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P.F. Chang's Reports Third Quarter Earnings
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P.F. Chang's China Bistro, Inc. (NASDAQ: PFCB) today reported consolidated net income of $3.0 million for the third quarter ended September 28, 2008, compared to $5.3 million for the third quarter of the prior year. Net income per diluted share for the third quarter of fiscal 2008 was $0.12, and the prior year was $0.20. Current quarter results include the pre-tax impact of $7.5 million in non-cash asset impairment charges recognized in connection with the Company's closure of 10 Pei Wei restaurants (discussed in further detail below). The asset impairment charges reduced current quarter diluted earnings per share by $0.19.
| Â | Â | Â | Â | (000 except per share data) | Â | 3Q08 | Â | 3Q07 | ||
| Revenues | $ | 298,359 | Â | $ | 270,282 | |||||
| Â | ||||||||||
| Income from continuing operations | $ | 2,786 | $ | 5,603 | ||||||
| Net income | $ | 2,962 | $ | 5,275 | ||||||
| Â | ||||||||||
| Income from continuing operations per diluted share | $ | 0.12 | $ | 0.21 | ||||||
| Net income per diluted share | $ | 0.12 | $ | 0.20 | ||||||
| Â | ||||||||||
| Weighted average shares - diluted | 23,927 | 26,105 | ||||||||
For the 13 weeks ended September 28, 2008, comparable store sales decreased 3.1% at the Bistro as a significant reduction in overall guest traffic more than offset the benefit of a 4% to 5% average check increase reflecting the net impact of price increases and menu mix changes. Comparable store sales at the Bistro decreased 3.5%, 1.5%, and 4.4% in July, August and September, respectively. Additionally, the impact of Hurricane Ike resulted in $0.4 million of lost revenue during the third quarter of 2008 as a result of temporary store closures at five Bistro locations in the Houston area.
For the 13 weeks ended September 28, 2008, comparable store sales decreased 2.9% at Pei Wei as a significant reduction in overall guest traffic more than offset the benefit of a slightly higher average check reflecting the net impact of price increases and menu mix changes. Comparable store sales at Pei Wei decreased 2.8%, 0.6%, and 5.2% in July, August and September, respectively. Additionally, the impact of Hurricane Ike resulted in $0.5 million of lost revenue during the third quarter of 2008 as a result of temporary store closures at 13 Pei Wei locations in the Houston area.
Net income for both years includes income (loss) from discontinued operations related to the Company's previously announced planned exit from its Taneko business. On August 1, 2008, the Company completed the sale of Taneko's long-lived assets.
During the third quarter of 2008, the Company opened six new Pei Wei restaurants. No Bistro restaurants opened during the third quarter of 2008.
Pei Wei Store Closures
As part of ongoing profitability initiatives, the Company will be closing 10 underperforming Pei Wei restaurants during the fourth quarter of 2008. This decision was a result of a rigorous evaluation of the Company's entire store portfolio. The Company reviewed each location's past, present and projected operating performance. The locations selected for closure represent restaurants with lower past and present profitability that are not projected to provide acceptable returns in the foreseeable future.
"We have made the tough decision to close 10 Pei Wei restaurants," said Rick Federico, CEO. "We reached this conclusion as a result of a disciplined financial analysis which highlighted stores that were not performing to the financial standards that we and our investors have come to rely upon. We believe that the underperformance at these locations was primarily a result of poor site selection, and the closure of these stores will improve the overall health of Pei Wei and the Company. We continue to believe that Pei Wei is a strong concept, and we remain very optimistic about Pei Wei's future.
"These decisions are extremely hard to make because of the personal and professional impact they have on all of our people," Mr. Federico continued. "As a Company, we place high value on the remarkable dedication of our employees and truly appreciate their many contributions each and every day. At the same time, we recognize that it is necessary to take actions that will strengthen our Pei Wei concept and enable us to focus on enhancing operating efficiency and ensuring long-term value for our employees, guests and shareholders."
During the third quarter of 2008, the Company recognized pre-tax, non-cash asset impairment charges of $7.5 million related to the 10 planned Pei Wei store closures. These asset impairment charges reduced current quarter diluted earnings per share by $0.19. The Company also anticipates additional charges will be recognized during the fourth quarter of 2008 related to lease termination costs and severance payments.
The Company expects Pei Wei restaurant operating income margins to improve by approximately 70-80 basis points in fiscal 2009 as a result of these store closures.
2008 Expectations
The Company has slightly reduced its full year 2008 forecasted earnings per share from continuing operations from a range of $1.36-$1.42 per share to a range of $1.34-$1.40 per share, reflecting expectations of continued economic pressure on consumers for the remainder of the year. This guidance excludes the impact of the asset impairment charges recognized during the third quarter as well as the impact of anticipated restructuring charges to be recognized during the fourth quarter, both of which the Company anticipates reflecting within discontinued operations effective fourth quarter upon restaurant closure.
The Company plans to open a total of 17 new Bistro restaurants and 25 new Pei Wei restaurants during 2008 and now expects full year fiscal 2008 consolidated revenues to increase 11 to 12 percent.
2009 Development
The Company has reduced its planned 2009 development and currently expects to open 8 to 10 new Bistro restaurants and 6 to 10 new Pei Wei restaurants during fiscal 2009, primarily reflecting the current macroeconomic environment.
The Company is hosting a conference call today at 1:00 p.m. ET in which management will provide further details on the third quarter results. A webcast of the call can be accessed through the company's website at http://www.pfcb.com.
P.F. Chang's China Bistro, Inc. owns and operates two restaurant concepts in the Asian niche. P.F. Chang's China Bistro features a blend of high-quality, traditional Chinese cuisine and American hospitality in a sophisticated, contemporary bistro setting. Pei Wei Asian Diner offers a modest menu of freshly prepared Asian cuisine in a relaxed, warm environment offering attentive counter service and take-out flexibility.
Note with Respect to Non-GAAP Financial Measures Contained within Supplemental Financial Information
In addition to using GAAP results in evaluating the Company's business, management measures restaurant operating income to assess the performance of its existing restaurant concepts. Restaurant operating income includes all ongoing costs related to operating the Company's restaurants but excludes preopening expenses and partner investment expense. Because these costs are solely related to expansion of the Company's business, they make an accurate assessment of the health of its ongoing operations more difficult and are therefore excluded. Additionally, general and administrative expenses are only included in the Company's consolidated financial presentation as these costs relate to support of both restaurant concepts and are generally not specifically identifiable to individual restaurant operations. As the Company's expansion is funded entirely from its ongoing restaurant operations, restaurant operating income is a primary consideration of management when determining whether and when to open additional restaurants. The non-GAAP financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Please see the non-GAAP to GAAP reconciliation at the bottom of pages 7 through 9 of this press release for a reconciliation of restaurant operating income to the most directly comparable GAAP measure, income from operations.
Note with Respect to Forward-Looking Statements
The statements contained in this press release that are not purely historical, including the Company's estimates of its earnings, revenues and anticipated new restaurants are forward-looking statements. The accuracy of these forward-looking statements may be affected by certain risks and uncertainties, including, but not limited to: the Company's ability to locate acceptable restaurant sites, open new restaurants and operate its restaurants profitably; the Company's ability to hire, train and retain skilled management and other personnel; the company's ability to access sufficient financing on acceptable terms; changes in consumer tastes and trends; customer acceptance of new concepts; national, regional and local economic and weather conditions; changes in costs related to food, utilities and labor; and other risks described in the Company's recent SEC filings.
| P.F. Chang's China Bistro, Inc. | ||||||
| Consolidated Statements of Operations | ||||||
| (In thousands, except per share amounts) | ||||||
| (Unaudited) | ||||||
| Â | Â | |||||
| 13 Weeks Ended | ||||||
| September 28, | September 30,
| |||||
| 2008 | 2007 | |||||
| Revenues | $ | 298,359 | $ | 270,282 | ||
| Costs and expenses: | ||||||
| Cost of sales | 81,075 | 73,865 | ||||
| Labor | 99,140 | 91,789 | ||||
| Operating | 52,767 | 43,816 | ||||
| Occupancy | 17,594 | 15,970 | ||||
| General & administrative | 18,152 | 17,186 | ||||
| Depreciation & amortization | 17,510 | 14,749 | ||||
| Preopening expense | 1,519 | 4,939 | ||||
| Partner investment expense | 99 | (71) | ||||
| Asset impairment charge | Â | 7,510 | Â | - | ||
| Total costs and expenses | Â | 295,366 | Â | 262,243 | ||
| Income from operations | 2,993 | 8,039 | ||||
| Interest and other income (expense), net | (895) | (10) | ||||
| Minority interest | Â | (367) | Â | (808) | ||
| Income from continuing operations before provision for income taxes
| 1,731 | 7,221 | ||||
| Provision for income taxes | Â | 1,055 | Â | (1,618) | ||
| Income from continuing operations | 2,786 | 5,603 | ||||
| Income (loss) from discontinued operations, net of tax | Â | 176 | Â | (328) | ||
| Net income | $ | 2,962 | $ | 5,275 | ||
| Â | ||||||
| Basic income per share: | ||||||
| Income from continuing operations | $ | 0.12 | $ | 0.22 | ||
| Income (loss) from discontinued operations, net of tax | Â | 0.01 | Â | (0.02) | ||
| Net income | $ | 0.13 | $ | 0.20 | ||
| Â | ||||||
| Diluted income per share: | ||||||
| Income from continuing operations | $ | 0.12 | $ | 0.21 | ||
| Income (loss) from discontinued operations, net of tax | Â | 0.00 | Â | (0.01) | ||
| Net income | $ | 0.12 | $ | 0.20 | ||
| Â | ||||||
| Weighted average shares used in computation - basic | Â | 23,613 | Â | 25,773 | ||
| Weighted average shares used in computation - diluted | Â | 23,927 | Â | 26,105 | ||
| P.F. Chang's China Bistro, Inc. | ||||||
| Consolidated Statements of Operations | ||||||
| (In thousands, except per share amounts) | ||||||
| (Unaudited) | ||||||
| Â | Â | |||||
| 39 Weeks Ended | ||||||
| September 28, | September 30,
| |||||
| 2008 | 2007 | |||||
| Revenues | $ | 911,018 | $ | 800,789 | ||
| Costs and expenses: | ||||||
| Cost of sales | 248,248 | 219,263 | ||||
| Labor | 304,807 | 270,959 | ||||
| Operating | 151,336 | 127,080 | ||||
| Occupancy | 53,349 | 46,384 | ||||
| General & administrative | 55,801 | 49,364 | ||||
| Depreciation & amortization | 51,593 | 40,827 | ||||
| Preopening expense | 6,152 | 10,774 | ||||
| Partner investment expense | 10 | (1,940) | ||||
| Asset impairment charge | Â | 7,510 | Â | - | ||
| Total costs and expenses | Â | 878,806 | Â | 762,711 | ||
| Income from operations | 32,212 | 38,078 | ||||
| Interest and other income (expense), net | (2,778) | 512 | ||||
| Minority interest | Â | (1,559) | Â | (3,576) | ||
| Income from continuing operations before provision for income taxes
| 27,875 | 35,014 | ||||
| Provision for income taxes | Â | (5,794) | Â | (9,023) | ||
| Income from continuing operations | 22,081 | 25,991 | ||||
| Loss from discontinued operations, net of tax | Â | (100) | Â | (974) | ||
| Net income | $ | 21,981 | $ | 25,017 | ||
| Â | ||||||
| Basic income per share: | ||||||
| Income from continuing operations | $ | 0.93 | $ | 1.01 | ||
| Loss from discontinued operations, net of tax | Â | (0.01) | Â | (0.03) | ||
| Net income | $ | 0.92 | $ | 0.98 | ||
| Â | ||||||
| Diluted income per share: | ||||||
| Income from continuing operations | $ | 0.91 | $ | 1.00 | ||
| Loss from discontinued operations, net of tax | Â | 0.00 | Â | (0.04) | ||
| Net income | $ | 0.91 | $ | 0.96 | ||
| Â | ||||||
| Weighted average shares used in computation - basic | Â | 23,828 | Â | 25,656 | ||
| Weighted average shares used in computation - diluted | Â | 24,156 For more information, go to www.businesswire.com
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