Imvescor Restaurant Group Inc. Reports Second Quarter Financial Results

MONCTON, N.B., June 7, 2013 /CNW/ - Imvescor Restaurant Group Inc. ("IRG" or the "Company") (TSX: IRG) reports financial results today for the 13 and 26 weeks ended April 28, 2013 ("second quarter" or "the period").

Improved Financial Results

(in thousands of dollars) Q2 2013
13 weeks ended
April 28, 2013
Q2 2012
13 weeks ended
April 29, 2012
YTD 2013
26 weeks ended
April 28, 2013
YTD 2012
26 weeks ended
April 29, 2012
Pizza Delight $   598 $   631 $  1,724 $  1,484
Mikes 1,140 740 2,207 1,826
Scores 714 896 1,429 1,186
Bâton Rouge 949 693 1,893 659
Total results from
operating activities(1)
$   3,401 $   2,960 $  7,253 $  5,155
(1)  Results from operating activities includes earnings before interest income, interest on long-term debt, loss on redemption of debentures, loss on derivative financial liability, net loss from discontinued operations, and income tax expense.

Total results from operating activities for the 13 and 26 weeks ended April 28, 2013 showed improvements over the comparable period of the prior year. Overall improvements are mainly related to increased supply chain revenues and retail royalties and reductions in general, administrative and franchise support expenses, after excluding general and administrative expenses related to company-owned restaurants.

Pizza Delight's second quarter results from operating activities were lower than the prior year mostly as a result of lower supplier revenues and higher advertising expenses during the period, partially offset by the decrease in general and administrative expenses.  Year to date, results from operating activities for Pizza Delight were higher than the prior year mostly as a result of a decrease in general, administrative and franchise support expenses.

The Mikes brand has showed improved results from operating activities for the second quarter and the first half of 2013 as compared to the prior year.  The improvement is mostly as a result of improved supply chain, franchise fees and other revenues, increases in retail royalties, partially offset by an increase in general, administrative and franchise support expenses mainly related to the take over costs of company-owned restaurants that were previously franchised.

Year to date results from operating activities for the Scores brand were higher than the prior year mostly as a result of increased supplier revenues and corporate restaurant sales. The decrease in the second quarter mainly relate to higher advertising expenses during the quarter as compared to the prior year.

The improved results from operating activities for Bâton Rouge are mainly attributed to the increase in retail royalties from the launch of the Bâton Rouge branded ribs in grocery stores and reduction in advertising expenses due to the delay of promotional media campaigns to later periods in the year.

(in thousands of dollars) Q2 2013
13 weeks ended
April 28, 2013
Q2 2012
13 weeks ended
April 29, 2012
YTD 2013
26 weeks ended
April 28, 2013
YTD 2012
26 weeks ended
April 29, 2012
Net earnings (loss) $   720 $   (1,177) $  1,731 $  (1,174)
Loss on redemption of debentures 968 --- 1,968 ---
Loss on derivative financial liability --- 2,547 --- 2,961
Loss from discontinued operations --- --- --- 38
Adjusted net earnings $   1,688 $   1,370 $  3,699 $  1,825

Adjusted net earnings for the 13 and 26 weeks ended April 28, 2013 were $1.7 million and $3.7 million, respectively, as compared to $1.4 million and $1.8 million for the comparative periods in 2012.  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.  Interest on long-term debt decreased from $2.8 million in the first half of 2012 to $1.7 million for the first half of 2013, a decrease of $1.1 million resulting from the restructuring and reduction of total debt.  The Company has excluded in the calculation of adjusted net earnings for the 26 weeks ended April 28, 2013 the $2.0 million non-cash loss on redemption of debentures, and for the 26 weeks ended April 29, 2012 the $3.0 million non-cash loss on derivative financial liability and the loss from discontinued operations of $38 thousand 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.

Second Quarter Financial and Operating Results

The following table provides selected financial information for the 13 and 26 weeks ended April 28, 2013, along with results for the comparative period of the prior year.

(in thousands of dollars) Q2 2013
13 weeks ended
April 28, 2013
Q2 2012
13 weeks ended
April 29, 2012
YTD 2013
26 weeks ended
April 28, 2013
YTD 2012
26 weeks ended
April 29, 2012
Total revenues $   13,914 $   11,827 $   26,544 $   23,052
Advertising, retail and other expenses 9,352 8,176 17,284 16,657
Adjusted EBITDA (note 1) 3,610 3,090 7,649 5,405
Net finance costs (note 2) 1,694 3,711 3,638 5,682
Net earnings (loss) (note 3) 720 (1,177) 1,731 (1,174)
Adjusted net earnings (notes 2 & 3) $   1,688 $   1,370 $   3,699 $   1,825
Note 1: Adjusted EBITDA includes earnings before interest income, interest on long-term debt, 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 $968 thousand and $2.0 million, respectively, for the 13 and 26 weeks ended April 28, 2013 as compared to nil in 2012 and a non-cash loss on derivative financial liability of nil as compared to $2.5 million and $3.0 million, respectively, for the 13 and 26 weeks ended April 29, 2012.  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 $38 thousand for the 13 and 26 weeks ended April 29, 2012 as compared to nil in 2012.  This has been excluded in the calculation of adjusted net earnings.

Total system sales for the 13 and 26 weeks ended April 28, 2013 were $94.4 million and $190.0 million, respectively, as compared to $97.9 million and $196.2 million for the 13 and 26 weeks ended April 29, 2012, a decrease of 3.5% and 3.1% respectively.

Overall, the Company experienced decreases in same store sales, both for the second quarter and year to date. The Mikes brand showed improved growth for both the second quarter and the first half of 2013. Pizza Delight showed a slight decrease in same store sales for the quarter and year to date. The Scores and Bâton Rouge brands have more significant declines for the quarter, and year to date. The delayed start of the NHL season had an adverse effect on restaurant sales for these brands in the first quarter of the year. Furthermore, competitive entry in key markets and aggressive promotional pricing by competitors has contributed to the decrease in the same store sales for those brands.  The Company has focused on introducing more value oriented offerings supported by marketing initiatives for all of its brands in order to regain market share.

(in thousands of dollars) Q2 2013
13 weeks ended
April 28, 2013
Q2 2012
13 weeks ended
April 29, 2012
YTD 2013
26 weeks ended
April 28, 2013
YTD 2012
26 weeks ended
April 29, 2012
Pizza Delight -1.6% -2.0% -0.6% -2.2%
Mikes +0.6% +1.3% +1.1% +0.5%
Scores -4.1% +2.8% -3.3% +1.5%
Bâton Rouge -5.9% -1.7% -5.2% +0.2%
Total same store sales -3.0% +0.3% -2.2% +0.2%

Debt Reduction

(in thousands of dollars) As at April 28, 2013 As at October 28, 2012
Long-term debt, net of financing charges * $   35,702 $   38,789
Financing charges on loan payable 966 1,180
Financing charges on debentures payable 1,209 3,348
Principal amount of long-term debt outstanding * $   37,877 $   43,317

* includes current portion

On January 25, 2013 and April 26, 2013, the Company repaid $2.0 million for a total reduction of $4.0 million in its outstanding debentures. These repayments, along with the Company's regular repayments on its senior credit facility, reduced total long-term debt outstanding from $43.3 million at year end to $37.9 million at the end of the second quarter.

The combination of the refinancing transactions completed in 2012 and the Company's reduction in debt has resulted in significant interest expense savings for the Company. Interest on long-term debt incurred during the first six months of 2013 was $1.7 million, a decrease of $1.1 million or 38%, as compared to the first six months of 2012.

Subsequent to April 28, 2013, the Company repaid on May 24, 2013 the remaining $2.5 million in debentures thereby completely eliminating this junior debt facility.

Retail Revenues

In November 2012, the Company introduced Bâton Rouge branded ribs in grocery stores.  The launch of the Bâton Rouge ribs represents the first of the new retail products to be introduced, and retail sales significantly exceeded management's expectations.  Net retail revenues for 13 and 26 weeks ended April 28, 2013 were $997 thousand and $1.7 million, respectively, as compared $418 thousand and $741 thousand for the comparative periods.  The increases in net retail revenues is attributed to increases in Mikes frozen pizza, pepperoni and sauce sales as well as the increases from the launch of Bâton Rouge ribs. 

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 this MD&A 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 issuers.

For instance, the Company uses earnings before interest income, interest on long-term debt, depreciation and amortization and income tax expense ("EBITDA") and earnings before interest income, interest on long-term debt, loss (gain) on derivative financial liability, loss on redemption of debentures, depreciation and amortization, net loss (earnings) from discontinued operations and income tax expense ("adjusted EBITDA") because those measures enable management to assess the Company's operational performance.  Those measures are a financial indicator of the Company's ability to service and incur debt.  The Company also uses net earnings excluding loss on redemption of debentures, loss (gain) on derivative financial liability and loss from discontinued operations, ("adjusted net earnings") as a measurement of performance since management is of the opinion that the expenses mentioned are not indicative of the Company's operations.  EBITDA, adjusted EBITDA and adjusted net 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, 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 company-owned restaurants 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 compared to the sales from the same group of restaurants in the comparable period.  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


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