Meritage Reports 13.6% Sales Increase
GRAND RAPIDS, Mich., March 31 /PRNewswire-FirstCall/ -- Meritage Hospitality
Group Inc. , the nation's only publicly traded Wendy's franchisee and the first
O'Charley's franchisee, today announced net sales for the first fiscal quarter
ended February 29, 2004 increased 13.6% to $12.0 million, compared to $10.6
million during the same period last year. Meritage's net loss for the quarter
was $480,000 or $0.11 per share, compared to a net loss of $503,000 or $0.10 per
share for the same period last year.
Meritage's Chief Executive Officer, Robert E. Schermer, Jr., stated, "The
results of the first fiscal quarter were encouraging as our same store sales
increased 10.9% and our customer counts increased nearly 12%. These two
measurements are among the best I have seen in our Company over the last five
years. On March 16, 2004, we opened a new Wendy's restaurant located in Battle
Creek at the site of a formerly leased store which we purchased and tore down.
This brings our total Wendy's locations in South and West Michigan to 47. We
anticipate opening one or two new Wendy's locations during the remainder of
calendar 2004." Mr. Schermer added, "Our rollout of O'Charley's restaurants is
proceeding according to plan. We foresee opening our first location later this
summer in Grand Rapids. We anticipate opening a total of two or three
O'Charley's restaurants during calendar 2004." Meritage continues to experience margin pressure on food cost primarily due to
higher beef prices, but anticipates these prices will decline as we move into
the summer months. Meritage expects its positive sales trend will continue into
the second fiscal quarter. Mr. Schermer stated, "This improved trend, combined
with the possible sale of surplus property, should keep us on track to deliver a
solid financial performance for the balance of fiscal 2004." Meritage currently operates 47 "Wendy's Old Fashioned Hamburgers" restaurants
throughout Western and Southern Michigan serving more than nine million
customers annually. The Company has been one of the fastest growing Wendy's
franchisees within the Wendy's franchise system for the past four years. The
Company is also expanding into the casual dining segment when it recently
entered into the nation's first development agreement with O'Charley's Inc.,
giving Meritage the exclusive rights to develop O'Charley's restaurants in the
State of Michigan.
The Wendy's franchise system is the third largest quick-service restaurant
hamburger chain in the world with more than 6,375 restaurants and system-wide
sales in excess of $7.1 billion. Wendy's is the leading national, high quality
hamburger concept in the quick-service restaurant category. Likewise,
O'Charley's is regarded as a leader in food quality within the casual restaurant
segment. O'Charley's, currently operates 206 restaurants in 16 states in the
Southeast and Midwest. A typical O'Charley's restaurant is a free-standing
brick building containing 6,790 square feet and seating for 275 customers
including 52 bar seats.
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995 Certain statements contained in this news release that are not historical facts
constitute forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995, and are intended to be covered by the
safe harbors created by that Act. Forward-looking statements may be identified
by words such as "estimates," "anticipates,""projects," "plans," "expects,"
"believes," "should," and similar expressions, and by the context in which they
are used. Such statements are based only upon current expectations of the
Company. Any forward-looking statement speaks only as of the date made.
Reliance should not be placed on forward-looking statements because they involve
known and unknown risks, uncertainties and other factors which may cause actual
results, performance or achievements to differ materially from those expressed
or implied. Meritage undertakes no obligation to update any forward-looking
statements to reflect events or circumstances after the date on which they are
made.
Statements concerning expected financial performance, business strategies and
action which Meritage intends to pursue to achieve its strategic objectives,
constitute forward-looking information. Implementation of these strategies and
achievement of such financial performance are subject to numerous conditions,
uncertainties and risk factors, which could cause actual performance to differ
materially from the forward-looking statements. These include, without
limitation: competition; changes in the national or local economy; changes in
consumer tastes and eating habits; concerns about the nutritional quality of our
restaurant menu items; concerns about consumption of beef or other menu items
due to diseases including E. coli, hepatitis, and mad cow; promotions and price
discounting by competitors; severe weather; changes in travel patterns; road
construction; demographic trends; the cost of food, labor and energy; the
availability and cost of suitable restaurant sites; the ability to finance
expansion; interest rates; insurance costs; the availability of adequate
managers and hourly-paid employees; directives issued by the franchisor
regarding operations and menu pricing; the general reputation of Meritage's and
its franchisors' restaurants; legal claims; and the recurring need for
renovation and capital improvements. In addition, Meritage's expansion into the
casual dining restaurant segment as a franchisee of O'Charley's will subject
Meritage to additional risks including, without limitation, unanticipated
expenses or difficulties in securing market acceptance of the O'Charley's
restaurant brand, the ability of our management and infrastructure to
successfully implement the O'Charley's development plan in Michigan, and our
limited experience in the casual dining segment. Also, Meritage is subject to
extensive government regulations relating to, among other things, zoning, public
health, sanitation, alcoholic beverage control, environment, food preparation,
minimum and overtime wages and tips, employment of minors, citizenship
requirements, working conditions, and the operation of its restaurants. Because
Meritage's operations are concentrated in certain areas of Michigan, a marked
decline in Michigan's economy, or in the local economies where our restaurants
are located, could adversely affect our operations.
Meritage Hospitality Group Inc. and Subsidiary
Consolidated Statements of Operations
For the Three Months Ended February 29, 2004 and March 2, 2003
(Unaudited) 2004 2003 Food and beverage revenue $12,059,124 $10,611,962 Costs and expenses
Cost of food and beverages 3,281,462 2,543,408
Operating expenses 7,276,724 6,746,724
General and administrative expenses 818,583 694,846
Depreciation and amortization 701,441 664,030
Total costs and expenses 12,078,210 10,649,008 Loss from operations (19,086) (37,046) Other income (expense)
Interest expense (603,189) (594,130)
Interest income 1,464 1,790
Other income, net 4,400 4,000
Gain on sale of non-operating property 136,800 122,419
Total other expense (460,525) (465,921) Loss before income taxes (479,611) (502,967) Income taxes - - Net loss (479,611) (502,967) Preferred stock dividends declared 113,284 6,642 Net loss on common shares $(592,895) $(509,609) Net loss per common share - basic and diluted $(0.11) $(0.10) Weighted average shares outstanding -
basic and diluted 5,343,286 5,342,627
DATASOURCE: Meritage Hospitality Group Inc.
CONTACT: Robert E. Schermer, Jr. of Meritage Hospitality Group Inc., +1-616-776-2600 Web site: http://www.meritagehospitality.com/
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