Imvescor Restaurant Group Inc. Reports Improved Annual Financial Results and Announces the Appointment of Three Directors and of a President and Chief Executive Officer
MONCTON, NB, Jan. 24, 2014 /CNW/ - Imvescor Restaurant Group Inc. ("IRG" or the "Company") (TSX: IRG) reported financial results today for the 13 weeks ended October 27, 2013 (or "fourth quarter") and 52 weeks ended October 27, 2013 (or "year end"). The 2012 results are for the 13 and 52 weeks ended October 28, 2012.
Improved Annual Financial Results
| (in thousands of dollars) | 13 weeks ended October 27, 2013 |
13 weeks ended October 28, 2012 |
52 weeks ended October 27, 2013 |
52 weeks ended October 28, 2012 |
| Pizza Delight | $ 711 | $ 1,107 | $ 3,385 | $ 3,428 |
| Mikes | 961 | 825 | 2,914 | 3,260 |
| Scores | 586 | 998 | 2,969 | 3,022 |
| Bâton Rouge | (48) | 738 | 1,703 | 2,123 |
| Retail | 323 | 70 | 2,761 | 868 |
| Total adjusted results from operating activities (*) |
$ 2,533 | $ 3,738 | $ 13,732 | $ 12,701 |
* Refer to non-GAAP measures
Adjusted results from operating activities for fiscal 2013 showed improvements over the prior year. Overall improvements are mainly related to increased supply chain revenues from $7.7 million in 2012 to $9.0 million in 2013 and retail royalties from $1.9 million in 2012 to $4.1 million in 2013. Supply chain revenues increased due to the successful negotiations of significant beverage and cheese contracts. Retail royalty revenues increased primarily from the successful introduction of the Bâton Rouge ribs and increased sales in Mikes branded products.
| (in thousands of dollars) | 13 weeks ended October 27, 2013 |
13 weeks ended October 28, 2012 |
52 weeks ended October 27, 2013 |
52 weeks ended October 28, 2012 |
| Net earnings | $ 868 | $ 120 | $ 2,570 | $ 1,848 |
| Bargain purchase price | --- | --- | (216) | --- |
| Reorganization costs | 537 | --- | 1,839 | 74 |
| Loss on redemption of debentures | --- | 1,820 | 3,163 | 1,820 |
| Loss on derivative financial liability |
--- | --- | --- | 1,964 |
| Net (earnings) loss from discontinued operations |
--- | 31 | --- | (162) |
| Adjusted net earnings (*) | $ 1,405 | $ 1,971 | $ 7,356 | $ 5,544 |
* Refer to non-GAAP measures
The increase in adjusted net earnings for the 52 weeks ended October 27, 2013 is primarily related to the improvement in the adjusted results from operations as described above as well as a decrease in interest on long-term debt. Adjusted results from operations increased by $1.0 million for fiscal 2013 compared to fiscal 2012 and the interest on long-term debt decreased by $2.2 million. Adjusted net earnings for the fourth quarter of 2013 was lower than the fourth quarter of the previous year, primarily due to the decrease in the adjusted results of operations of $1.2 million, partially offset by the decrease in the interest on long-term debt of $525 thousand. The Company has excluded in the calculation of adjusted net earnings for the 52 weeks ended October 27, 2013 the $216 thousand bargain purchase gain from the acquisition of assets from a previous franchisee, $2.5 million reorganization costs, net of taxes of $667 thousand, and the $3.2 million non-cash loss on redemption of debentures, and for the 52 weeks ended October 28, 2012, the $100 thousand reorganization costs, net of taxes of $26 thousand, $1.8 million non-cash loss on redemption of debentures, $2.0 million non-cash loss on derivative financial liability and the net earnings from discontinued operations of $162 thousand as management believes these items are not indicative of the Company's operations and thus adjusted net earnings is a better reflection of the Company's results from its normal business activities.
Fourth Quarter and 2013 Year End Financial and Operating Results
The following table provides selected financial information for the 13 and 52 weeks ended October 27, 2013, along with results for the comparative periods of the prior year.
| (in thousands of dollars) | 13 weeks ended October 27, 2013 |
13 weeks ended October 28, 2012 |
52 weeks ended October 27, 2013 |
52 weeks ended October 28, 2012 |
| Total revenues | $ 13,691 | $ 12,538 | $ 55,078 | $ 47,305 |
| Advertising and general, administrative and franchise support expenses |
10,641 | 8,064 | 38,991 | 31,969 |
| Adjusted EBITDA (*) | 2,744 | 4,116 | 14,596 | 13,494 |
| Net finance costs | 601 | 2,939 | 6,076 | 8,892 |
| Net earnings | 868 | 120 | 2,570 | 1,848 |
| Adjusted net earnings (*) | 1,405 | 1,971 | 7,356 | 5,544 |
* Refer to non-GAAP measures
Adjusted EBITDA for fiscal 2013 was $14.6 million, compared to $13.5 million for fiscal 2012, an increase of $1.1 million or 8%. The increase was primarily due to an increase in retail royalties and supply chain revenues of $2.3 million and $1.3 million, respectively, offset by increases in legal expenses and lease exit costs of $509 thousand and $1.1 million, respectively. The decrease in the fourth quarter of 2013 compared to the fourth quarter of 2012 is due mainly to legal settlement costs of $500 thousand incurred for the Scores brand and lease exit costs of $650 thousand incurred to exit the Bâton Rouge Calgary location, partially offset by increases in retail royalties of $143 thousand and supply chain revenues of $190 thousand.
Total system sales for the fourth quarter of 2013 and fiscal 2013 were $96.5 million and $386.1 million, respectively, as compared to $100.7 million and $396.5 million for the fourth quarter and fiscal 2012.
Pizza Delight's total system sales decreased by 2.5% for the 13 weeks ended October 27, 2013 compared to the fourth quarter of 2012 mostly attributable to store closures. During 2013, three franchised locations closed temporarily, and four locations closed permanently. For fiscal 2013, the brand was able to increase their total system sales by 0.3% over the previous year as a result of positive same store sales and store openings in 2012.
Total system sales for Mikes decreased by 3.2% for the fourth quarter of 2013 and by 1.9% for the year ended October 27, 2013 over the comparable periods in 2012. The decreases were mostly attributable to the closure of two underperforming restaurants during 2012 and the temporary closure of three restaurants during 2013 while the restaurants were transitioned from being franchised to company-owned. The decreases were partially offset by the increase in the same store sales of 1.3% and 2.3% for the fourth quarter of 2013 and fiscal 2013, respectively.
Scores' total system sales decreased by 4.4% for the quarter ended October 27, 2013 compared to the fourth quarter of 2012 mainly due to the decrease in the same store sales of 1.1%, the closure of two franchised restaurants earlier in the year, as well as the impact of two restaurant openings in the fourth quarter of 2012. For fiscal 2013, the decrease in total system sales was 0.5% due mainly to the decrease in same store sales of 1.1% and restaurant closures, offset by the two Scores Express locations that opened in the second and fourth quarters of 2013.
Bâton Rouge experienced decreased total system sales of 6.3% and 7.6% for the fourth quarter and for the year ended October 27, 2013, respectively, compared to the same periods of the prior year mostly as a result of decreased same store sales. Same store sales at the Bâton Rouge locations have been impacted by numerous factors including the delayed start of the NHL season in the first quarter of 2013, competitive entry in key markets, reduced customer traffic due to closures of surrounding businesses and temporary closures from transitioning franchised locations to corporate stores.
Same Store Sales ("SSS") *
| (in thousands of dollars) | 13 weeks ended October 27, 2013 |
13 weeks ended October 28, 2012 |
52 weeks ended October 27, 2013 |
52 weeks ended October 28, 2012 |
| Pizza Delight | 1.4% | 2.2% | 0.1% | -0.3% |
| Mikes | 1.3% | 1.7% | 2.3% | 0.3% |
| Scores | -1.1% | -1.2% | -1.1% | 0.0% |
| Bâton Rouge | -4.8% | -4.1% | -5.0% | -1.7% |
| Total SSS | -0.9% | -0.5% | -1.0% | -0.4% |
* Refer to non-GAAP measures
Overall, the Company experienced a decrease of 0.9% in same store sales for the fourth quarter of 2013. Same store sales for the year ended October 27, 2013 were 1.0% lower than fiscal 2012. The Company is focusing on introducing more value oriented offerings supported by marketing initiatives for all of its brands in order to regain market share.
Increased focus on retail
The Company's focus on retail in fiscal 2013 has shown significant positive results. The Company has allocated additional internal resources to pursue the growth of this business. The Company launched additional Mikes and Bâton Rouge products in the last two quarters and early results are very positive. The Company has also expanded the sale of retail products to additional provinces across the country. Lastly, in November 2013, the Company bought the assets of Commensal 2007 S.E.C., including its manufacturing facility which will permit IRG to pursue the commercialization of several additional products under the Commensal brand as well as begin the production of additional Mikes, Bâton Rouge and Scores products for sale into the retail network. The facility will also increase the Company's sale of proprietary manufactured products within the franchise network.
Retail royalty revenue for the 13 and 52 weeks ended October 27, 2013 was $719 thousand and $4.1 million, respectively, as compared to $576 thousand and $1.9 million in 2012. The significant increase is attributable to the successful introduction of the Bâton Rouge ribs in November 2012, as well as the increase in sales from the launch of new Mikes retail products. The Company also expanded the sale of the Bâton Rouge ribs and Mikes products to provinces outside of Quebec.
Debt Reduction
During fiscal 2013, the Company fully repaid the balance of $6.5 million outstanding on its debentures. These repayments, along with the Company's regular principal repayments on its senior credit facility, reduced total long-term debt outstanding from $43.3 million at October 28, 2012 to $33.9 million at October 27, 2013, a reduction of $9.4 million.
Appointment of Directors and of a President and Chief Executive Officer
The Company also announced today that Roland Boudreau, Gary O'Connor and François-Xavier Seigneur have each been appointed to the Board of Directors of the Company (the "Board"), effective as of January 25, 2014.
The Company is also pleased to announce that Mr. Denis Richard has been appointed as President and Chief Executive Officer of IRG, effective immediately.
"We are looking forward to working with Messrs. Boudreau, O'Connor and Seigneur" said Mr. Robb Chase, Chairman of the Board.
Roland Boudreau is an independent retail consultant, after having being active as a senior executive in the Canadian retail industry. Gary O'Connor is a corporate director. François-Xavier Seigneur is the President of EFFIX INC., a firm he founded in 1986 and that is now an exclusive advertising and sponsorship sales agency for the Montreal Canadiens, the Bell Centre and Evenko.
About Imvescor Restaurant Group Inc.
Headquartered in Moncton, New Brunswick, Imvescor Restaurant Group Inc. owns franchised and corporate restaurants throughout Canada under four brands: Pizza Delight, operating primarily in Atlantic Canada, where it dominates the family/mid-scale segment, Mikes and Scores, operating primarily in Quebec in the family and casual dining segments and the take-out and delivery segments, and Bâton Rouge, operating in Quebec, Ontario and Nova Scotia in the casual dining segment.
Non-GAAP Measures and Financial Metrics
The information contained in this press release includes some figures that are not performance measures consistent with IFRS. Because they do not have a standardized meaning prescribed by IFRS, they may not be comparable with similar measures presented by other issuers.
For instance, the Company uses earnings from continuing operations before interest income, interest on long-term debt, depreciation and amortization and income tax expense ("EBITDA") and earnings before interest income, interest on long-term debt, loss on derivative financial liability, loss on redemption of debentures, depreciation and amortization, impairment of long-lived assets, bargain purchase gain, reorganization costs, net loss/earnings from discontinued operations and income tax expense ("adjusted EBITDA") because these measures enable management to assess the Company's operational performance. Those measures are a financial indicator of the Company's ability to service and incur debt. The Company also uses net earnings excluding loss on redemption of debentures, loss on derivative financial liability, reorganization costs, bargain purchase gain and net earnings/loss from discontinued operations, ("adjusted net earnings") as a measurement of performance since management is of the opinion that the items mentioned are not indicative of the Company's operations. In reviewing the results of operating activities by brand, the Company excludes bargain purchase gain and reorganization costs ("adjusted results from operating activities"). EBITDA, adjusted EBITDA, adjusted net earnings, and adjusted results from operating activities should not be considered by an investor as an alternative to earnings, an indicator of operating performance or cash flows, or as a measure of liquidity.
In addition, the following financial metrics are not performance measures consistent with IFRS. Total system sales are the aggregate sales achieved by all "Pizza Delight", "Mikes", "Scores" and "Bâton Rouge" restaurants, whether they are company-owned restaurants or franchises. This performance measure indicates the Company's overall growth and reflects the direct impact of the restaurant openings and closures. The Company also discloses same store sales, which are defined as sales generated by stores that have been open for at least one year compared to the sales from the same group of restaurants in the comparable period. The Company believes this is a meaningful measure of operating performance.
The retail sales information is not a performance measure consistent with IFRS. The Company licenses the right to manufacture and sell branded food products in grocery stores and retail outlets and earns a royalty for items sold. This performance measure demonstrates the volumes and margins associated with the sale of branded food products which enables the Company to monitor growth of existing as well as new product lines introduced.
The following table reconciles GAAP measures to non-GAAP measures referred to in this press release.
| (in thousands of dollars) | 13 weeks ended October 27, 2013 |
13 weeks ended October 28, 2012 |
52 weeks ended October 27, 2013 |
52 weeks ended October 28, 2012 |
| Net earnings | $ 868 | $ 120 | $ 2,570 | $ 1,848 |
| Interest on long-term debt | 620 | 1,145 | 3,002 | 5,230 |
| Interest income | (19) | (26) | (89) | (122) |
| Income tax expense | 333 | 648 | 2,796 | 2,023 |
| Depreciation and amortization | 211 | 178 | 864 | 593 |
| EBITDA | $ 2,013 | $ 2,065 | $ 9,143 | $ 9,572 |
| Bargain purchase gain | $ --- | $ --- | $ (216) | $ --- |
| Reorganization costs | 731 | --- | 2,506 | 100 |
| Loss on redemption of debentures |
--- | 1,820 | 3,163 | 1,820 |
| Loss on derivative financial liability |
--- | --- | --- | 1,964 |
| Impairment of long-lived assets | --- | 200 | --- | 200 |
| Net (earnings) loss from discontinued operations |
--- | 31 | --- | (162) |
| Adjusted EBITDA | $ 2,744 | $ 4,116 | $ 14,596 | $ 13,494 |
Cautionary Note Regarding Forward-Looking Statements
Certain information in this MD&A regarding the Company, including, but not limited to, the Company's business objectives, strategies and priorities, the generation of cash flows, the growth of the same store sales, and other statements that are not historical facts, are "forward-looking statements" within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Forward-looking statements can generally be identified by words such as "may", "should", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "outlook" and similar expressions. All such forward-looking statements are made pursuant to the "safe harbour" provisions of applicable securities laws. These statements are based on information currently available to the Company's management and on the current assumptions, intentions, plans, expectations and estimates of the management regarding the Company's future growth, results of operations, performance and opportunities as well as the economic environment in which it operates. Forward-looking statements involve known and unknown risks, uncertainties and other factors outside the Company's control. A number of factors could cause actual results of the Company to differ materially from the results discussed in the forward-looking statements, including, but not limited to: market conditions for financing; competitive conditions, whether related to new competitors or current competitors; change in the Company's or its competitors current pricing strategies; changes in demographic trends; changes in consumer preferences and discretionary spending patterns; changes in national and local business and economic conditions; risks associated with the closure of restaurants; risk associated with ownership of restaurants by the Company; costs associated with strategically exiting locations; the ability of the Company to pay dividends; the Company successfully offering new and innovative products and executing its strategies as planned; legislation and governmental regulation; changes in accounting policies, practices and standards; and the results of operations and financial condition of the Company and other factors referenced in the Company's Annual Information Form and the Company's other continuous disclosure filings which are available on SEDAR at www.sedar.com. Although the forward-looking statements contained herein are based upon what the Company believes to be reasonable assumptions on the date of this MD&A, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. Certain assumptions underlying the forward-looking statements contained herein include assumptions related to the Company's ability to obtain financing on conditions favorable to the Company, future cash flows, market conditions, sales estimates, estimates relating to the Company's ability to settle and exit leases. Readers should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this MD&A and, accordingly, are subject to change after such date. Forward-looking statements are provided herein for the purpose of giving information about the Company's current strategic priorities, expectations and plans, allowing investors and others to get a better understanding of the Company's business outlook and operating environment. Readers are cautioned, however, that such information may not be appropriate for other purposes. The Company assumes no obligation to update such forward-looking statements to reflect new information, future events or otherwise, except as required by applicable securities laws. Except as otherwise indicated, forward-looking statements do not reflect the potential impact of any non-recurring or other special items or of any transactions that may be announced or that may occur after the date of this MD&A. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them. The Company therefore cannot describe the expected impact in a meaningful way or in the same way it presents known risks affecting the business. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.
SOURCE: Imvescor Restaurant Group Inc.
Denis Richard
President and Chief Executive Officer
Imvescor Restaurant Group Inc.
http://www.imvescor.ca
514-341-5544
For more information about our brands:
Pizza Delight http://www.pizzadelight.com
Mikes http://www.mikes.ca
Scores http://www.scores.ca
Bâton Rouge http://www.batonrougerestaurants.com
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