EX-99.1 3 dex991.htm PRESS RELEASE DATED JANUARY 21, 2003 Press Release dated January 21, 2003
Exhibit 99.1
 
CHAMPPS ENTERTAINMENT, INC. REPORTS FISCAL 2003 SECOND QUARTER
RESULTS
 
Littleton, Colo.—January 21, 2003—Champps Entertainment, Inc. (Nasdaq:CMPP) today announced results for the second quarter of fiscal 2003 ended December 29, 2002.
 
Highlights for the quarter include:
Total revenue increased 14.7 percent
Restaurant operating and franchise contribution increased 17.7 percent
Restaurant contribution margin improved 40 basis points
Net income increased 81.7 percent
Diluted earnings per share increased 75.0 percent
 
Revenues for the quarter reached $46,538,000 compared to $40,565,000 reported for the second quarter of fiscal 2002, an increase of 14.7 percent. Diluted earnings per share was $0.14 for the second quarter on net income of $1,768,000 compared to $0.08 per diluted share on net income of $973,000 for the same period last fiscal year.
 
Restaurant operating and franchise contribution for the quarter was $6,091,000 compared to $5,176,000 for the same period last fiscal year, an increase of 17.7 percent. General and administrative expenses were 5.5 percent of revenues compared to 5.4 percent of revenues the prior year. Comparable food sales increased 1.6 percent while comparable liquor sales decreased 7.6 percent resulting in an overall decrease in comparable same store sales of 1.6 percent for the quarter.
 
The Company successfully opened two new Champps restaurants during the quarter in the Cleveland and Raleigh markets increasing the number of Company owned Champps restaurants to 38. The Company intends to open one additional Champps restaurant in the third quarter and three additional Champps restaurants in the fourth quarter of fiscal 2003.
 
In December 2002, the Company completed the sale of $15,000,000 in convertible notes and related warrants in a private placement. A portion of the proceeds was applied to pay down approximately $5,243,000 of existing debt resulting in debt extinguishment costs of $290,000 during the quarter or $0.02 per diluted share. Additionally, the Company took a charge of $144,000, or $0.01 per diluted share, related to costs associated with a proposed real estate transaction for a Champps location that was abandoned.
 
The Company has amended its agreement with a third party for sale/leaseback financing for Champps restaurants to be developed in the future. The amended agreement provides available funds of $24,500,000 for the construction of up to seven new Champps restaurants through November 30, 2005. The Company has also received a commitment from a financial institution for an $8,000,000 line of credit, $6,000,000 of which may be used for interim financing of construction costs for new Champps restaurants.
 
William H. Baumhauer, Champps’ chairman, president and chief executive officer, commented: “We are pleased to report strong operating results for our second quarter. In this difficult operating environment we continue to focus our efforts on restaurant level execution. We have also initiated several programs to drive sales for the third quarter including a new menu

 
to be introduced in the first week of February. Our goal this quarter is to report positive comparable same store sales in addition to positive guest counts. We are projecting revenues of $47,000,000 to $48,000,000 for the third quarter with earnings per share in the $0.17 to $0.19 range and revenues for the fourth quarter of $48,000,000 to $49,000,000 with earnings per share in the $0.15 to $0.17 range. These estimates for the balance of the fiscal year have been revised to reflect the impact of the costs associated with the issuance of the convertible notes and related warrants and contemplates comparable same store sales to range between flat and a positive one percent. These estimates include an effective tax rate of 4% for state and local income tax and do not include income associated with the recognition of additional deferred tax assets.”
 
Littleton, Colo.-based Champps Entertainment, Inc. currently owns and operates 38 and franchises 12 Champps restaurants in 18 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.
 
Statements made in this press release include forward-looking statements 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. Information on significant potential risks and uncertainties that may cause such differences include, but are not limited to, those mentioned by the Company from time to time in its filings with the Securities and Exchange Commission. The words “believe,” “estimate,” “expect,” “intend,” “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.
 
(Financial Table to Follow)

CHAMPPS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
 
    
Three Months Ended
     
Six Months Ended
  
    
December 29, 2002
   
December 30, 2001
     
December 29, 2002
   
December 30, 2001
  
Revenue
                                
Sales
   
$
46,389
   
$
40,413
 
   
$
87,721
   
$
75,083
 
Franchising and royalty, net
   
 
149
   
 
152
 
   
 
297
   
 
307
 
    
  
  
  
Total revenue
   
 
46,538
   
 
40,565
 
   
 
88,018
   
 
75,390
 
    
  
  
  
Costs and expenses
                                
Restaurant operating expenses:
                                
Product costs
   
 
12,908
   
 
11,352
 
   
 
24,439
   
 
21,351
 
Labor costs
   
 
14,487
   
 
12,953
 
   
 
28,043
   
 
24,301
 
Other operating expenses
   
 
7,268
   
 
6,108
 
   
 
13,711
   
 
11,670
 
Occupancy
   
 
3,888
   
 
3,380
 
   
 
7,606
   
 
6,241
 
Depreciation and amortization
   
 
1,896
   
 
1,596
 
   
 
3,663
   
 
3,085
 
    
  
  
  
Total restaurant operating expenses
   
 
40,447
   
 
35,389
 
   
 
77,462
   
 
66,648
 
    
  
  
  
Restaurant operating and franchise contribution
   
 
6,091
   
 
5,176
 
   
 
10,556
   
 
8,742
 
General and administrative expense
   
 
2,544
   
 
2,197
 
   
 
4,849
   
 
4,119
 
Pre-opening expense
   
 
849
   
 
1,029
 
   
 
1,552
   
 
1,716
 
Expenses related to predecessor companies
   
 
—  
   
 
283
 
   
 
—  
   
 
283
 
Interest expense and income, net
   
 
415
   
 
491
 
   
 
811
   
 
935
 
Debt extinguishment costs
   
 
290
   
 
—  
 
   
 
290
   
 
—  
 
Other (income) expense
   
 
150
   
 
(3
)
   
 
201
   
 
(6
)
    
  
  
  
Income from continuing operations
   
 
1,843
   
 
1,179
 
   
 
2,853
   
 
1,695
 
Loss from discontinued operations, net of tax
   
 
—  
   
 
153
 
   
 
—  
   
 
153
 
    
  
  
  
Income before income taxes
   
 
1,843
   
 
1,026
 
                
Income tax expense
   
 
75
   
 
53
 
   
 
113
   
 
93
 
    
  
  
  
Net income
   
$
1,768
   
$
973
 
   
$
2,740
   
$
1,449
 
    
  
  
  
Income before discontinued operations
   
$
0.14
   
$
0.09
 
   
$
0.22
   
$
0.13
 
Loss from discontinued operations
   
 
—  
   
 
(0.01
)
   
 
—  
   
 
(0.01
)
    
  
  
  
Basic income per share:
   
$
0.14
   
$
0.08
 
   
$
0.22
   
$
0.12
 
    
  
  
  
Income before discontinued operations
   
$
0.14
   
$
0.09
 
   
$
0.21
   
$
0.12
 
Loss from discontinued operations
   
 
—  
   
 
(0.01
)
   
 
—  
   
 
(0.01
)
    
  
  
  
Diluted income per share:
   
$
0.14
   
$
0.08
 
   
$
0.21
   
$
0.11
 
    
  
  
  
Basic weighted average shares outstanding
   
 
12,497
   
 
12,071
 
   
 
12,349
   
 
12,060
 
    
  
  
  
Diluted weighted average shares outstanding
   
 
13,089
   
 
12,667
 
   
 
13,004
   
 
12,698
 
    
  
  
  

Supplemental Information — Restaurant Operating Expenses
    (Stated as a percentage of sales)
 
    
Three Months Ended
       
Six Months Ended
  
    
December 29, 2002
     
December 30, 2001
       
December 29, 2002
       
December 30, 2001
  
Product costs
   
 
27.8
%
   
 
28.1
%
     
27.8
%
     
28.4
%
Labor costs
   
 
31.2
%
   
 
32.1
%
     
32.0
%
     
32.4
%
Other operating expenses
   
 
15.7
%
   
 
15.1
%
     
15.6
%
     
15.6
%
Occupancy
   
 
8.4
%
   
 
8.4
%
     
8.7
%
     
8.3
%
Depreciation and amortization
   
 
4.1
%
   
 
3.9
%
     
4.2
%
     
4.1
%
Total restaurant contribution margin
   
 
12.8
%
   
 
12.4
%
     
11.7
%
     
11.2
%
    
  
    
    
General and administrative expense
   
 
5.5
%
   
 
5.4
%
     
5.5
%
     
5.5
%
    
  
    
    
    (Stated as a percentage of revenue)
                                    
Selected Consolidated Balance Sheet Information
 
                  
    
December 29, 2002
     
June 30,
2002
                    
Cash and cash equivalents
   
$
11,313
 
   
$
4,643
 
                  
Property and equipment, net
   
 
73,985
 
   
 
67,541
 
                  
Total assets
   
 
114,697
 
   
 
95,575
 
                  
Notes payable
   
 
27,917
 
   
 
19,299
 
                  
Capital lease obligations
   
 
1,785
 
   
 
2,536
 
                  
Shareholders’ equity
   
 
56,954
 
   
 
50,955