Prime Restaurants Inc.
TSX : EAT

Prime Restaurants Inc.

May 11, 2011 17:00 ET

Prime Restaurants Inc. Announces 5% Same Store Sales Growth in Q1 2011 and Declares Quarterly Dividend

MISSISSAUGA, ONTARIO--(Marketwire - May 11, 2011) - Prime Restaurants Inc. ("PRI" or the "Company") (TSX:EAT) today reported its results for the 13 weeks ended April 3, 2011. Effective April 5, 2010 Prime Restaurants Royalty Income Fund (the "Fund") was reorganized (the "Reorganization") into a public corporation named Prime Restaurants Inc. The 13 week period ended April 3, 2011 of PRI is compared to the three months ended March 31, 2010 of the Fund. As PRI's operations are substantially different from the operations of the Fund, much of the information in this press release is not directly comparable. In addition, effective January 3, 2011 the Company began incorporating International Financial Reporting Standards ("IFRS") in its reporting. For more information relating to the impact of the transition to IFRS on the Company's reported financial position, financial performance and cash flows, please refer to the Company's Management Discussion and Analysis ("MD&A") for the thirteen weeks ended April 3, 2011 available on the Company's web site or at www.sedar.com.

Q1 2011 HIGHLIGHTS:

  • Strong Same Store Sales Growth ("SSSG")1 of 5.0% in the quarter
  • Solid growth across the majority of its brands and geographic regions
  • Solid performance at East Side Mario's restaurants with strong 5.9% SSSG
  • Casey's restaurants generated very solid 4.8% SSSG in quarter
  • New menus and advertising programs to benefit future growth.

PRI generated a solid increase in SSSG in the first quarter ended April 3, 2011 as the Company's proven sales and marketing programs successfully capitalized on the slowly improving Canadian economy and consumer sentiment. Same store sales for the 13 weeks ended April 3, 2011 increased by 5.0% compared to 1.3% for the comparable period last year.

Most of the Company's brands posted positive SSSG in the quarter, with East Side Mario's restaurants leading the way with 5.9%, while Casey's restaurants posted 4.8% SSSG, and the pubs experienced a small decline in SSSG of (1.1%). Nearly all of PRI's geographic regions in Canada posted positive SSSG, with Ontario up an impressive 6.3%, Atlantic Canada up 3.8%, and Western Canada posting SSSG of 2.3%. Québec posted a slight decline in SSSG of (0.9%) for the 13 weeks ended April 3, 2011.

"Following same store sales growth of 4.1% in 2010, we are very encouraged by the strong 5% increase in the first quarter of the new year, the result of our proven sales and marketing programs, and our dedication to providing the highest quality experience for our guests," commented John Rothschild, Chief Executive Officer of PRI.

In 2011 East Side Mario's management will focus on utilizing larger format restaurants to maximize revenues, supported by a four-fold increase in television advertising compared to 2010. A new and updated menu was introduced across the East Side Mario's restaurant network in January. Casey's restaurants launched new marketing programs early in 2011, including e-mail and direct mail campaigns, and a new summer menu that will be introduced in July. PRI's pub locations introduced a new core food and beverage menu in the first quarter of 2011 featuring an innovative quick reference code directing guests to a mobile web site suggesting recommended beer and food pairings.

"Looking ahead, we are confident that Prime will continue to grow over the long-term as our renovation programs, new menu offerings and rigorous focus on customer service attract new and repeat guests to all of our well-recognized and popular brands," Mr. Rothschild concluded.

Operational Review

During the 13 weeks ended April 3, 2011, a previously closed East Side Mario's restaurant in Ontario reopened under new management, and one Casey's restaurant in Ontario was renovated to the up-dated Casey's image.

Reorganization

Effective April 5, 2010 the Fund was reorganized into a public corporation named Prime Restaurants Inc. The new corporate structure includes the combination of the businesses of Prime Restaurants of Canada Inc. ("PRC"), the Fund and PRC Trademarks Inc. ("TradeMarkCo"). The Fund was dissolved and unitholders and limited voting unitholders of the Fund received, for each unit and limited voting unit of the Fund, one class A limited voting share ("Class A Limited Voting Shares") of PRI.

FINANCIAL HIGHLIGHTS:
($000's)13 weeks ended3 months ended
April 3, 2011March 31, 2010
EntityPRIFund
System sales5 – reported by PRI restaurants82,808-
Total revenue10,540808
Costs and expenses9,44769
Income before the undernoted1,093739
Depreciation expenses87-
Stock-based compensation expense116-
Operating income890739
Interest income13-
Interest expense23-
Income before taxes880739
Income taxes262-
Total comprehensive income618739
Total comprehensive income attributable to:
Owners of parent617739
Non-controlling interest1-
618739
Basic earnings per Share / Unit$0.071$0.112
Diluted earnings per Share / Unit$0.073$0.114
Dividend paid per Class A Limited Voting Share$0.12-
Distributions paid per Unit-$0.12

  1. The basic earnings per share were calculated based on the 7,378,552 Class A Limited Voting Shares and 942,686 of class B limited voting shares ("Class B Limited Voting Share") of PRI that were outstanding April 3, 2011
  2. The basic earnings per Unit were calculated based on 6,443,436 Units outstanding on March 31, 2010
  3. The diluted earnings per share were calculated based on 8,335,581 diluted Class A Limited Voting Shares of PRI on April 3, 2011
  4. The diluted earnings per Unit were calculated based on 9,655,056 diluted Units on March 31, 2010
  5. System sales is not an earnings measure recognized by IFRS and therefore may not be comparable to similar measure presented by other issuers. The Company believes this non-IFRS operating measure provides useful information to both management and investors as it is a key driver of growth in PRI's operations.

Revenue reported by PRI for the 13 weeks ended April 3, 2011 includes royalties and franchise-related income, sales from corporate-owned restaurants, and reimbursements from franchisees of restaurant development costs. Prior to the Reorganization, the Fund's revenues comprised mainly of interest income on a promissory note issued by TradeMarkCo.

Costs and expenses for the 13 weeks ended April 3, 2011 include costs incurred by company-owned restaurants such as cost of sales, general and administrative expenses as well as expenses associated with managing the activities of PRI and providing services to the corporate and franchised restaurants including employees' salaries, wages and benefits and recoverable development costs incurred to build restaurants on behalf of franchisees. Prior to the Reorganization, costs and expenses reflected only the fees paid to Trustees and other expenses associated with managing the activities of the Fund.

Depreciation expense is comprised of depreciation on property, plant and equipment. Prior to the Reorganization, the Fund did not have any depreciable assets.

PRI has a Restricted Share Plan (the "Plan") that provides for the grant of Restricted Share Units ("RSUs") to officers, employees and directors of PRI and its affiliates, as well as consultants engaged by PRI or its affiliates. The principal purposes of the Plan are to retain and attract qualified personnel and directors, to promote a proprietary interest in PRI by such personnel and directors, to encourage such personnel and directors to remain in the employ or service of PRI, to reward and encourage performance of participants, and to focus participants on creating long-term shareholder value. The Plan provides for a vesting period for RSUs granted to the board of directors of one-third on the date of grant, one-third on the first anniversary of the date of grant and one-third on the second anniversary of the date of grant. The RSUs granted to officers of the Company have a vesting date of April 5, 2013. Stock-based compensation expense is comprised of the value of RSUs that have vested and straight-line amortization of individual tranches over their respective vesting periods. The total value of the RSUs granted was based on the market price of the Class A Limited Voting Shares on the grant date.

Interest income represents interest earned on cash balances maintained and interest earned on promissory notes from franchisees. Prior to the Reorganization, the Fund did not maintain cash balances.

Interest expense for the 13 weeks ended April 3, 2011 includes interest arising from a loan agreement that was assumed by PRI as part of the Reorganization. The proceeds from the loan were used by PRC to finance the construction and opening of a second Bier Markt location in downtown Toronto. The loan bears interest at the banker's acceptance rate plus 3.25% per annum and will mature in September 2015. Prior to the Reorganization, the Fund did not have any outstanding loans.

Non-controlling interest relates to a partnership interest formed on August 4, 2008 between PRC and a third party to open a Bier Markt location in Toronto, and the Company is entitled to 95% of the profits. A third party holds the remaining 5% investment and is reflected as a non-controlling interest on the Company's balance sheet.

Quarterly Dividend

PRI also declared today a quarterly dividend of $0.12 per Class A Limited Voting Share payable to shareholders of record on June 30, 2011. The dividend will be paid on July 15, 2011 and will be considered an eligible dividend for income tax reporting.

PRI's financial statements and MD&A for the 13 weeks ended April 3, 2011 as well as historical financial statements and MD&As of PRC and the Fund are available at www.primerestaurants.com and www.sedar.com.

About Prime Restaurants Inc.

PRI franchises, owns and operates one of Canada's leading networks of casual dining restaurants and pubs. With such well-respected brands as East Side Mario's, Casey's, Fionn MacCool's, D'Arcy McGee's, Paddy Flaherty's, Tir nan Óg, and Bier Markt, Prime has been delivering quality, value and a superior guest experience for more than thirty years. Prime's Class A Limited Voting Shares are listed on the Toronto Stock Exchange under the symbol "EAT".

Forward-Looking Statements

The public communications of PRI often include written or oral forward-looking statements. Statements of this type are included in this news release, and may be included in filings with Canadian securities regulators, or in other communications. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives for 2011 and beyond, our strategies or planned future actions, and our targets or expectations for our financial performance and condition. All statements, other than statements of historical fact, contained in this news release are forward-looking statements, including, without limitation, statements regarding the future financial position and operations, business strategy, plans and objectives of or involving PRI. Readers can identify many of these statements by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" and similar words or the negative thereof. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties including those discussed in the MD&A and the Annual Information Form (the "AIF") under "Narrative Description of the Business – Risk Factors" which are available at www.sedar.com. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

The information set forth in the MD&A and AIF identifies factors that could affect operating results and performance. We caution that the list of factors discussed in the MD&A and the AIF is not exhaustive, and that, when relying on forward-looking statements to make decisions with respect to PRI, investors and others should carefully consider the factors discussed, as well as other uncertainties and potential events, and the inherent risks and uncertainties of forward-looking statements.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release. Except as required by applicable securities laws, PRI does not undertake to update any forward-looking statement, whether written or oral, that may make or that may be made, from time to time.

1 Same store sales growth is not an earnings measure recognized by IFRS and therefore may not be comparable to similar measure presented by other issuers. The Company believes this non-IFRS operating measure provides useful information to both management and investors as it is a key driver of growth in PRI's operations.

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