 2009 2010 2009
    Revenues $ 308,410 $ 290,329 $ 931,619 $ 901,526
    Costs and expenses:
    Cost of sales 78,380 76,364 244,110 239,093
    Labor 101,620 95,713 308,390 294,531
    Operating 52,058 50,883 156,408 150,383
    Occupancy 18,504 17,566 54,951 52,347
    General and administrative 23,226 20,408 62,044 60,745
    Depreciation and amortization 19,318 19,055 57,654 56,126
    Preopening expense 572 1,550 1,537 2,499
    Partner investment expense   (147 )   18     (271 )   (537 )
    Total costs and expenses   293,531     281,557     884,823     855,187  
    Income from operations 14,879 8,772 46,796 46,339
    Interest and other income (expense), net   175     85     (905 )   (1,292 )
    Income from continuing operations before taxes 15,054 8,857 45,891 45,047
    Provision for income taxes   (4,417 )   (2,477 )   (13,349 )   (12,538 )
    Income from continuing operations, net of tax 10,637 6,380 32,542 32,509
    Income (loss) from discontinued operations, net of tax   -     (17 )   6     (534 )
    Net income 10,637 6,363 32,548 31,975
    Less: Net income attributable to noncontrolling interests   172     155     619     813  
    Net income attributable to PFCB $ 10,465   $ 6,208   $ 31,929   $ 31,162  
     
    Basic income per share:
    Income from continuing operations attributable to PFCB common stockholders $ 0.46 $ 0.27 $ 1.41 $ 1.38
    Income (loss) from discontinued operations, net of tax, attributable to PFCB common stockholders   0.00     0.00     0.00     (0.03 )
    Net income attributable to PFCB common stockholders $ 0.46   $ 0.27   $ 1.41   $ 1.35  
     
    Diluted income per share:
    Income from continuing operations attributable to PFCB common stockholders $ 0.45 $ 0.27 $ 1.38 $ 1.35
    Income (loss) from discontinued operations, net of tax, attributable to PFCB common stockholders   0.00     0.00     0.00     (0.03 )
    Net income attributable to PFCB common stockholders $ 0.45   $ 0.27   $ 1.38   $ 1.32  
     
    Weighted average shares used in computation:
    Basic   22,697     22,810     22,719     23,103  
    Diluted   23,070     23,285     23,150     23,535  
     
    Cash dividends declared per share $ 0.21   $ -   $ 0.63   $ -  
     
    Amounts attributable to PFCB:
    Income from continuing operations, net of tax $ 10,465 $ 6,225 $ 31,923 $ 31,696
    Income (loss) from discontinued operations, net of tax   -     (17 )   6     (534 )
    Net income attributable to PFCB $ 10,465   $ 6,208   $ 31,929   $ 31,162  
     
    P.F. Chang's China Bistro, Inc.
    Supplemental Financial Information
                             
    2008 1Q09   2Q09   3Q09   4Q09   2009 1Q10   2Q10   3Q10   YTD Q3 2010
     
    Units 348 350 351 356 363 363 364 366 368 368
    Sales weeks 17,170 4,531 4,563 4,604 5,058 18,756 4,731 4,736 4,770 14,237
    AWS 69,780 68,382 66,044 63,060 64,581 65,482 65,604 66,055 64,656 65,436
     
    Revenues (1) 1,198,124 309,837 301,360 290,329 326,653 1,228,179 310,371 312,838 308,410 931,619
     
    Operating costs
    Cost of sales 325,630 83,072 79,657 76,364 87,328 326,421 84,013 81,717 78,380 244,110
    Labor 396,911 100,707 98,111 95,713 107,052 401,583 104,475 102,295 101,620 308,390
    Operating 198,967 50,691 48,809 50,883 53,476 203,859 52,753 51,597 52,058 156,408
    Occupancy 69,809 17,378 17,403 17,566 18,288 70,635 17,838 18,609 18,504 54,951
    Net income attributable to noncontrolling interests 1,933 370 288 155 595 1,408 206 241 172 619
    Depreciation & amortization 68,711 18,496 18,575 19,055 18,303 74,429 19,001 19,335 19,318 57,654
    Restaurant operating income 136,163 39,123 38,517 30,593 41,611 149,844 32,085 39,044 38,358 109,487
     
    Development costs
    Preopening expenses 8,457 488 461 1,550 1,420 3,919 133 832 572 1,537
    Partner investment expense (354 ) (464 ) (91 ) 18 (92 ) (629 ) 11 (135 ) (147 ) (271 )
     
    Other expenses

    General and administrative (2)

    		 77,488 19,814 20,523 20,408 22,004 82,749 19,053 19,765 23,226 62,044
    Interest and other (income) expense, net 3,362 940 437 (85 ) 345 1,637 415 665 (175 ) 905
    Provision for income taxes 12,193 4,953 5,108 2,477 5,954 18,492 3,788 5,144 4,417 13,349
    Income from continuing operations 35,017 13,392 12,079 6,225 11,980 43,676 8,685 12,773 10,465 31,923
    Income (loss) from discontinued operations, net of tax (7,591 ) (43 ) (474 ) (17 ) 55 (479 ) 6 - - 6
    Net income attributable to PFCB 27,426 13,349 11,605 6,208 12,035 43,197 8,691 12,773 10,465 31,929
     
    Income from continuing operations per FDS $ 1.45 $ 0.56 $ 0.51 $ 0.27 $ 0.52 $ 1.87 $ 0.38 $ 0.55 $ 0.45 $ 1.38
     
    Fully diluted shares (FDS) 24,080 23,795 23,526 23,285 23,045 23,413 23,104 23,277 23,070 23,150
     
    Revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
    Cost of sales 27.2 % 26.8 % 26.4 % 26.3 % 26.7 % 26.6 % 27.1 % 26.1 % 25.4 % 26.2 %
    Labor 33.1 % 32.5 % 32.6 % 33.0 % 32.8 % 32.7 % 33.7 % 32.7 % 32.9 % 33.1 %
    Operating 16.6 % 16.4 % 16.2 % 17.5 % 16.4 % 16.6 % 17.0 % 16.5 % 16.9 % 16.8 %
    Occupancy 5.8 % 5.6 % 5.8 % 6.1 % 5.6 % 5.8 % 5.7 % 5.9 % 6.0 % 5.9 %
    Net income attributable to noncontrolling interests 0.2 % 0.1 % 0.1 % 0.1 % 0.2 % 0.1 % 0.1 % 0.1 % 0.1 % 0.1 %
    Depreciation & amortization   5.7 %   6.0 %     6.2 %     6.6 %     5.6 %     6.1 %   6.1 %     6.2 %     6.3 %     6.2 %
    Restaurant operating income   11.4 %   12.6 %     12.8 %     10.5 %     12.7 %     12.2 %   10.3 %     12.5 %     12.4 %     11.8 %
    Preopening expenses 0.7 % 0.2 % 0.2 % 0.5 % 0.4 % 0.3 % 0.0 % 0.3 % 0.2 % 0.2 %
    Partner investment expense (0.0 %) (0.1 %) (0.0 %) 0.0 % (0.0 %) (0.1 %) 0.0 % (0.0 %) (0.0 %) (0.0 %)

    General and administrative (2)

    		 6.5 % 6.4 % 6.8 % 7.0 % 6.7 % 6.7 % 6.1 % 6.3 % 7.5 % 6.7 %
    Interest and other (income) expense, net 0.3 % 0.3 % 0.1 % (0.0 %) 0.1 % 0.1 % 0.1 % 0.2 % (0.1 %) 0.1 %
    Provision for income taxes   1.0 %   1.6 %     1.7 %     0.9 %     1.8 %     1.5 %   1.2 %     1.6 %     1.4 %     1.4 %
    Income from continuing operations   2.9 %   4.3 %     4.0 %     2.1 %     3.7 %     3.6 %   2.8 %     4.1 %     3.4 %     3.4 %
    Income (loss) from discontinued operations, net of tax   (0.6 %)   (0.0 %)     (0.2 %)     (0.0 %)     0.0 %     (0.0 %)   0.0 %     0.0 %     0.0 %     0.0 %
    Net income attributable to PFCB   2.3 %   4.3 %     3.9 %     2.1 %     3.7 %     3.5 %   2.8 %     4.1 %     3.4 %     3.4 %
     

    Reconciliation of Non-GAAP Financial Information to GAAP measures:
    Restaurant operating income 136,163 39,123 38,517 30,593 41,611 149,844 32,085 39,044 38,358 109,487
    Add: Net income attributable to noncontrolling interests 1,933 370 288 155 595 1,408 206 241 172 619
    Less: General and administrative (2) (77,488 ) (19,814 ) (20,523 ) (20,408 ) (22,004 ) (82,749 ) (19,053 ) (19,765 ) (23,226 ) (62,044 )
    Less: Preopening expenses (8,457 ) (488 ) (461 ) (1,550 ) (1,420 ) (3,919 ) (133 ) (832 ) (572 ) (1,537 )
    Less: Partner investment expense   354     464       91       (18 )     92       629     (11 )     135       147       271  
    Income from operations   52,505     19,655       17,912       8,772       18,874       65,213     13,094       18,823       14,879       46,796  
     
    Note: Consolidated results include the impact of Shared Services and Other as well as the Bistro and Pei Wei concepts
            (1)   Consolidated revenues include revenues related to the Bistro and Pei Wei concepts as well as Global Brand Development initiatives
    (2) Consolidated general and administrative expenses includes the costs of supporting the Company, including all concepts
     
    Concept: P.F. Chang's China Bistro
    Supplemental Financial Information
                             
    2008 1Q09   2Q09   3Q09   4Q09   2009 1Q10   2Q10   3Q10  

    YTD Q3 2010
     
    Units 189 190 190 192 197 197 197 199 200 200
    Sales weeks 9,373 2,458 2,470 2,486 2,736 10,150 2,561 2,565 2,593 7,719
    AWS 98,127 95,661 91,958 87,324 89,884 91,161 90,077 90,964 89,202 90,078
    Revenues 919,963 235,141 227,144 217,093 245,943 925,321 230,767 233,365 231,309 695,441
     
    Operating costs
    Cost of sales 249,911 62,963 59,749 56,624 65,480 244,816 62,711 60,914 58,135 181,760
    Labor 301,967 76,051 73,286 71,216 80,222 300,775 78,192 76,769 76,533 231,494
    Operating 149,083 36,973 36,373 37,487 40,050 150,883 38,546 38,183 38,554 115,283
    Occupancy 50,670 12,441 12,412 12,390 12,943 50,186 12,640 13,254 13,242 39,136
    Net income attributable to noncontrolling interests 1,361 179 145 104 110 538 71 93 62 226
    Depreciation & amortization 51,091 13,728 13,646 13,900 13,247 54,521 13,854 14,043 14,018 41,915
    Restaurant operating income 115,880 32,806 31,533 25,372


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

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