Champps Entertainment, Inc. Reports Fiscal 2003 Third Quarter Results.Business Editors LITTLETON Littleton, city (1990 pop. 33,685), seat of Arapahoe co., N central Colo.; platted 1812, inc. 1890. It is a suburb south of Denver in an irrigated farm area. , Colo.--(BUSINESS WIRE)--April 22, 2003 Champps Entertainment, Inc. (Nasdaq:CMPP CMPP Centre Médico-Psycho-Pédagogique ) today announced results for the third quarter of fiscal 2003 ended March 30, 2003. Revenues for the quarter reached $46,184,000 compared to $41,230,000 reported for the third quarter of fiscal 2002, an increase of 12.0 percent. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of was $0.04 for the third quarter on net income of $544,000 compared to $0.14 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share on net income of $1,766,000 for the same period last fiscal year. General and administrative expenses for the quarter included $241,000 in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. costs associated with an adverse court ruling related to a 1997 contract dispute. Additionally, the Company incurred $93,000 of legal expenses related to a review by its audit committee of the Sarbanes-Oxley Act See SOX. , and corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. issues. During the quarter, the Company also incurred litigation expenses related to predecessor predecessor - parent companies in the amount of $272,000 associated with two adverse legal decisions that originated in 1995 and 1996. Overall, these litigation costs and legal expenses totaled $606,000 or $0.05 on a per diluted share basis. Additionally, the Company increased its state income tax provision to 6.8% from 4.0% for the year which impacted earnings per diluted share by $0.01 for this quarter. Restaurant operating and franchise contribution for the quarter was $4,746,000 compared to $5,012,000 for the same period last fiscal year, a decrease of 5.3 percent. General and administrative expenses were 5.7 percent of revenues compared to 5.4 percent of revenues the prior year. Comparable food sales increased 0.6 percent while comparable liquor liquor /li·quor/ (lik´er) (li´kwor) pl. liquors, liquo´res [L.] 1. a liquid, especially an aqueous solution containing a medicinal substance. 2. sales decreased 8.4 percent resulting in an overall decrease in comparable same store sales Same Store Sales A statistic used in retail industry analysis. It compares sales of stores that have been open for a year or more. Notes: This statistic allows investors to determine what portion of new sales has come from sales growth and what portion from the opening of of 2.3 percent for the quarter. For the quarter, guest counts in our restaurants were up approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 2.5 percent over last year while check average was down approximately 2.4%. During the quarter, revenues and operating results were adversely impacted by the particularly severe weather in the Midwest Midwest or Middle West, region of the United States centered on the western Great Lakes and the upper-middle Mississippi valley. It is a somewhat imprecise term that has been applied to the northern section of the land between the Appalachians and the East Coast in February February: see month. and March. Approximately, 10% of the restaurant operating days in the quarter were negatively impacted by the weather, 50 percent of which experienced sales declines of 35% or more. Overall, the company estimates that sales were negatively impacted between $700,000 and $1,000,000 for the quarter and operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: were negatively impacted by approximately 100 basis points. Operating margins were also affected by higher utility and insurance costs during the quarter. The Company opened one new Champps restaurant during the quarter in the Phoenix market increasing the number of Company owned Champps restaurants to 39. The Company intends to open three Champps restaurants in the fourth quarter of fiscal 2003 in Tampa, Florida “Tampa” redirects here. For other uses, see Tampa (disambiguation). Tampa is a United States city in Hillsborough County, on the west coast of Florida. It serves as the county seat for Hillsborough County.GR6. ; Lansing, Michigan “Lansing” redirects here. For other uses, see Lansing (disambiguation). Lansing is the capital city of the U.S. state of Michigan, and the state's sixth largest city. ; and Cincinnati, Ohio “Cincinnati” redirects here. For other uses, see Cincinnati (disambiguation). Cincinnati is a city in the U.S. state of Ohio and the county seat of Hamilton County. . William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack H. Baumhauer, Champps' chairman, president and chief executive officer, commented: "Operating results did not meet our expectations for the third quarter. Although the impact of the weather could not have been predicted, our continuing decline in liquor sales and our lower than anticipated operating margins were not acceptable. We are pleased to report that comparable same store food sales and guest counts continue to remain positive as the introduction of our new menu in February appears to have been well received by our guests. In an effort to reverse our negative sales trends in liquor, we have initiated several promotions which are focusing on improving liquor sales during both happy hour and the dinner meal periods. We are projecting revenues for the fourth quarter to range between $46,000,000 and $47,000,000 with earnings per share in the $0.06 to $0.08 range. This estimate has been revised to reflect the impact of the costs associated with the issuance of the convertible notes and related warrants and to reflect higher than previously anticipated preopening expenses associated with opening three restaurants in our fourth quarter and three restaurants in the first quarter of fiscal 2004. This forecast also contemplates flat comparable same store sales for the fourth quarter." Littleton, Colo.-based Champps Entertainment, Inc. owns and operates 39 and franchises 12 Champps restaurants in 19 states. Champps, which competes in the upscale casual dining segment, offers an extensive menu consisting of freshly prepared food, coupled with exceptional service. Champps creates an exciting environment through the use of videos, music, sports and promotions. Statements made in this press release include forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Information on significant potential risks and uncertainties that may cause such differences include, but are not limited to, those mentioned by the Company from time to time in its filings with the Securities and Exchange Commission. The words "believe," "estimate," "expect," "intend," "anticipate," "should" and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and, therefore, readers should not place undue reliance on these forward-looking statements.
CHAMPPS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Nine Months
Ended Ended
------------------ -------------------
March 30, March 31, March 30, March 31,
2003 2002 2003 2002
------------------- -------------------
Revenue
Sales $46,037 $41,066 $133,758 $116,149
Franchising and royalty, net 147 164 444 471
--------------------------------------
Total revenue 46,184 41,230 134,202 116,620
--------------------------------------
Costs and expenses
Restaurant operating expenses:
Product costs 13,003 11,612 37,442 32,963
Labor costs 14,982 13,249 43,025 37,550
Other operating expenses 7,265 6,084 20,976 17,754
Occupancy 4,249 3,638 11,855 9,879
Depreciation and amortization 1,939 1,635 5,602 4,720
--------------------------------------
Total restaurant operating
expenses 41,438 36,218 118,900 102,866
--------------------------------------
Restaurant operating and
franchise contribution 4,746 5,012 15,302 13,754
General and administrative
expenses 2,643 2,240 7,492 6,359
Pre-opening expenses 593 486 2,145 2,202
Expenses related to predecessor
companies 272 22 272 305
Interest expense and income,
net 526 465 1,337 1,400
Debt extinguishment costs - - 290 -
Other (income) expense 41 (3) 242 (9)
--------------------------------------
Income from continuing
operations 671 1,802 3,524 3,497
Loss from discontinued
operations, net of tax - - - 153
--------------------------------------
Income before income taxes 671 1,802 3,524 3,344
Income tax expense 127 36 240 129
--------------------------------------
Net income $544 $1,766 $3,284 $3,215
======================================
Income from continuing
operations $0.04 $0.15 $0.26 $0.28
Loss from discontinued
operations - - - (0.01)
--------------------------------------
Basic income per share: $0.04 $0.15 $0.26 $0.27
======================================
Income from continuing
operations $0.04 $0.14 $0.25 $0.26
Loss from discontinued
operations - - - (0.01)
--------------------------------------
Diluted income per share: $0.04 $0.14 $0.25 $0.25
======================================
Basic weighted average shares
outstanding 12,712 12,129 12,470 12,083
======================================
Diluted weighted average shares
outstanding 12,989 12,963 12,957 12,768
======================================
Supplemental Information -- Restaurant Operating Expenses
(Stated as a percentage of restaurant sales)
Three Months Nine Months
Ended Ended
------------------- -------------------
March 30, March 31, March 30, March 31,
2003 2002 2003 2002
------------------- -------------------
Product costs 28.3% 28.3% 28.0% 28.4%
Labor costs 32.5% 32.3% 32.2% 32.3%
Other operating expenses 15.8% 14.8% 15.7% 15.3%
Occupancy 9.2% 8.8% 8.8% 8.5%
Depreciation and amortization 4.2% 4.0% 4.2% 4.1%
Total restaurant contribution
margin 10.0% 11.8% 11.1% 11.4%
--------------------------------------
General and administrative
expense 5.7% 5.4% 5.6% 5.5%
(Stated as a percentage --------------------------------------
of revenue)
Selected Consolidated Balance Sheet
Information March 30, June 30,
2003 2002
-----------------------
Cash and cash equivalents $10,951 $ 4,643
Property and equipment, net 77,032 67,541
Total assets 117,335 96,676
Notes payable 27,657 19,299
Capital lease obligations 1,397 2,536
Shareholders' equity 57,973 50,955
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