Humpty's Restaurants International Inc.
TSX VENTURE : HMP

Humpty's Restaurants International Inc.

April 30, 2007 19:08 ET

Humpty's Releases Fiscal Year-End 2006 Results

CALGARY, ALBERTA--(CCNMatthews - April 30, 2007) - Humpty's Restaurants International Inc. (TSX VENTURE:HMP) today released financial results for the 12-month period ending December 31, 2006.



For the 12- Months ended December 31
2006 2005
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Consolidated Revenue: $ 11,325,321 $ 8,439,456
Net Income: 126,533 (374,352)
Net Income/Share: 0.009 (0.025)
Shares Outstanding: 14,784,441 14,842,275
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We are pleased to present to you our Company's operating results for 2006. The positive results reflect our continued efforts to solidify our position in the market place and strengthen our financial status. It is our opinion that 2006 was the beginning of a future of year over year positive financial growth.

Our Operating Results

Total revenue for fiscal 2006 was $11,325,321 which represents a 34.2% increase from fiscal 2005 ($8,439,456). The bulk of this increase was derived from the restaurant, gasoline and convenience store division. The change of gasoline brands at our Red Deer AB location increased that locations sales by $2,788,470 in 2006. Despite five less Franchise locations in fiscal 2006 vs. 2005. Royalty revenue increased 1.5%. Operating expenses increased proportionally with the revenue increase (33.8% vs. 34.2%). Again, as reported for fiscal 2005 "Lease settlements and franchise assistance" were the major contributors to these expenses. The reason we identify this category is because it is the only expense dedicated to troubled locations or rectifying one-time unusual write downs. Although this expense was 9.6% reduced from fiscal 2005 we missed our target of $395,000 by $194,165.

The following three unusual items were the write downs that were the major contributors to this expense.

a) Thunder Bay ON location that closed in January/06. Remainder of lease obligations were $178,229.

b) Prince George B.C. lease obligations for fiscal 2006 and part of fiscal 2007 were $93,529.

c) Terminated a Franchise location in Edmonton, AB in July/06. The expenses of this closed location to fiscal year-end were $67,388. This location was renovated and re-franchised in March 2007.

The net effect of the aforementioned unusual items was a loss of $339,146. Lease settlements and franchise assistance will always be a cost of doing business in our Company however they should never be to the extent that we have experienced over the past five years. Since we don't have any significant lease settlement issues remaining we can project that this category should not exceed $296,000 for fiscal 2007.

Despite the aforementioned expenses the Company recorded a 53.1% increase of Income from Operations ($250,477/06 vs. $163,591/05). Net income improved 133.8%.

Normal Course Issuers Bid

In September 2002 the Company was granted permission to commence a Normal Course Issuers Bid which meant it could repurchase for cancellation up to 759,740 shares of its own capital stock. In September 2003, November 2004, November 2005 and December 2006 the Company renewed its Bid to repurchase its capital stock. Since 2002 the Company has repurchased and cancelled 448,000 of its own shares. Since the end of fiscal 2006 the Company has repurchased an additional 45,000 shares and is awaiting cancellation. With the shares that have already been cancelled or awaiting cancellation it means we have repurchased 3.2% of the original outstanding total. By purchasing these shares for cancellation the Company continues to enhance shareholder value.

Our Market Position

2007 marks the 30th year of the Humpty's System in Canada. Our market share on December 31, 2006 was forty-nine (49) locations operating and one location closed for renovations (re-opened March/07). The Company owns or manages nine (9) locations and has purchased the Nanton, AB location for a corporate takeover May 1/07. This is a prime highway location that will contribute approximately $1M to our restaurant revenue. The Company also owns a Gas Bar/Convenience Store/Car Wash operation at Gasoline Alley in Red Deer, AB that will generate in excess of $5M revenue for fiscal 2007.

Looking Forward

Although the Company has decreased in size by eight (8) locations in the past five years the actual annual revenue generated by each Franchise location has increased by 20.4% ($61,591/06 vs. $51,151/02). This is a significant increase despite a new reduced Royalty structure implemented in January 2005.

We will maintain our objective to continue to improve on what we have. That is the reason we have continued to upgrade our locations thus improving sales. We will continue to replace under performing Franchise owners (three changes 2006) with more motivated and progressive entrepreneurs.

Although we continue to focus on improvement we will look at every opportunity to develop new locations, particularly in Ontario and the Atlantic Provinces. We know there will be opportunities however the deal has to be right. It's better to be cautious than careless.

Western Canada (particularly Alberta) continues to experience an extreme labour shortage. This is not a short term situation. We are making provisions as are our Franchisees to bring in foreign workers. To date we have brought in fifteen (15) from Mexico and have another eleven (11) coming from Mexico plus nineteen (19) from the Philippines. We feel we can stay one step ahead of our competition if we can maintain a steady and focused work force.

Summary

If we stay focused on profitability growth we will be prepared for expansion opportunities when they present themselves.

For detailed financial information, audited statements can be found at www.sedar.com.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Humpty's Restaurants International Inc.
    Mr. Koenig
    (403) 269-4675
    (403) 266-1973 (FAX) (FAX)
    or
    Humpty's Restaurants International Inc.
    Tom Scappatura
    Controller
    (403) 269-4675
    (403) 266-1973 (FAX)
    Email: info@humptys.com
    Website: www.humptys.com