Humpty's Restaurants International Inc.

Humpty's Restaurants International Inc.

November 29, 2006 17:05 ET

Humpty's Restaurants International Inc.: Third Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 29, 2006) - Humpty's Restaurants International Inc. (TSX VENTURE:HMP) today released financial results for the 9-month period ending September 30, 2006.

For the 9-Months ended September 30
2006 2005
Consolidated Revenue: $9,110,777 $6,569,612
Net Income: 315,736 380,927
Net Income/Share: 0.021 0.026
Shares Outstanding: 14,776,785 14,838,785

We are pleased to present the Third Quarter Report of Humpty's Restaurants International Inc. (H.R.I.I.) for the nine months ending September 30 2006. Operating results were disappointing when comparing them to the same period in fiscal 2005. The net income for the period was $115,791 vs. $226,417 in 2005. Some of the reasons for this decrease will be outlined later in this report and the Management Discussion and Analysis that follows. Overall the operating results for the nine-month period ending September 30, 2006 decreased by 17.1% (net income $315,736 vs. net income $380,927 in fiscal 2005).

Year-over year Third Quarter combined revenue (Franchise Revenue and Corporate Store Operations) increased significantly during the period from $2.357 million (Q3/05) to $3.495 million (Q3/06). Franchise revenue decreased by 0.8% however Corporate Store operations increased by 78.1%. Decrease in Franchise revenue was entirely due to the fact that the Corporation no longer collects rental revenue from property it owned in Red Deer, AB in fiscal 2005. Corporate Store operations continued its upward progression due to the vibrant Alberta economy and the improved gasoline sales (Red Deer, AB) since our petroleum brand name change. As a result of increased Corporate Store operations, net revenue improved by $51,133 over the same period in 2005.

Third Quarter earnings before interest, amortization and taxes (EBITDA) were $289,160 vs. $468,810 (Q3/05). The substantial decrease of $179,650 can be attributed to the following.

During the same period in 2005 the Corporation recorded a substantial gain (Other Items) of $97,637 when it sold it's Corporate location in Yorkton SK.

In the Third Quarter 2006 the Corporation terminated Franchise Agreements in Red Deer, AB and Edmonton, AB. These two terminated locations cost the Corporation $53,100 in this Quarter plus an approximate loss of $21,000 Royalty revenue. The Red Deer location has been re-franchised, thoroughly renovated and will re-open in December/06. The Edmonton location is currently being renovated and is scheduled to re-open in late January/07. Although this location has not been awarded to a new Franchisee we are confident this will occur prior to year-end.

Western Canada (particularly Alberta) is experiencing severe labour shortages causing some locations to reduce hours of operation due to the lack of available employees. Corporately we have become very proactive in the recruitment of foreign employees. As a result of this initiative sixteen employees from Mexico were recruited in the Third Quarter to be placed in our eight Corporate locations. This cost us $30,000 however two employees per location guaranteed for a minimum twelve months will go a long way to ensure that our customers continue receiving the service and quality that is expected.

The consolidated balance sheet working capital ratio of 0.94 to 1.00 is much improved over the 0.57 to 1.00 ratio recorded in Q3/05 and the debt to equity ratio improved slightly from 4.54 to 1.00 in Q3/05 to 4.51 to 1.00 in this Quarter.

Currently there are fifty-one locations in the Humpty's System. As previously mentioned, locations in Edmonton and Red Deer are presently being renovated with scheduled re-openings for December/06 and January/07 respectively. As both these locations have been in the system since 1986 we are excited about the new look we are going to present to our customers when we re-open. We are also pleased to report that system-wide sales recorded same store sales increases for nine straight months (Jan/06-Sept/06). This despite the fact some locations had to reduce hours of operation because of staff shortages. The extreme lack of quality labour continues to hamper the service industry therefore recruitment and retaining staff continues to be a high priority for H.R.I.I. Our Corporate and Franchise owners continue to be very proactive in this regard.

As this will be our last report in fiscal 2006 may we take this opportunity to extend to you our best wishes for a prosperous and healthy New Year.

For detailed financial information, audited statements can be found at

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)
    Humpty's Restaurants International Inc.
    Tom Scappatura
    (403) 269-4675
    (403) 266-1973 (FAX)