Imvescor Restaurant Group Inc. Reports Third Quarter Financial Results

MONCTON, NB, Sept. 9, 2013 /CNW/ - Imvescor Restaurant Group Inc. ("IRG" or the "Company") (TSX: IRG) reports financial results today for the 13 and 39 weeks ended July 28, 2013 ("third quarter" or "the period").

Key Highlights

• Significant increase in total revenues of $3.1 million and $6.6 million for the 13 and 39 weeks ended July 28, 2013 as compared to the prior year, an increase of 27% and 19% respectively.
• Positive same store system sales in three of the four brands.
• Significant increase in retail royalties of $943 thousand and $2.1 million for the 13 and 39 weeks ended July 28, 2013 as compared to the prior year, an increase of 548% and 164% respectively.
• Improved earnings after reorganisation costs and other non-cash accounting    adjustments.
• Continued improvements in deleveraging the balance sheet.

Improved Third Quarter Financial and Operating Results

The following table provides selected financial information for the 13 and 39 weeks ended July 28, 2013, along with results for the comparative period of the prior year.

(in thousands of dollars)	Q3 2013 13 weeks ended July 28, 2013	Q3 2012 13 weeks ended July 29, 2012	YTD 2013 39 weeks ended July 28, 2013	YTD 2012 39 weeks ended July 29, 2012
Total revenues	$   14,843	$   11,715	$   41,387	$   34,767
Operating expenses	12,456	8,007	31,747	25,904
Adjusted EBITDA (note 1)	4,118	3,873	11,852	9,378
Net finance costs (note 2)	1,837	271	5,475	5,953
Net earnings (loss) (note 3)	(29)	2,902	1,702	1,728
Adjusted net earnings (note 4)	$   2,640	$   1,674	$   6,424	$   3,599

Note 1: Adjusted EBITDA includes earnings before interest income, interest on long-term debt, loss on redemption of debentures, loss (gain) on derivative financial liability, depreciation and amortization, impairment of long-lived assets, bargain purchase gain, reorganization costs, net earnings  from discontinued operations, and income tax expense.

Note 2: Finance costs include a non-cash loss on redemption of debentures of $1.2 million and $3.2 million, respectively, for the 13 and 39 weeks ended July 28, 2013 as compared to nil in 2012 and a non-cash gain/loss on derivative financial liability of nil as compared to $997 thousand gain and $2.0 million loss, respectively, for the 13 and 39 weeks ended July 29, 2012.  These non-cash gain/losses have been excluded in the calculation of adjusted net earnings.

Note 3: Net earnings include earnings from discontinued operations of $231 thousand and 193 thousand, respectively for the 13 and 39 weeks ended July 29, 2012 as compared to nil in 2013.

Note: 4: Adjusted net earnings includes net earnings (loss), before bargain purchase gain, reorganization costs, loss of redemption of debentures, loss (gain) on derivative financial liability and net earnings from discontinued operations.

Adjusted EBITDA for the 13 and 39 weeks ended July 28, 2013 showed improvements over the comparable period of the prior year. Overall improvements are mainly related to increased retail royalties and supply chain revenues. During the year, the Company launched Bâton Rouge ribs and new Mikes sauces and pizzas which has resulted in the increased revenues. Retail royalties for the 13 and 39 weeks ended July 28, 2013 were $1.1 million and $3.4 million, respectively, as compared to $172 thousand and $1.3 million for the comparative periods, an increase of $943 thousand and $2.1 million respectively.

(in thousands of dollars)	Q3 2013 13 weeks ended July 28, 2013	Q3 2012 13 weeks ended July 29, 2012	YTD 2013 39 weeks ended July 28, 2013	YTD 2012 39 weeks ended July 29, 2012
Net earnings (loss)	$   (29)	$   2,902	$  1,702	$  1,728
Bargain purchase gain	(216)	---	(216)	---
Reorganization costs^(2)	1,690	---	1,775	100
Loss on redemption of debentures	1,195	---	3,163	---
Loss (gain) on derivative financial liability	---	(997)	---	1,964
Net earnings from discontinued operations	---	(231)	---	(193)
Adjusted net earnings	$   2,640	$   1,674	$  6,424	$  3,599

^(2)	During the third quarter, the Company incurred $1.7 million in reorganization costs consisting of costs related to the departure of the Company's Chief Executive Officer of $1.3 million and $350 thousand in costs related to the accelerated vesting of related stock options.

The increase in adjusted net earnings for the 13 and 39 weeks ended July 28, 2013 is related to the increases in retail royalties and supply chain revenues as described above and an overall decrease in interest on long-term debt.

Interest on long-term debt decreased from $4.1 million in the first 39 weeks of 2012 to $2.4 million in 2013, a decrease of $1.7 million resulting from the reduction of total debt. The Company has excluded in the calculation of adjusted net earnings for the 39 weeks ended July 28, 2013 the $216 thousand bargain purchase gain, $1.8 million reorganization costs and the $3.2 million non-cash loss on redemption of debentures, and for the 39 weeks ended July 29, 2012 the $100 thousand reorganization costs, $2.0 million non-cash loss on derivative financial liability and the net earnings from discontinued operations of $193 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.

Same Store Sales

(in thousands of dollars)	Q3 2013 13 weeks ended July 28, 2013	YTD 2013 39 weeks ended July 28, 2013
Pizza Delight	0.1%	-0.4%
Mikes	5.3%	2.6%
Scores	3.2%	-1.1%
Bâton Rouge	-4.8%	-5.0%
Total same store sales	1.1%	-1.1%

Overall, the Company experienced an increase of 1.1% in same store sales for the third quarter of 2013. Same store sales for the 39 weeks ended July 28, 2013 were 1.1% lower than the comparable period of 2012. The Company has focused on introducing more value oriented offerings supported by marketing initiatives for all of its brands in order to regain market share.

Same store sales for Pizza Delight for the third quarter of 2013 increased 0.1% compared to the third quarter of 2012 and negative 0.4% for the 39 weeks ended July 28, 2013.

Mikes experienced an increase of 5.3% and 2.6%, respectively, for the 13 and 39 weeks ended July 28, 2013. This increase was the result of the closure of non-performing locations in 2012 as well as increased traffic and day-part market penetration as a result of successful promotions, including 'Lobster Sub sliders', 'Summer Sunshine Pizza Duettos' and the first ever 'Breakfast' campaign highlighting a redesigned and re-engineered menu.

Scores experienced an increase of 3.2% in same store sales for the third quarter of 2013 as compared to the third quarter of 2012 as a result of an increased focus on advertising and promotions in response to aggressive promotional pricing by competitors. Despite this increase in the third quarter, same store sales for the first 39 weeks of 2013 remain lower than the comparable period of the prior year.

Bâton Rouge continues to experience a decrease in same store sales. Same store sales for the 13 and 39 weeks ended July 28, 2013 were negative 4.8% and negative 5.0%, respectively. The sales at the Bâton Rouge locations have been impacted by numerous factors including the delayed start of the NHL season, competitive entry in key markets, reduced customer traffic due to closures of surrounding businesses and temporary closures from transitioning to new franchisees or corporate stores.

Debt Reduction

(in thousands of dollars)	As at July 28, 2013	As at October 28, 2012
Long-term debt, net of financing charges *	$   33,802	$   38,789
Financing charges on loan payable	850	1,180
Financing charges on debentures payable	-	3,348
Principal amount of long-term debt outstanding *	$   34,652	$   43,317

* includes current portion

During the first three quarters of the year, the Company fully repaid the balance of $6.5 million outstanding on the debentures payable. 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 year end to $34.7 million at the end of the third quarter, a reduction of $8.7 million.

The combination of the refinancing transactions completed in 2012 and the reduction in debt has resulted in significant interest expense savings for the Company. Interest on long-term debt for the third quarter of 2013 was $658 thousand compared to $1.3 million for the third quarter of 2012, a decrease of $638 thousand or 49%. Year to date, interest on long-term debt was $2.4 million as compared to $4.1 million in 2012, a decrease of $1.7 million or 42%.

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, Alberta and Nova Scotia in the casual dining segment.

Non-GAAP Measures

The information contained in this MD&A 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 compatible with similar measures presented by other issuers.

For instance, the Company uses earnings 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 (gain) 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 those 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 (gain) on derivative financial liability, reorganization costs, bargain purchase gain and earnings/loss from discontinued operations, ("adjusted net earnings") as a measurement of performance since management is of the net opinion that the items mentioned are not indicative of the Company's operations.  EBITDA, adjusted EBITDA and adjusted net earnings 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 elements 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.

Cautionary Note Regarding Forward-Looking Statements

Certain information in this press release 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; 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 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 press release, 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 press release 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 press release. 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.

Ming-Ming Wong
Chief Financial Officer and Interim 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