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P.F. Chang’s Reports First Quarter 2011 Results

2011-04-27

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P.F. Chang Same stores sales in the first quarter of 2011 included the benefit of a two to three percent menu price increase partially offset by unfavorable shifts in product mix/traffic

SCOTTSDALE, Ariz.--()--P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) reported financial results for the first quarter ended April 3, 2011.

(000 except per share data)	Q1 2011		Q1 2010		% Change
Total revenues	$	317,369	$	310,371	2.3	%

Net income	$	10,596	$	8,691	21.9	%

Diluted net income per share	$	0.46	$	0.38	21.1	%

Weighted average shares - diluted		22,901		23,104	-0.9	%

Highlights for the first quarter of 2011 compared to the prior year quarter include:

Consolidated revenues increased 2.3% to $317.4 million.
Comparable store sales increased 0.5% at the Bistro and declined 0.2% at Pei Wei.
Net income increased 21.9% to $10.6 million.
Net income per diluted share increased 21.1% to $0.46.
Pei Wei temporary store closures impacted first quarter 2011 net income per diluted share by approximately $0.04.

First quarter 2011 comparable store sales

	January	February	March	Total Q1
Bistro	0.6%	1.5%	-0.6%	0.5%
Pei Wei	0.4%	1.7%	-2.7%	-0.2%

At both concepts, same stores sales in the first quarter of 2011 included the benefit of a two to three percent menu price increase partially offset by unfavorable shifts in product mix/traffic.

Global Brand Development revenues

Global Brand Development revenues totaled $1.1 million for the first quarter of 2011. Restaurant licensing revenues totaled $0.7 million related to fees from ten international Bistro restaurants, which operate under licensing agreements, as well as two Bistro restaurants operated in Hawaii under a joint venture arrangement. Retail licensing revenues totaled $0.4 million related to a line of premium frozen food entrées, which operates under a licensing agreement.

Pei Wei temporary restaurant closures

During March 2011, eight Pei Wei restaurants in Arizona were temporarily closed subsequent to an employment-related identity theft investigation conducted by local authorities. These store closures resulted in approximately 29 lost sales weeks during March 2011, which equated to approximately $1.1 million in lost sales. Excluding Arizona March sales, Pei Wei same store sales were +0.5% for March 2011 and +0.8% for the first quarter of 2011.

As a result of this investigation and the store closures, Pei Wei lost a number of employees and therefore experienced higher labor and other costs during the first quarter of 2011 related to hiring and training new employees. The overall estimated impact of the restaurant closures on first quarter 2011 diluted earnings per share was approximately $0.04.

Quarterly dividend

The Company’s Board of Directors authorized a cash dividend payment of $0.21 per share on the Company’s outstanding common stock. The dividend is payable on May 23, 2011 to shareholders of record at the close of business on May 9, 2011. The amount of the cash dividend was computed based on 45% of the Company’s net income for the quarter ended April 3, 2011.

2011 expectations

The Company continues to anticipate that fiscal 2011 consolidated revenues will increase approximately three to four percent compared to fiscal 2010. Despite the impact of the temporary store closures in Arizona, the Company continues to expect consolidated diluted earnings per share to range from $2.15 to $2.20 for fiscal 2011.

The Company slightly reduced its 2011 development schedule and now expects to open two new Bistro restaurants and five new Pei Wei restaurants. In addition, the Company continues to expect its international partners to collectively open seven to ten Bistro restaurants in international markets during fiscal 2011.

Additionally, through a licensing agreement with HMS Host, the Company expects to open its first two Pei Wei TakeAway locations in John Wayne Orange County Airport and Minneapolis - St. Paul Airport late this year.

The Company plans to repurchase approximately $60 million in common shares under its current authorization during fiscal 2011.

Definitions

The following definitions apply to these terms as used throughout this release:

Net income refers to net income attributable to PFCB common stockholders.
Comparable store sales changes include company-operated restaurants and represent the change in period-over-period sales for the comparable restaurant base. A restaurant becomes comparable in its eighteenth month of operation.

Conference call information

The Company is hosting a conference call today at 1:00 pm ET during which management will provide further details on the first quarter results. A webcast of the call can be accessed through the company’s website at www.pfcb.com.

P.F. Chang's China Bistro, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

	13 Weeks Ended
	April 3,			April 4,
		2011			2010
Revenues:
Restaurant sales	$	316,304		$	310,242
Restaurant licensing		684			129
Retail licensing		381			-
Total revenues		317,369			310,371
Costs and expenses:
Cost of sales		83,322			84,013
Labor		106,464			104,475
Operating		53,807			52,753
Occupancy		18,425			17,838
General and administrative		20,280			19,053
Depreciation and amortization		19,698			19,001
Preopening expense		398			133
Partner investment expense		(126	)		11
Total costs and expenses		302,268			297,277
Income from operations		15,101			13,094
Interest and other income (expense), net		204			(415	)
Income from continuing operations before taxes		15,305			12,679
Provision for income taxes		(4,555	)		(3,788	)
Income from continuing operations, net of tax		10,750			8,891
Income from discontinued operations, net of tax		3			6
Net income		10,753			8,897
Less net income attributable to noncontrolling interests		157			206
Net income attributable to PFCB	$	10,596		$	8,691

Basic income per share:
Income from continuing operations attributable to PFCB common stockholders	$	0.47		$	0.38
Income from discontinued operations, net of tax, attributable to PFCB common stockholders		0.00			0.00
Net income attributable to PFCB common stockholders	$	0.47		$	0.38

Diluted income per share:
Income from continuing operations attributable to PFCB common stockholders	$	0.46		$	0.38
Income from discontinued operations, net of tax, attributable to PFCB common stockholders		0.00			0.00
Net income attributable to PFCB common stockholders	$	0.46		$	0.38

Weighted average shares used in computation:
Basic		22,523			22,631
Diluted		22,901			23,104

Cash dividends declared per share	$	0.21		$	0.17

Amounts attributable to PFCB:
Income from continuing operations, net of tax	$	10,593		$	8,685
Income from discontinued operations, net of tax		3			6
Net income attributable to PFCB	$	10,596		$	8,691

P.F. Chang's China Bistro, Inc.
Supplemental Financial Information

		2009 ⁽³⁾		1Q10			2Q10			3Q10			4Q10				2010		1Q11

Units		363			364			366			368			369			369			372
Sales weeks		18,756			4,731			4,736			4,770			4,791			19,028			4,819
AWS		65,482			65,604			66,055			64,656			64,951			65,314			65,858

Revenues (1)
Restaurant sales		1,228,045			310,242			311,502			307,499			310,260			1,239,503			316,304
Restaurant licensing		134			129			1,108			394			474			2,105			684
Retail licensing		-			-			228			517			446			1,191			381
Total revenues		1,228,179			310,371			312,838			308,410			311,180			1,242,799			317,369

Operating costs
Cost of sales		326,421			84,013			81,717			78,380			80,621			324,731			83,322
Labor		401,583			104,475			102,295			101,620			101,610			410,000			106,464
Operating		203,859			52,753			51,597			52,058			51,886			208,294			53,807
Occupancy		70,635			17,838			18,609			18,504			18,756			73,707			18,425
Net income attributable to noncontrolling interests		1,408			206			241			172			165			784			157
Depreciation & amortization		74,429			19,001			19,335			19,318			19,832			77,486			19,698
Restaurant operating income		149,844			32,085			39,044			38,358			38,310			147,797			35,496

Development costs
Preopening expenses		3,919			133			832			572			439			1,976			398
Partner investment expense		(629	)		11			(135	)		(147	)		(47	)		(318	)		(126	)

Other expenses
General and administrative (2)		82,749			19,053			19,765			23,226			19,839			81,883			20,280
Interest and other (income) expense, net		1,637			415			665			(175	)		(333	)		572			(204	)
Provision for income taxes		18,492			3,788			5,144			4,417			3,773			17,122			4,555
Income from continuing operations		43,676			8,685			12,773			10,465			14,639			46,562			10,593
Income (loss) from discontinued operations, net of tax		(479	)		6			-			-			40			46			3
Net income attributable to PFCB		43,197			8,691			12,773			10,465			14,679			46,608			10,596

Income from continuing operations per FDS	$	1.87		$	0.38		$	0.55		$	0.45		$	0.64		$	2.01		$	0.46

Fully diluted shares (FDS)		23,413			23,104			23,277			23,070			23,011			23,115			22,901

Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		26.6	%		27.1	%		26.1	%		25.4	%		25.9	%		26.1	%		26.3	%
Labor		32.7	%		33.7	%		32.7	%		32.9	%		32.7	%		33.0	%		33.5	%
Operating		16.6	%		17.0	%		16.5	%		16.9	%		16.7	%		16.8	%		17.0	%
Occupancy		5.8	%		5.7	%		5.9	%		6.0	%		6.0	%		5.9	%		5.8	%
Net income attributable to noncontrolling interests		0.1	%		0.1	%		0.1	%		0.1	%		0.1	%		0.1	%		0.0	%
Depreciation & amortization		6.1	%		6.1	%		6.2	%		6.3	%		6.4	%		6.2	%		6.2	%
Restaurant operating income		12.2	%		10.3	%		12.5	%		12.4	%		12.3	%		11.9	%		11.2	%
Preopening expenses		0.3	%		0.0	%		0.3	%		0.2	%		0.1	%		0.2	%		0.1	%
Partner investment expense		(0.1	%)		0.0	%		(0.0	%)		(0.0	%)		(0.0	%)		(0.0	%)		0.0	%
General and administrative (2)		6.7	%		6.1	%		6.3	%		7.5	%		6.4	%		6.6	%		6.4	%
Interest and other (income) expense, net		0.1	%		0.1	%		0.2	%		(0.1	%)		(0.1	%)		0.0	%		(0.1	%)
Provision for income taxes		1.5	%		1.2	%		1.6	%		1.4	%		1.2	%		1.4	%		1.4	%
Income from continuing operations		3.6	%		2.8	%		4.1	%		3.4	%		4.7	%		3.7	%		3.3	%
Income (loss) from discontinued operations, net of tax		(0.0	%)		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Net income attributable to PFCB		3.5	%		2.8	%		4.1	%		3.4	%		4.7	%		3.8	%		3.3	%

Reconciliation of Non-GAAP Financial Information to GAAP measures:
Restaurant operating income		149,844			32,085			39,044			38,358			38,310			147,797			35,496
Add: Net income attributable to noncontrolling interests		1,408			206			241			172			165			784			157
Less: General and administrative (2)		(82,749	)		(19,053	)		(19,765	)		(23,226	)		(19,839	)		(81,883	)		(20,280	)
Less: Preopening expenses		(3,919	)		(133	)		(832	)		(572	)		(439	)		(1,976	)		(398	)
Less: Partner investment expense		629			(11	)		135			147			47			318			126
Income from operations		65,213			13,094			18,823			14,879			18,244			65,040			15,101

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 as well as Global Brand Development initiatives
(3) 2009 results were comprised of a 53 week operating year

Concept: P.F. Chang's China Bistro
Supplemental Financial Information

	2009		1Q10		2Q10		3Q10		4Q10		2010		1Q11

Units	197		197		199		200		201		201		201
Sales weeks	10,150		2,561		2,565		2,593		2,607		10,326		2,613
AWS	91,161		90,077		90,964		89,202		89,726		89,989		90,181
Total revenues	925,321		230,767		233,365		231,309		233,931		929,372		235,782

Operating costs
Cost of sales	244,816		62,711		60,914		58,135		60,008		241,768		61,333
Labor	300,775		78,192		76,769		76,533		76,667		308,161		79,792
Operating	150,883		38,546		38,183		38,554		37,804		153,087		38,783
Occupancy	50,186		12,640		13,254		13,242		13,368		52,504		13,074
Net income attributable to noncontrolling interests	538		71		93		62		70		296		79
Depreciation & amortization	54,521		13,854		14,043		14,018		14,519		56,434		14,384
Restaurant operating income	123,602		24,753		30,109		30,765		31,495		117,122		28,337

Total revenues	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	26.5	%	27.2	%	26.1	%	25.1	%	25.7	%	26.0	%	26.0	%
Labor	32.5	%	33.9	%	32.9	%	33.1	%	32.8	%	33.2	%	33.8	%
Operating	16.3	%	16.7	%	16.4	%	16.7	%	16.2	%	16.5	%	16.4	%
Occupancy	5.4	%	5.5	%