SOURCE: Meritage Hospitality Group

June 26, 2008 14:00 ET

Meritage Reports Second Quarter Results; Second Quarter Profit

GRAND RAPIDS, MI--(Marketwire - June 26, 2008) - Meritage Hospitality Group Inc. (PINKSHEETS: MHGU), one of the nation's premier franchise operators, today announced net sales for the second fiscal quarter ended June 1, 2008 were $14.8 million, compared to $14.6 million during the same period last year. Meritage reported net income of $191,000 for the quarter, compared to a net loss of $362,000 for the same period last year. Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) for the period was $916,000 compared to $514,000 in the same period of fiscal 2007, an increase of 78.2%.

Sales for the six month period ended June 1, 2008, were $28.2 million compared to sales of $28.5 million during the same period last year. Meritage reported a net loss for the six month period of $601,000, compared to a net loss of $1,158,000 for the same period last year. Consolidated EBITDA for the six months was $1.19 million compared to $665,000 in the same period of 2007, an increase of 78.6%.

Gary Rose, Meritage's Vice President & Chief Financial Officer, stated, "Our second quarter profit was largely due to improved operating performance, the recognized gain on the sale of the a newly constructed retail center, and an income tax refund from a prior year."

In late April, Wendy's and Arby's parent company (Triarc Companies) announced a merger agreement between the two companies. While this merger will not change the Wendy's brand, we are hopeful that leadership under future CEO, Roland Smith, will help the Wendy's franchise system experience improved restaurant margins that brings Wendy's closer to the industry average of 15%. Mr. Smith stated his intention to pursue expansion focused on breakfast and new unit growth. He also aims to improve margins significantly in the Wendy's company-owned stores, and develop synergies and efficiencies between the brands including possible dual-concept development in high-cost real estate markets.

The Company previously reported that it became a venture partner in a new resort development in the Bahamas managed by Jorge Perez and Steven M. Ross, founders of The Related Group. The development includes an upscale leisure and mixed-use resort opportunity including a marina, golf course, oceanfront lots and high-end hotels operated by international luxury hotel operators. Meritage will focus on real estate sales and marketing, as well as development services.

Meritage is one of the nation's premier franchise operators, currently operating 53 restaurants in two brands: Wendy's in the quick service restaurant segment and O'Charley's in the casual dining segment. The Company employs over 2,000 Michigan residents.

SAFE HARBOR STATEMENT

Certain information in this new release, particularly information regarding future economic performance and finances, and plans, expectations and objectives of management, constitutes forward-looking statements. Factors set forth in our Safe Harbor Statement, in addition to other possible factors not listed, could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. Please review the Company's Safe Harbor Statement at http://www.meritagehospitality.com.

    Meritage Hospitality Group Inc. and Subsidiaries
          Consolidated Statement of Operations
                     (Unaudited)

                                          Three Months Ended

                                          June 1,      May 27,
                                           2008         2007
                                       ------------  ------------

Food and Beverage Revenue              $ 14,793,578  $ 14,636,354

Costs and Expenses
  Cost of food and beverages              3,980,701     3,978,694
  Labor and related expenses              5,064,950     5,069,685
  Advertising expenses                      582,528       573,758
  Other operating expenses                3,891,141     3,867,927
                                       ------------  ------------

     Total Operating Expenses            13,519,320    13,490,064

  General and administrative expenses       729,947       642,453
  Depreciation and amortization             515,099       596,391
                                       ------------  ------------

     Total Costs and Expenses            14,764,366    14,728,907
                                       ------------  ------------

Income (Loss) from Operations                29,212       (92,553)

Other Income (Expense)
  Interest expense                         (282,612)     (231,012)
  Debt extinguishment charges                     -             -
  Interest income                            12,766        23,504
  Other income                               29,107           960
  Gain on disposal of assets                291,057        (1,254)
  Stock option expense                      (34,152)      (25,000)
                                       ------------  ------------

     Total Other Expense                     16,166      (232,803)
                                       ------------  ------------


Income (Loss) Before Income Taxes            45,378      (325,356)

Income Tax Expense (Credit)                (145,302)       13,373
                                       ------------  ------------

Income (Loss) from Continuing Operations    190,681      (338,729)

Discontinued Operations                           -       (23,034)
                                       ------------  ------------

Net Income (Loss)                      $    190,681  $   (361,763)
                                       ============  ============

Contact Information

  • CONTACT:
    Gary A. Rose
    Chief Financial Officer
    Meritage Hospitality Group Inc.
    616/776-2600