Prime Restaurants Inc.

Prime Restaurants Inc.

March 30, 2011 16:05 ET

Prime Restaurants Inc. Announces Solid Same Store Sales Growth in 2010

MISSISSAUGA, ONTARIO--(Marketwire - March 30, 2011) - Prime Restaurants Inc. ("PRI" or the "Company") (TSX:EAT) today reported its results for the 13 and 52 weeks ended January 2, 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 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 ("Unit") and limited voting unit of the Fund, one class A limited voting share ("Class A Limited Voting Shares") of PRI. Additionally, in connection with the Reorganization, Prime Restaurant Holdings Inc. ("PRH"), the former parent of PRC, received class B limited voting shares ("Class B Limited Voting Shares") and class C non-voting shares ("Class C Non-Voting Shares"), which shares are convertible into Class A Limited Voting Shares of PRI if certain financial targets are met by PRI. Details regarding the conversion rights are set out in the share conversion agreement between PRI and PRH dated April 5, 2010 (the "Conversion Agreement").

The 13 and 52-week periods ended January 2, 2011 of PRI are compared below to the three and twelve-month periods ended December 31, 2009 of the Fund. As PRI's operations are substantially different from the operations of the Fund, some of the information in this press release is not directly comparable.


  • Strong Same Store Sales Growth ("SSSG") of 4.1% for the year, up 4.3% in fourth quarter
  • Solid growth across all brands and geographic regions
  • Solid performance at East Side Mario's with strong 4.9% SSSG, up 5.4% in fourth quarter
  • Casey's and Pubs post SSSG of 2.1% and 5.0% respectively in 2010
  • New menus, price increases and increased advertising programs to benefit future growth.

PRI generated a solid increase in SSSG in the fourth quarter and fiscal year ended January 2, 2011, as the Company's proven sales and marketing programs successfully capitalized on the slowly improving Canadian economy and resurgence in consumer sentiment. Same store sales for the 13 weeks ended January 2, 2011 increased by 4.3% compared to negative same store sales of (4.4%) for the same period last year. For the 52 weeks ended January 2, 2011 same store sales were up 4.1% compared to a decline of (6.5%) last year.

All of the Company's brands posted positive SSSG in the quarter, with East Side Mario's leading the way with strong SSSG of 5.4%, while Prime Pubs posted SSSG of 4.0% and Casey's at 1.4% SSSG. For the 52 weeks ended January 2, 2011, East Side Mario's posted SSSG of 4.9%, while Casey's and the pubs posted SSSG of 2.1% and 5.0% respectively. All of PRI's geographic regions in Canada posted positive SSSG, with Ontario up 4.5%, Québec rising 3.4%, Atlantic Canada up 5.1% and Western Canada posting SSSG of 2.6% for the 13 weeks ended January 2, 2011. For the 52 weeks ended January 2, 2011, Ontario generated SSSG of 4.1%, Québec was up 5.0%, Atlantic Canada 5.7% and Western Canada rose 2.0%. There were 154 restaurant and pub locations as at January 2, 2011.

"We are very pleased with the solid growth and strong operational performance generated in 2010, a testament to the effectiveness of our value enhancing programs and our multi-brand approach covering all aspects of the Canadian casual dining and pub business," commented John Rothschild, Chief Executive Officer of PRI.

In 2011 East Side Mario's 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 at East Side Mario's in January. Casey's launched new marketing programs early in 2011, including e-mail blast and direct mail campaigns, as well as the testing of a Loyalty Rewards program at eight locations for potential national roll-out in the fourth quarter. PRI's pub locations introduced a new core food and beverage menu in the first quarter of 2011 that features an innovative quick reference code directing guests to a mobile web site suggesting recommended beer and food pairings.

"Looking ahead, we believe our ongoing renovation programs, new location openings, menu innovations and other sales initiatives, combined with our rigorous focus on customer service, will continue to attract new and repeat guests and contribute to our growth over the long term," Mr. Rothschild concluded.

Operational Review

During the 13 weeks ended January 2, 2011, PRI opened one pub in Ontario and one East Side Mario's restaurant in Calgary. During the quarter one Casey's and two East Side Mario's locations were closed. For the year ended January 2, 2011 three East Side Mario's restaurants and two pubs were opened, and nine restaurants were closed, including seven East Side Mario's, three in Ontario and four in Alberta, and two Casey's locations in Ontario.

During the year ended January 2, 2011 three Casey's and one East Side Mario's restaurants were renovated. Sales at these locations have cumulatively risen 12.2% and 14.3% for the 13 and 52 weeks ended January 2, 2011, respectively, compared with their pre-renovation sales levels.

($000's) 13 weeks   Three   52 weeks   12 months  
  ended   months   ended   ended  
  January 2,   December   January 2,   December 31,  
  2011   31, 2009   2011   2009  
Entity PRI   Fund   PRI & Fund   Fund  
Gross revenue – reported by PRI restaurants 82,490   -   257,209   -  
Total revenue 10,638   1,294   35,295   6,860  
Operating costs & administrative expenses 9,096   169   28,699   263  
Earnings before the undernoted 1,542   1,125   6,596   6,597  
Interest and amortization expenses 90   -   230   -  
Share of loss from significantly influenced company -   -   19   -  
Write-down of investments 123   16,754   123   16,754  
Reorganization adjustments -       11,905      
Reorganization transaction costs -   -   2,436   -  
Stock-based compensation expense 116   -   273   -  
Income/(Loss) before taxes 1,213   (15,629 ) (8,390 ) (10,157 )
Income tax recovery (4,200 ) -   (2,416 ) -  
Income/(Loss) for the period 5,413   (15,629 ) (5,974 ) (10,157 )
Income/(loss) attributed to non-controlling interest 6   -   17   -  
Income/(loss) attributed to shareholders equity 5,407   (15,629 ) (5,991 ) (10,157 )
Total assets 51,973   42,579   51,973   42,579  
Total liabilities 10,849   514   10,849   514  
Shareholder's Equity 41,094   42,065   41,094   42,065  
Non-controlling interest 30   -   30   -  

Revenue reported by PRI for the 13 and 52 weeks ended January 2, 2011 includes royalties and franchise-related income, sales from corporate-owned restaurants, and income from PRI's 50% ownership interest in The Ricmar Limited Partnership which owns one Casey's restaurant. Prior to the Reorganization, the Fund's revenues included interest income on a promissory note issued by TradeMarkCo, common share dividend and amortization of deferred financing fees.

Operating and administrative costs for the 13 and 52 weeks ended January 2, 2011 include costs incurred by company-owned restaurants such as marketing and advertising expenses, cost of sales, operating expenses, as well as general and administrative expenses associated with managing the activities of PRI and providing services to the corporate and franchised restaurants. Prior to the Reorganization, operating and administrative costs reflected only the operating and administrative expenses of the Fund.

Interest expense for the 13 and 52 weeks ended January 2, 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.

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

At the time of the Reorganization, PRI acquired, through its acquisition of Prime Restaurants of America Inc., 50% of the partnership of Prime Pubs of America LLC. During the quarter ended January 2, 2011, the remaining 50% ownership was purchased by PRI and the investment was written off, resulting in a net charge of $123,000.

As previously disclosed, PRI is the successor reporting issuer to the Fund, and is accounted for as a continuity of the interest and business operations of the Fund. In order to facilitate the Reorganization, the Fund recorded a one-time adjustment of $11.9 million comprised of an $11.95 million write-down of its investment in TradeMarkCo to the market value of the outstanding Units as of April 4, 2010, $302,000 write-off of inter-company payables and a $258,000 write-off of interest receivable from TradeMarkCo that it would have used to pay a distribution on April 15, 2010, to Unitholders of record on March 31, 2010, had the Reorganization not been approved. Instead, the distribution payable to Unitholders of record on March 31, 2010 was paid as a dividend by PRI on April 15, 2010 to holders of Class A Limited Voting Shares of record on April 8, 2010.

Reorganization costs for the 13 and 52 weeks ended January 2, 2011 were one-time and include costs such as legal, audit, TSX listing, transfer agent, third-party valuation and consulting fees.

Stock-based compensation expense relates to a restricted share plan that provides for the grant of restricted share units ("RSUs") to officers, employees and directors of PRI and its affiliates, and to certain consultants engaged by PRI or its affiliates. PRI recorded stock based compensation expenses of $116,000 and $273,000 respectively, related to the RSUs for the 13 and 52 weeks ended January 2, 2011. The current year expense is comprised of the value of RSUs that have vested and the straight-line amortization of the unvested RSUs 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. There were no similar stock- based compensation plans existing in the prior year.

PRI's financial statements and management discussion and analysis (the "MD&A") for the 13 and 52 weeks ended January 2, 2011 as well as historical financial statements and MD&As of PRC and the Fund are available at and

Amendment to Conversion Agreement

PRI also reported today certain amendments to the Conversion Agreement. The amendments involve changes to the "Adjusted Earnings Targets" set out in the Conversion Agreement as a result of changes in the accounting treatment of certain deferred revenue and deferred rent following the completion of the Reorganization. The changes were made with the approval of the independent directors of PRI and the consent of PRH pursuant to the terms of the Conversion Agreement and were consented to by the Toronto Stock Exchange. The amendment to the Conversion Agreement will be filed under PRI's profile on SEDAR at

Conversion of Class B Limited Voting Shares and Class C Non-Voting Shares

Additionally, PRI reported today that as PRI had achieved the "Adjusted Earnings Target" for 2010 as set out in the Conversion Agreement, PRH converted 628,457 Class B Limited Voting Shares and 203,667 Class C Non-Voting Shares into an aggregate of 832,124 Class A Limited Voting Shares.

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 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.

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