MONCTON, NB, Sept. 7, 2012 /CNW/ - Imvescor Restaurant Group Inc. ("IRG" or the "Company") (TSX: IRG) reported financial results today for the 13 and 39 weeks ended July 29, 2012. The 2011 results are for the 13 and 39 weeks ended July 31, 2011.
Third Quarter 2012 Financial and Operating Results
The following table provides selected financial information for the 13 and 39 weeks ended July 29, 2012, along with results for the comparative periods of the prior year, which are calculated for the 13 and 39 weeks ended July 31, 2011.
|(in thousands of dollars)|| 13 weeks
July 29, 2012
| 13 weeks
July 31, 2011
| 39 weeks
July 29, 2012
| 39 weeks
July 31, 2011
|Retail, supply chain, franchise fees and other revenue||2,304||2,660||7,636||8,560|
|Corporate restaurant sales and sale of manufactured goods||2,333||1,276||6,121||3,737|
|Advertising and administrative expenses||7,248||6,640||23,905||23,307|
|Adjusted EBITDA (note 1)||3,873||4,317||9,278||9,241|
|Net finance costs (note 2)||271||1,588||5,953||4,861|
|Net earnings (note 3)||2,902||2,099||1,728||1,544|
|Adjusted net earnings (notes 2 & 3)||1,674||1,893||3,499||2,745|
Note 1: Adjusted EBITDA includes earnings before interest income, interest on long-term debt and convertible debentures, gain (loss) on derivative financial liability, depreciation and amortization, loss from discontinued operations and income taxes.
Note 2: Finance costs include a non-cash gain on derivative financial liability of $997 thousand for the 13 weeks ended July 29, 2012 and loss of $1,964 thousand for the 39 weeks ended July 29, 2012 as compared to nil in 2011. This non-cash gain (loss) has been excluded in the calculation of adjusted net earnings.
Note 3: Net earnings include earnings from discontinued operations of $231 thousand and $193 thousand for the 13 and 39 weeks ended July 29, 2012 and earnings of $206 thousand and a loss of $1,201 thousand for the 13 and 39 weeks ended July 31, 2011 respectively. These items have been excluded in the calculation of adjusted net earnings.
Total system sales for the 13 weeks ended July 29, 2012 were $99.6 million as compared to $104.1 million in 2011, a decrease of 4.3%. Total system sales for the 39 weeks ended July 29, 2012 were $295.8 million as compared to $302.9 million in 2011, a decrease of 2.4%. The decrease in total sales is attributed to the closure of 8 non-performing restaurants during the fiscal year 2011 and 6 non-performing restaurants in the 39 weeks ended July 29, 2012. 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 39 weeks ended July 29, 2012 was negative 1.7% and negative 0.4% as compared to negative 1.4% and negative 2.2% in 2011, respectively. Pizza Delight has shown improvement in SSS during this quarter with positive 0.8% while Scores has maintained an overall positive 0.4% SSS year to date as a result of improved marketing focus. Overall SSS year to date are flat compared to the 39 weeks ended July 31, 2011.
Total revenues for the 13 and 39 weeks ended July 29, 2012 were $11.7 million and $34.8 million, as compared to $11.3 million and $33.4 million in 2011, an increase of $459 thousand and $1.4 million, respectively. Despite the decreases in total system sales, the Company has maintained consistent royalty and advertising revenues from franchisees as compared to the prior year. The Company experienced decreases in retail revenues of $620 thousand and franchise fees of $365 thousand for the 39 weeks ended July 29, 2012. Decreases in retail revenues from frozen pizza sales was a result of the Company's authorized manufacturer's failure to deliver required volumes to the grocery stores. The Company continues to work with the manufacturer towards ensuring a consistent supply of its pizza retail products. The Company has also secured a second manufacturer who should be in a position to produce and deliver products in the fourth quarter. There were also decreases in franchise fees related to fewer new restaurant openings and franchise renewals as compared to the prior year. The increase in corporate restaurant sales and sale of manufactured goods of $2.4 million for the 39 weeks ended July 29, 2012 is a result of operating two additional restaurants during the period.
Finance costs include interest income, interest on long-term debt and convertible debentures and the non-cash gain (loss) on derivative financial liability related to the fair value of the warrants. Interest on long-term debt and convertible debentures decreased $326 thousand to $1.3 million and $875 thousand to $4.1 million for the 13 and 39 weeks ended July 29, 2012, respectively. This decrease is related to the overall reduction of debt. The Company recorded a gain on derivative financial liability of $997 thousand for the 13 weeks ended July 29, 2012 and a loss of $2.0 million for the 39 weeks ended July 29, 2012 as compared to nil in 2011.
Results from operating activities, or EBITDA, decreased $444 thousand to $3.9 million for the 13 weeks ended July 29, 2012. This decrease in EBITDA is related to recoveries in accounts receivable from franchisees that were previously provided for and cost savings from the exit of underperforming locations and unfavourable lease terms in the prior year which did not reoccur in the current year. Year to date EBITDA of $9.3 million for the 39 weeks ended July 29, 2012 is comparable to the prior year.
Adjusted net earnings excludes the non-cash gain on derivative financial liability of $997 thousand and loss of $2.0 million for the 13 and 39 weeks ended July 29, 2012, respectively. Given the cashless exercise option in favor of the warrant holder, the warrants are required to be measured at fair value under International Financial Reporting Standards at each reporting period. The fair value is affected by a number of factors, including, without limitation, the Company's common share price and the volatility thereof. Management believes this adjustment has no impact on the Company's operations and thus adjusted net earnings is more indicative of the Company's results from its normal business activities. On July 19, 2012, the Company entered into a First Supplemental Indenture to the Warrant Indenture, thereby removing the cashless exercise option. Such removal of the cashless exercise option has eliminated the non-cash financial impact from measuring the warrants at fair value at each reporting period in the future.
Total long-term debt and convertible debentures at July 29, 2012 decreased to $47.0 million as compared to $62.9 million at October 30, 2011, a result of principal payments and the refinancing transactions related to the convertible debentures in December 2011.
On August 31, 2012, the Company completed the refinancing of its senior credit facility with GE Capital, Canada. The new credit facility consists of a $37.1 million term loan, maturing in August 2015. The proceeds of the new credit facility have been applied to fully repay the Company's existing fixed rate senior debt facilities and two third-party loans, totalling $37.1 million. The new credit facility provides for a BA floating rate plus 4.1%, with an option to convert to a fixed rate. Subject to any fluctuations in the BA rate, this new facility should reduce the Company's overall borrowing rate by approximately 300 basis points, representing annual interest expense savings on senior debt of approximately $1 million over the term of the loan.
The new credit facility also provides the Company with additional flexibility to pay down its existing outstanding subordinated debentures. In that respect, the Company has provided to the holders of subordinated debentures the required redemption notice pursuant to which the subordinated debentures will be partially repaid in the amount of $3.5 million, effective October 1, 2012 resulting in additional interest expense savings going forward.
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, and Nova Scotia in the casual dining segment.
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
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President & CEO
Imvescor Restaurant Group Inc.