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 LOUISVILLE, Ky., Nov. 2 /PRNewswire/ -- Rally's Hamburgers (NASDAQ: RLLY) today reported a net loss for the third quarter of $2.9 million, or $.21 per share. As described in its release of Sept. 29, 1993, the results for the third quarter include one-time charges of $3.0 million and other charges of $2.5 million, or $.28 per share. The company reported earnings of $2.7 million, or $.22 per share, for the third quarter a year ago.
 Earnings for the first nine months of 1993 were $1.1 million, or $.09 per share, compared with $6.5 million, or $.54 per share, for the same period a year ago.
 The one-time charges are related to the settlement of a lawsuit ($2.0 million, or $.10 per share) and a one-time charge primarily for previously deferred intangible and other assets ($1.0 million, or $.05 per share) associated with the development of new restaurants or the acquisition of new markets.
 Charges of $2.5 million are related to additional advertising ($2.0 million, or $.10 per share) incurred in the quarter primarily to promote the introduction of two new products, an adjustment to the company's provision for income taxes resulting from its adoption of SFAS No. 109 "Accounting for Income Taxes" ($140,000, or $.01 per share) and establishing an accrual for write-offs of assets to be replaced in remodeling certain of its restaurants ($360,000, or $.02 per share).
 Exclusive of these charges, earnings for the quarter would have been $.07 per share. Third quarter results were impacted by slower than anticipated growth in new restaurants and lower than anticipated sales in certain of its restaurants, with both factors occurring primarily in its less developed markets. Further, over the last 12 months, Rally's entered 14 new markets, many of which have performed at levels below company sales averages. The company believes these factors hurt overall company-owned sales and restaurant level operating margins and limited its coverage of general and administrative costs more than anticipated.
 Randy Laney, Senior Executive Vice President and Chief Financial Officer, had stated in the company's earlier release that although the circumstances that led to this quarter's disappointing results necessitated expedient action, the company's focus was also on developing a well-planned strategy that would provide the best opportunity for continued improvement in performance over the next 12 months.
 Mr. Laney reported today that the company is taking action to respond to the third quarter results. Mr. Laney said, "Our immediate plans include both a slow-down in our development of new restaurants in 1994 and a concentration of future development in our core markets. We are also making reductions in general and administrative and restaurant operating costs which we believe are necessary to enable us to continue our position as America's everyday best value hamburger restaurant." Mr. Laney added, "In the third quarter there was significant competition in the hamburger segment primarily through discounts and value meals. Simultaneously with this competitive pressure, we introduced a new sausage and a new chicken sandwich in the third quarter with significant television advertising. While these products were well-received, our message in the quarter was not directed at our everyday value or our core hamburger product."
 Systemwide sales grew 19 percent for the quarter to $94.7 million and 22 percent for the first nine months of 1993 to $265.1 million. Sales at company-owned restaurants grew 49 percent to $44.7 million for the quarter and 51 percent to $122.7 million for the first nine months of 1993. Same store sales were flat for the quarter for all stores in the chain, were up 1 percent for company-owned restaurants, and down 1 percent for franchisee-owned restaurants.
 For the quarter, Rally's opened 14 new restaurants, closed one restaurant, and acquired three restaurants from a franchisee. Rally's franchisees opened 14 new restaurants, closed three restaurants, and sold three restaurants to the company. During the quarter, six restaurants operating under the brand name "Zipps" were allowed to defranchise and leave the Zipps system. Rally's had acquired the Zipps brand and rights as the Zipps system franchisor in 1992. There are currently five franchise restaurants still operating under the Zipps name.
 The company expects to open 115 to 120 new restaurants in 1993 (exclusive of acquired or closed restaurants), approximately 60 company- owned and 60 franchised. At Nov. 2, 1993, there were 505 Rally's Hamburger restaurants operating in 24 states.
 For additional information contact Randy Laney, Senior Executive Vice President and Chief Financial Officer, at 502-245-8900.
 Consolidated Statements of Income
 (Dollars in thousands, except per share information)
 (Unaudited) - Subject to Year-End Review
 For the Quarter Ended For the Nine Months Ended
 Oct. 3, Oct. 4, Oct. 3, Oct. 4,
 1993 1992 1993 1992
 Systemwide sales $94,659 $79,834 $265,139 $217,922
 Total revenues $46,901 $32,401 $129,182 $86,642
 Total costs and
 expenses 48,063 28,206 123,070 76,246
 Income (loss) from
 operations (1,162) 4,195 6,112 10,396
 Total other (expense) (1,144) (35) (2,163) (320)
 Income (loss) before
 unusual item and
 income taxes (2,306) 4,160 3,949 10,076
 Litigation settlement (2,000) --- (2,000) ---
 Income (loss) before
 income taxes (4,306) 4,160 1,949 10,076
 Provision (benefit)
 for income taxes (1,431) 1,438 802 3,597
 Net income (loss) ($2,875) $2,722 $1,147 $6,479
 Weighted average
 outstanding(a) 13,484 12,418 13,432 12,029
 Earnings (loss)
 per share(a) ($.21) $.22 $.09 $.54
 (a) The company declared a 3-for-2 stock split which was paid on Sept. 10, 1992, in the form of a 50 percent stock dividend to holders of record at Aug. 28, 1992. The effects of this stock split have been reflected for all periods presented.
 -0- 11/2/93
 /CONTACT: Randy Laney, senior executive VP and CFO of Rally's Hamburgers, 502-245-8900/
 (RLLY) CO: Rally's Inc. ST: Kentucky IN: LEI SU: ERN

JL-LS -- LA005 -- 9445 11/02/93 07:01 EST
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Publication:PR Newswire
Date:Nov 2, 1993

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