Champps Entertainment, Inc. (Nasdaq:CMPP) today announced results
for its fiscal 2006 third quarter ended April 2, 2006. Total
revenues for the third quarter increased 0.2% to $54.2 million,
compared with revenues of $54.1 million for the third quarter of
our last fiscal year. The company's revenues benefited from
operating two more restaurants in the third quarter 2006 than in
the third quarter 2005, but this benefit was largely offset by a
decline in same store sales. Net loss for the third quarter 2006
was $1.9 million, or $.15 per diluted share compared to net loss of
$3.6 million, or $.28 per diluted share in the same quarter a year
ago. This year's third quarter included a $4.3 million pretax asset
impairment charge related to three restaurants. Last year's third
quarter included a $6.6 million pretax asset impairment charge
related to four restaurants and $0.5 million pretax severance
expense. Comparable same store sales decreased 3.1 percent for
third quarter 2006. Comparable alcohol sales decreased 1.5 percent,
while comparable food sales decreased 3.7 percent for the third
quarter 2006. "We worked hard this quarter but still came up
short," commented Mike O'Donnell, Champps' Chairman, President, and
Chief Executive Officer. "While we started January strong and had
great expectations for the quarter, our momentum was lost in
February and March despite new menu items and bar offerings. We
were certainly influenced by external factors -- weather, high fuel
costs and decreased viewership of the 2006 NCAA `March Madness'
tournament. Our challenge is to find ways to become part of
consumer's discretionary spending even when it is tight or winning
sports teams don't line up in our major cities. We are focused on
that issue for the remainder of 2006 and beyond. We believe our
best opportunity to accomplish this is to focus on our execution.
"I am however, proud of our team who kept our strategic initiatives
on track, and ensured we made strides ahead even in tough
conditions. This quarter, our first group of six restaurant general
managers joined in our partnership bonus plan, and we expect to
continue offering this program to select managers over the next 15
months. Our operating units are executing well with one-third of
our locations growing cash flow over last year's third quarter.
Food costs are down despite higher quality offerings, we have
tightened our standards for our managers, and we are receiving
excellent feedback on all of our new programs including the new
menu rollout in April." Mr. O'Donnell continued: "Last week we
closed three underperforming restaurants in the Houston, Texas, and
Toledo, Ohio areas. This is the toughest action we had to take to
date to improve future results. The three closed sites suffered
from poor site selection which we don't believe could be overcome
despite our best operational initiatives." Total cost of sales and
operating expenses decreased slightly to 86.2 percent of sales for
the third quarter this year compared to 86.3 percent of sales for
the same quarter last year. Product costs improved to 28.3 percent
of sales in the most recent quarter from 28.5 percent of sales
compared to the third quarter of the last fiscal year, and labor
costs improved to 31.7 percent of sales from 32.2 percent of sales
for the same period last fiscal year. Average store utility costs,
while somewhat moderated from the second quarter, were still almost
11 percent higher on average than those experienced last year
causing other operating costs to increase to 15.6 percent of sales
in this year's third quarter from 15.0 percent of sales in the same
quarter last year. Occupancy expense increased to 10.5 percent of
sales versus 10.0 percent of sales in the third quarter of 2005
because of the de-leveraging effect of lower average sales.
Depreciation and amortization expense was down 0.1 percent of sales
due to the asset impairment charge of $6.6 million in the third
quarter of 2005. Pre-opening expenses for the quarter were $78,000,
or 0.1 percent of sales, compared to $340,000, or 0.6 percent of
sales, for the same quarter in the prior year. No new restaurants
were opened in the third quarter of fiscal 2006 versus one new
restaurant opening during the same quarter of fiscal 2005. The
Company does not plan to open any new restaurants during the
remainder of fiscal 2006. General and administrative expenses for
the third quarter were $3.7 million, or 6.8 percent of revenues,
compared to $3.4 million, or 6.3 percent of revenues, in the
comparable period last fiscal year. This increase resulted from
higher legal costs, compensation expense for stock-based
compensation resulting from adoption of a new accounting standard
and the issuance of restricted stock awards partially offset by
reduced support staff levels and bonus expense. Dave Womack, Chief
Financial Officer, commented: "Despite the weaker sales, our
operating cash flow for the third quarter was $2.0 million. We
ended the quarter with $11.2 million of cash, no outstanding credit
facility borrowings and we repurchased $0.2 million of Champps
stock under the previously authorized $5 million repurchase plan.
Our capital expenditure requirements for the fiscal year continue
to decrease, and we now expect our total capital expenditures
outlook for fiscal 2006 to be between $4 and $5 million of which
$3.3 million was expended through the third quarter." Mr. Womack
continued: "The $4.3 million asset impairment charge taken this
quarter includes our restaurant closure decisions. As a result of
the closures, we currently expect to record exit or disposal costs
in the fourth quarter and ultimately spend $3 to $4 million net
cash to exit the locations. We may also close up to two additional
restaurants depending on lease negotiations and other various
factors." Total revenues for the first three quarters of fiscal
2006 increased 0.3% to $165.2 million, compared with revenues of
$164.7 million for the first three quarters of last fiscal year.
The increase in revenue was due primarily to operating four more
restaurants on average in the first three quarters of fiscal 2006
than during the same quarters of fiscal 2005, partially offset by
the extra week of sales in fiscal 2005 and lower comparable sales
of 3.0%. Net income for the first three quarters of fiscal 2006 was
$0.4 million, or $.03 per diluted share compared with net income of
$0.3 million, or $.02 per diluted share, reported in the same
period of the prior fiscal year. Both years included asset
impairment charges mentioned previously. Also, last year's
operations included an extra operating week which had a more
pronounced effect on operating margins than did the overall revenue
effect because of certain fixed operating costs and this year's
results included costs for stock based compensation. The Company's
management will discuss the results of the third quarter 2006 on a
conference call and simultaneous webcast on May 10, 2006, at 10:00
a.m. ET. To hear the call in a listen-only mode, participants must
dial 800-947-6545 or 706-634-1745 (International) at least ten
minutes prior to the start of the call and refer to conference
identification number 8354671. To hear a live Web simulcast of the
call, visit the company's Web site at www.champps.com, click on the
Investor Relations icon and refer to conference identification
number 8354671. If unable to participate at the time of the call,
the archived webcast can be accessed until June 10, 2006, by
visiting www.champps.com, clicking on the Investor Relations icon
and referring to conference identification number 8354671. About
Champps Entertainment, Inc. Champps Entertainment, Inc. owns and
operates 50 and franchises/licenses 13 Champps restaurants in 23
states. Champps, which competes in the upscale casual dining
segment, offers an extensive menu consisting of freshly prepared
food, coupled with exceptional service. Champps creates an exciting
environment through the use of videos, music, sports and
promotions. Safe Harbor Statement Certain statements made in this
press release are forward-looking statements based on management's
current experience and expectations. These forward-looking
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such statements
involve certain risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking
statements. Such forward-looking statements include statements
regarding our strategic initiatives; stock repurchase program;
lease renegotiations; impairment charges and closing of
restaurants; new menu and operating initiatives critical to
improvement in same store sales, the absence of new store openings
in the remainder of fiscal 2006, and future uses of cash for stock
repurchases or exit costs, among others. Among the factors that
could cause future results to differ materially from those provided
in this press release are: the ability of the Company to
successfully implement our strategic initiatives to improve same
store sales; the ability to make and fund stock repurchases; the
ability to successfully close or renegotiate lease terms for
certain restaurants; the impact of intense competition in the
casual dining restaurant industry, the Company's ability to control
restaurant operating costs, which are impacted by commodity prices,
minimum wage and other employment laws, fuel and energy costs,
consumer perceptions of food safety, changes in consumer tastes and
trends, and general business and economic conditions. Information
on significant potential risks and uncertainties that may also
cause such differences include, but are not limited to, those
mentioned by the Company from time to time in its filings with the
SEC. The words "may," "believe," "estimate," "expect," "plan,"
"intend," "project," "anticipate," "should" and similar expressions
and variations thereof identify certain of such forward-looking
statements, which speak only as of the dates on which they were
made. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events, or otherwise. Readers are cautioned
that any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and,
therefore, readers should not place undue reliance on these
forward-looking statements. -0- *T CHAMPPS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months and Nine
Months Ended April 2, 2006 and April 3, 2005 (Dollars in thousands,
except per share data) (Unaudited) Three Months Ended Nine Months
Ended ------------------ ------------------- April 2, April 3,
April 2, April 3, 2006 2005 2006 2005 --------- -------- ---------
--------- Revenue Sales $54,004 $53,939 $164,742 $164,225
Franchising and royalty, net 174 150 468 437 --------- --------
--------- --------- Total revenue 54,178 54,089 165,210 164,662
--------- -------- --------- --------- Costs and expenses Cost of
sales and operating expenses Product costs 15,281 15,357 46,533
46,816 Labor costs 17,106 17,363 52,253 51,971 Other operating
expense 8,439 8,092 25,288 23,786 Occupancy 5,646 5,377 16,839
15,812 Pre-opening expense 78 340 413 984 General and
administrative expense 3,710 3,417 10,539 9,659 Depreciation and
amortization 2,820 2,857 8,479 8,320 Severance 5 547 110 547 Asset
impairment charges 4,271 6,567 4,271 6,567 Other (income) expense
131 26 286 (95) --------- -------- --------- --------- Income
(loss) from operations (3,309) (5,854) 199 295 Interest expense and
income, net 237 343 913 1,100 Expenses related to predecessor
companies (2) 50 (5) 315 --------- -------- --------- ---------
Income (loss) before income taxes (3,544) (6,247) (709) (1,120)
Income tax expense (benefit) (1,615) (2,675) (1,145) (1,393)
--------- -------- --------- --------- Net income (loss) $(1,929)
$(3,572) $436 $273 ========= ======== ========= ========= Basic
income (loss) per share $(0.15) $(0.28) $0.03 $0.02 Diluted income
(loss) per share $(0.15) $(0.28) $0.03 $0.02 Basic weighted average
shares outstanding 13,194 12,888 13,135 12,856 Diluted weighted
average shares outstanding 13,194 12,888 13,188 13,082 *T -0- *T
CHAMPPS ENTERTAINMENT, INC. Supplemental Information -- Restaurant
Operating Expenses (Stated as a percentage of restaurant sales)
(Unaudited) Three Months Ended Nine Months Ended ------------------
------------------- April 2, April 3, April 2, April 3, 2006 2005
2006 2005 -------- -------- -------- -------- Product costs 28.3%
28.5% 28.2% 28.5% Labor costs 31.7% 32.2% 31.7% 31.6% Other
operating expenses 15.6% 15.0% 15.4% 14.6% Occupancy 10.5% 10.0%
10.2% 9.6% Pre-opening expenses 0.1% 0.6% 0.3% 0.6% ---------
-------- --------- --------- Total cost of sales and operating
expenses 86.2% 86.3% 85.8% 84.9% Depreciation and amortization 5.2%
5.3% 5.1% 5.0% Total cost of sales, operating expenses and
depreciation and amortization 91.4% 91.6% 90.9% 89.9% ---------
-------- --------- --------- General and administrative expense
(Stated as a percentage of revenue) 6.8% 6.3% 6.4% 5.9% ---------
-------- --------- --------- Champps Entertainment, Inc. Selected
Balance Sheet Information (In thousands) (Unaudited) April 2, July
3, 2006 2005 ------------ ------------ Cash and cash equivalents
$11,231 $2,702 Current assets 24,680 17,053 Total assets 136,879
137,311 Current liabilities 10,570 14,667 Debt 14,657 14,649 Total
shareholders' equity 78,606 76,061 Champps Entertainment, Inc.
Selected Cash Flow Information (In thousands) (Unaudited) Nine
Months Ended -------------------------- April 2, April 3, 2006 2005
------------ ------------ Net cash provided by operating activities
$11,067 $14,747 Net cash used in investing activities (3,289)
(11,403) Net cash provided by financing activities 751 (2,387)
------------ ------------ Net change in cash and cash equivalents
$8,529 $957 ============ ============ *T
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