Imvescor Restaurant Group Inc. Reports Improved Financial Results

MONCTON, NB, Jan. 18, 2013 /CNW/ - Imvescor Restaurant Group Inc. ("IRG" or the "Company") (TSX: IRG) reported financial results today for the 13 weeks ended October 28, 2012 (or "fourth quarter") and 52 weeks ended October 28, 2012 (or "year end").  The 2011 results are for the 13 and 52 weeks ended October 30, 2011.

Improved Financial Results

(in thousands of dollars) 13 weeks ended
October 28,
2012
13 weeks ended
October 30,
2011
52 weeks ended
October 28,
2012
52 weeks ended
October 30,
2011
Pizza Delight $ 1,066 $ 769 $ 3,462 $ 3,199
Mikes 1,066 845 4,056 3,493
Scores 1,061 365 2,997 2,034
Bâton Rouge 544 346 2,086 2,457
Total results from operating activities $ 3,737 $ 2,325 $ 12,601 $ 11,183

For fiscal 2012, three of the Company's four brands showed improved results from operating activities over the prior year.  The improvements in Pizza Delight, Mikes and Scores are mainly attributed to the reduction of overhead and one-time restructuring costs during the year as compared to fiscal 2011.  In fiscal 2011, the Company incurred approximately $2.0 million in costs to restructure its operations, including severance costs of personnel, and costs to exit certain underperforming locations and unfavorable lease terms.  The overall decrease in Bâton Rouge for 2012 is the result of costs of approximately $1.0 million related the costs of corporately taking over restaurants that were previously franchised and costs relating to settling a lawsuit.

(in thousands of dollars) 13 weeks ended
October 28,
2012
13 weeks ended
October 30,
2011
52 weeks ended
October 28,
2012
52 weeks ended
October 30,
2011
Net earnings $ 120 $ 291 $ 1,848 $ 1,835
Loss on redemption of debentures 1,820 --- 1,820 ---
Loss on derivative financial liability --- --- 1,964 ---
Loss (earnings) from discontinued operations 31 90 (162) 1,291
Adjusted net earnings $ 1,971 $ 381 $ 5,470 $ 3,126

Adjusted net earnings for the 13 and 52 weeks ended October 28, 2012 were $2.0 million and $5.5 million as compared to $381 thousand and $3.1 million in 2011 respectively.  The increase in adjusted net earnings is related to the improvement in operating results described above as well as a decrease in interest on long-term debt and 7.75% convertible debentures.  Interest on long-term debt and convertible debentures decreased from $6.7 million for the year ended 2011 to $5.2 million for the year ended 2012, a decrease of $1.5 million resulting from the reduction of total debt.  The Company has excluded, in the calculation of adjusted net earnings, the $1.8 million non-cash loss on redemption of existing unsecured debentures, the $2.0 million non-cash loss on derivative financial liability and the loss (earnings) from discontinued operations as management believes these expenses are not indicative of the Company's operations and thus adjusted net earnings is a better reflection of the Company's results from its normal business activities.

Fourth Quarter and 2012 Year End Financial and Operating Results

The following table provides selected financial information for the 13 and 52 weeks ended October 28, 2012, along with results for the comparative periods of the prior year, which are calculated for the 13 and 52 weeks ended October 30, 2011.

(in thousands of dollars) 13 weeks ended
October 28,
2012
13 weeks ended
October 30,
2011
52 weeks ended
October 28,
2012
52 weeks ended
October 30,
2011
Total revenues $ 12,538 $ 11,011 $ 47,305 $ 44,389
Advertising, retail and administrative expenses 7,558 8,061 31,969 31,533
Adjusted EBITDA (note 1) 4,116 2,790 13,394 12,030
Net finance costs (note 2) 2,940 1,683 8,892 6,543
Net earnings (note 3) 120 291 1,848 1,835
Adjusted net earnings
(notes 2 & 3)
1,971 381 5,470 3,126

Note 1: Adjusted EBITDA includes earnings before interest income, interest on long-term debt and convertible debentures, loss on redemption of debentures, loss (gain) on derivative financial liability, depreciation and amortization, impairment of long-lived assets, net (earnings) loss from discontinued operations, and income tax expense.
Note 2: Finance costs include a non-cash loss on redemption of debentures of $1,820 thousand for the 13 and 52 weeks ended October 28, 2012 as compared to nil in 2011 and a non-cash loss on derivative financial liability of nil and $1,964 thousand for the 13 and 52 weeks ended October 28, 2012 respectively, as compared to nil for 2011.  These non-cash losses have been excluded in the calculation of adjusted net earnings.
Note 3: Net earnings include a loss from discontinued operations of $31 thousand and recovery of $162 thousand for the 13 and 52 weeks ended October 28, 2012 and a loss of $90 thousand and $1,291 thousand for the 13 and 52 weeks ended October 30, 2011, respectively.  These items have been excluded in the calculation of adjusted net earnings.

Total system sales for the 13 and 52 weeks ended October 28, 2012 were $100.7 million and $396.5 million as compared to $102.2 million and $405.0 million in 2011, a decrease of 1.5% and 2.1% respectively. The decrease in total sales is attributed to the closure of 8 non-performing restaurants during the 52 weeks ended October 28, 2012 and 6 non-performing restaurants during fiscal 2011.  These restaurant closures are expected to reduce franchise support costs and improve the Company's overall profitability.

Same store sales ("SSS") for the 13 and 52 weeks ended October 28, 2012 were negative 0.5% and 0.4% as compared to positive 0.6% and negative 1.5% in 2011 respectively.

(in thousands of dollars) 13 weeks ended
October 28,
2012
13 weeks ended
October 30,
2011
52 weeks ended
October 28,
2012
52 weeks ended
October 30,
2011
Pizza Delight 2.2% -2.7% -0.3% -1.2%
Mikes 1.7% 0.8% 0.3% -1.3%
Scores -1.2% 2.4% 0.0% -2.9%
Bâton Rouge -4.1% 0.8% -1.7% -0.7%
Total SSS -0.5% 0.6% -0.4% -1.5%

Pizza Delight and Mikes have shown improved SSS during the quarter at positive 2.2% and 1.7% growth respectively.  Mikes has shown year over year positive SSS and an overall positive 0.3% for the year ended October 28, 2012.  Year to date, Scores has reversed the negative SSS trend experienced in the prior year.  The improvement in SSS trend is attributed to improved marketing during the quarter and focus on initiatives to increase sales in restaurants which have been impacted by competitive entry.

Improved Balance Sheet

The Company made a net repayment of $19.5 million on its long-term debt during the year, which included repayments of $66.6 million on its existing total long-term debt, offset by $47.1 million in proceeds from the issuance of new debt.

On December 29, 2011, the Company completed the refinancing of its 7.75% convertible extendible unsecured subordinated debentures. The refinancing was comprised of a $10.0 million private placement of debentures bearing interest at 10.0% and the issue of 32,536,552 common shares for gross proceeds of $15.0 million and an issue of 16,334,000 warrants to purchase common shares.

On August 31, 2012, the Company completed the refinancing of its senior credit facility. The new credit facility consists of a $37.1 million term loan, maturing in August 2015 at a BA floating rate plus 4.1%, with an option to convert to a fixed rate.

The new credit facility also provides the Company with additional flexibility to pay down its existing outstanding unsecured debentures.  In that respect, the Company repaid the unsecured debentures in the amount of $3.5 million on September 30, 2012.  In addition, the Company has provided to the holder of the subordinated debentures the required redemption notice pursuant to which the subordinated debentures will be further repaid $2.0 million on January 25, 2013.

The combination of the refinancing transactions and the Company's continued focus on reducing its debt has resulted in what management believes to be significant interest expense savings for the Company going forward.

Focus on Concept Evolution

Management believes that the Company has now substantially completed the financial and operational restructuring initiatives identified in early 2011. This turning point should now permit management to substantially dedicate their efforts towards brand evolution and an ultimate return to growth. The Company has throughout 2012 identified numerous strategic initiatives that will be tested during 2013 and if successful should be rolled out throughout the network in the future.

Scores has developed and will test in 2013 a smaller restaurant concept offering similar menu items in a fast casual service model.  This smaller concept requiring a reduced initial investment as well as lower labor and overhead costs is expected to provide the Scores brand with the ability to open restaurants in smaller markets where Scores is not currently operating.

The Company is currently testing in the Atlantic provinces the co-branding of a Pizza Delight and Scores concept to offer its Pizza Delight customers the additional choice of selected Scores menu items including a range of chicken choices and its signature soup, salad and fruit bar.  This co-branded concept offers an opportunity to grow sales in existing Pizza Delight markets where a Scores restaurant would not typically be in operation.

The Mikes brand will be testing a pasta bar as an enhancement to its current Mikes Trattoria concept focused on pizza, pasta and hot Italian submarines.  Mikes will focus on its signature submarines as well as introduce innovative premium submarines to its menu offerings. Mikes will also be examining the potential of introducing for 2014 an express concept similar to the one described above for Scores.

Bâton Rouge is entering a renovation phase for many of its oldest franchises. A new modern look has been developed and a first renovation will be completed and tested this year. Bâton Rouge has also developed a smaller footprint concept which should enable the brand to open in smaller, suburban markets.  A new executive chef has also joined the organization with a mandate to introduce significant menu engineering initiatives that should appeal to a broader consumer base.

About Imvescor Restaurant Group Inc.

Headquartered in Moncton, New Brunswick, Imvescor Restaurant Group Inc. owns franchised and corporate restaurants throughout Canada under four brands: Pizza Delight, operating primarily in Atlantic Canada, where it dominates the family/mid-scale segment, Mikes and Scores, operating primarily in Quebec in the family and casual dining segments and the take-out and delivery segments, and Bâton Rouge, operating in Quebec, Ontario, Alberta and Nova Scotia in the casual dining segment.

Non-GAAP Measures

The information contained in the press release includes some figures that are not performance measures consistent with IFRS.  Because they do not have a standardized meaning prescribed by IFRS, they may not be compatible with similar measures presented by other users.

The Company uses "adjusted EBITDA" because this measure enables management to assess the Company's operational performance and is a financial indicator of a company's ability to service and incur debt.  The Company also uses "adjusted net earnings" which excludes loss on redemption of debentures, loss on derivative financial liability and loss (earnings) from discontinued operations as a measurement of performance.  Management is of the opinion that the expenses mentioned are not indicative of the Company's operations.  Adjusted EBITDA and adjusted earnings should not be considered by an investor as an alternative to earnings, an indicator of operating performance or cash flows, or as a measure of liquidity.

In addition to adjusted EBITDA and adjusted earnings, the following elements are not performance measures consistent with IFRS.  Total system sales are the aggregate sales achieved by all "Pizza Delight", "Mikes", "Scores" and "Bâton Rouge" restaurants, whether they are corporate units or franchises.  This performance measure indicates the Company's overall growth and reflects the direct impact of the restaurant openings and closures.  The Company also discloses same store sales, which are defined as sales generated by stores that have been open for at least one year.  The Company believes this is a meaningful measure of operating performance.

Cautionary Note Regarding Forward-Looking Statements

Certain information in this press release regarding the Company, including, but not limited to, the Company's business objectives, strategies and priorities, the generation of cash flows, the growth of the same store sales, and other statements that are not historical facts, are "forward-looking statements" within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Forward-looking statements can generally be identified by words such as "may", "should", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "outlook" and similar expressions. All such forward-looking statements are made pursuant to the "safe harbour" provisions of applicable securities laws. These statements are based on information currently available to the Company's management and on the current assumptions, intentions, plans, expectations and estimates of the management regarding the Company's future growth, results of operations, performance and opportunities as well as the economic environment in which it operates. Forward-looking statements involve known and unknown risks, uncertainties and other factors outside the Company's control. A number of factors could cause actual results of the Company to differ materially from the results discussed in the forward-looking statements, including, but not limited to: market conditions for financing; competitive conditions, whether related to new competitors or current competitors; change in the Company's or its competitors current pricing strategies; changes in demographic trends; changes in consumer preferences and discretionary spending patterns; changes in national and local business and economic conditions; risks associated with the closure of restaurants; costs associated with strategically exiting locations; the ability of the Company to pay dividends; the Company successfully offering new and innovative products and executing its strategies as planned; legislation and governmental regulation; changes in accounting policies, practices and standards; and the results of operations and financial condition of the Company and other factors referenced in the Company's continuous disclosure filings which are available on SEDAR at www.sedar.com. Although the forward-looking statements contained herein are based upon what the Company believes to be reasonable assumptions on the date of this press release, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. Certain assumptions underlying the forward-looking statements contained herein include assumptions related to the Company's ability to obtain financing on conditions favorable to the Company, future cash flows, market conditions, sales estimates, estimates relating to the Company's ability to settle and exit leases. Readers should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this press release and, accordingly, are subject to change after such date. Forward-looking statements are provided herein for the purpose of giving information about the Company's current strategic priorities, expectations and plans, allowing investors and others to get a better understanding of the Company's business outlook and operating environment. Readers are cautioned, however, that such information may not be appropriate for other purposes.

The Company assumes no obligation to update such forward-looking statements to reflect new information, future events or otherwise, except as required by applicable securities laws. Except as otherwise indicated, forward-looking statements do not reflect the potential impact of any non-recurring or other special items or of any transactions that may be announced or that may occur after the date of this press release. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them. The Company therefore cannot describe the expected impact in a meaningful way or in the same way it presents known risks affecting the business. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.

 

 

SOURCE: Imvescor Restaurant Group Inc.

For further information:

Denis Richard
President & CEO
Imvescor Restaurant Group Inc.

http://www.imvescor.ca
514-341-5544

For more information about our brands:

Pizza Delight http://www.pizzadelight.com
Mikes http://www.mikes.ca
Scores http://www.scores.ca
Bâton Rouge http://www.batonrougerestaurants.com