EX-99.1 5 l28089aexv99w1.htm EX-99.1 EX-99.1
 

Exhibit 99.1
(MAX & ERMA’S LOGO)
4849 Evanswood Drive, Columbus, Ohio 43229
FOR IMMEDIATE RELEASE
Max & Erma’s Restaurants, Inc.
  For Further Information Contact:
NASDAQ: MAXE
  William C. Niegsch, Jr.
 
  Exec.Vice President & Chief Financial Officer
September 19, 2007
  (614) 431-5800
 
  www.maxandermas.com
MAX & ERMA’S RESTAURANTS, INC.
REPORTS THIRD QUARTER RESULTS
Third Quarter Highlights:
•   Todd Barnum announces retirement; Robert A. Lindeman elected CEO
 
•   Mike Nahkunst, former Brinker and Cheesecake Factory operations executive, elected EVP and COO
 
•   $968,000 net loss reported for third quarter 2007
 
•   Two Company-owned and one franchised restaurant scheduled to open in fourth quarter 2007
 
•   Two Company-owned and eight franchised restaurants planned for 2008
 
•   Cost cutting measures totaling $1.5 million to be implemented
 
•   Company to explore strategic alternatives
Financial Summary (Unaudited)
(In thousands, except per share data)
                                 
    12 Weeks Ended     40 Weeks Ended  
    8/5/07     8/6/06     8/5/07     8/6/06  
Revenues
   $ 39,201     $ 40,646     $ 135,857     $ 141,045  
 
                        
 
                                
Operating Income (Loss)
   $ (1,092 )   $ 14     $ 1,035     $ 1,001  
 
                        
 
                                
Loss Before Taxes
   $ (1,889 )   $ (811 )   $ (1,642 )   $ (1,333 )
 
                        
 
                                
Net Loss
   $ (968 )   $ (295 )   $ (321 )   $ (165 )
 
                        
 
                                
Net Loss per Diluted Common Share
   $ (0.38 )   $ (0.12 )   $ (0.13 )   $ (0.06 )
 
                        
 
                                
Diluted Shares Outstanding
     2,556       2,552       2,555       2,551  
 
                        

 

 

Columbus, Ohio, September 19, 2007 – Max & Erma’s Restaurants, Inc. (Nasdaq/NMS: MAXE) today reported third quarter 2007 financial results.
Q3 Results
Revenues for the third quarter fell 3.6% from $40.6 million for the third quarter of 2006 to $39.2 million for the third quarter of 2007. Net loss and net loss per share increased from $(295,000) or $(0.12) per diluted share for the third quarter of 2006 to ($968,000) or $(0.38) per diluted share for the third quarter of 2007. Results for the third quarter include a pre-tax asset impairment charge of $431,000 for 2007 and $339,000 for 2006.
Year-to-date revenues decreased 3.7% from $141.0 million for 2006 to $135.9 million for 2007. Year-to-date the Company reported a net loss of $(321,000) or $(0.13) per diluted share for 2007 as compared to $(165,000) or $(0.06) per diluted share for 2006. Results for all of 2007 and 2006 include $431,000 and $844,000 asset impairment charges, respectively.
Barnum Retirement; Election of Lindeman as CEO and Nahkunst as COO
The Company announced that Todd Barnum, Chairman of the Board and Chief Executive Officer, has retired effective September 19, 2007. Mr. Barnum will remain on the Company’s Board of Directors and continues to serve as non-executive Chairman of the Board. Mr. Barnum, age 65, said: “After over 35 years at Max & Erma’s it is time to take a less active role, but I will continue to remain very involved in the Company as a board member and large stockholder.” Barnum and his partner, the late Barry Zacks, bought the first Max & Erma’s in the German Village section of Columbus in the summer of 1972. The original intent was to convert the shot-and-a-beer bar into the first gourmet hamburger restaurant in the Midwest. After opening the first restaurant on Dec. 28, 1972, Barnum oversaw the Company’s expansion to 101 restaurants in 11 states. The Board of Directors, in accepting Mr. Barnum’s retirement, expressed its appreciation to Mr. Barnum for his service to the Company.
The Company’s Board has elected President Robert A. Lindeman, age 39, to the additional position of Chief Executive Officer. Lindeman’s move into the role of CEO is part of a planned transition, which began when he became company president in September 2005. Mr. Lindeman has over 18 years of experience with Max & Erma’s rising through the ranks from a restaurant assistant manager to President in September 2005. Prior that time, he served as the Company’s Chief Development Officer where he oversaw franchising of Company restaurants.
Mr. Lindeman said: “There are many challenges both within the Company and the casual restaurant operating environment, but I also believe that the core strengths of Max & Erma’s offer many opportunities as well. I look forward to the challenge and excitement of this new position. It’s a great opportunity with a great company, and I’m very excited about our future. With that said, I’m also very humbled to be taking over for Todd. He’s been a great mentor and the face of Max & Erma’s for nearly 35 years.” Mr. Barnum stated: “I am pleased with the promotion of Rob Lindeman to the CEO position. Rob has displayed the leadership characteristics and knowledge of our business and industry that will serve us well in the future

 

 

under his leadership. Rob has a terrific vision for this brand, and I have no doubt that he is the right person to head this company. In his 18 years with Max & Erma’s, Rob has demonstrated exceptional leadership skills every step of the way.”
As announced last week, the Company recently elected Michael A. Nahkunst as Executive Vice President and Chief Operating Officer. Mr. Nahkunst has been actively involved in the casual dining segment of the restaurant industry for over 30 years. He has served as Senior Vice President of New Concept Development of Chili’s, Executive Vice President and Chief Operating Officer of Cheesecake Factory and Chief Operating Officer of BJ’s Restaurants.
Mr. Lindeman stated that “The addition of Mike Nahkunst is part of a reorganization of the Company’s operations department, and other cost saving measures, which are expected to result in savings of over $1 million annually. Mr. Nahkunst will be charged with improving customer satisfaction and building same-store sales.”
Q3 Detail
The revenue decline for both the quarter and year-to-date periods is essentially a result of same-store sales declines of 3.6% and 3.4% for the quarter and year-to-date periods, respectively. The Company continues to experience sales pressure from the overall economy and a sluggish sales environment for casual dining. Margins have been impacted by the sales declines and an increase in the Ohio minimum wage. On a positive note, Mr. Lindeman added that restaurants remodeled to the Company’s new prototype look are performing very well. The seven restaurants remodeled prior to the start of the third quarter of 2007 reported a 3.2% increase in same-store sales, almost a seven percentage point improvement over the entire chain.
Exploration of Strategic Alternatives
During the third quarter the Company expensed $130,000 of professional fees and costs associated with the exploration of strategic alternatives for the Company. The Company’s third quarter results and a volatile debt market have made prospects for an equity investment in the Company or the sale of the Company a difficult process. Nonetheless, the Company will continue to pursue strategic alternatives which could include the sale of the Company, an equity investment in the Company, the sale of Company-owned restaurants to a franchisee or group of franchisees, or other actions. There can be no assurance that the Company will be successful in securing an equity investment, the sale of the Company, the sale of restaurants to franchisees or other third parties, or in any other transaction affecting the capitalization of the Company.
Future Restaurant Openings Planned
Looking forward, Mr. Lindeman stated that “The Company plans to open two restaurants during the fourth quarter of 2007 in Clinton Township, Michigan, a suburb of Detroit and Washington, Pennsylvania. A third restaurant will open early in the first quarter of 2008 in Pickerington, Ohio, a Columbus suburb. All three restaurants were under construction at the end of the third quarter of 2007. Tentative plans are for one additional Company-owned

 

 

restaurant in late 2008.” Mr. Lindeman went on to say that “One franchised restaurant has opened early in the fourth quarter of 2007 in Merrillville, Indiana, bringing total franchised openings to four during 2007. Eight to nine franchised openings are expected during 2008.”
About Max & Erma’s
As of August 5, 2007, Max & Erma’s owns and operates 77 casual dining full-service restaurants in Akron, Canton, Columbus, Cleveland, Cincinnati, Dayton, Niles, and Toledo, Ohio; Indianapolis, Indiana; Detroit, Ann Arbor, Grand Rapids, and Lansing, Michigan; Pittsburgh and Erie, Pennsylvania; Lexington, Louisville, and Crestview Hills, Kentucky; Chicago, Illinois; Charlotte, North Carolina; Atlanta, Georgia; Virginia Beach and Norfolk, Virginia. The Company also currently franchises 23 restaurants in Cleveland, Columbus, Cincinnati, Wilmington, Chillicothe, Dayton, Findlay, and Sandusky, Ohio; St. Louis, Missouri; Philadelphia, Pennsylvania; Detroit, Michigan; Edinburgh, Evansville, Seymour, and Mishawaka, Indiana; Richmond, Norfolk and Virginia Beach, Virginia; and Huntington, West Virginia. The Company’s common shares are traded on the NASDAQ National Market System under the symbol MAXE.

This release includes “forward-looking” information statements, as defined in the Private Securities Litigation Reform Act of 1995, including the statements relating to future restaurant openings. Actual performance may differ materially from that projected in such statements. Major factors potentially affecting performance include a significant change in the performance of any existing units, the ability to obtain locations for, and complete construction of, additional restaurants at acceptable costs and the ability to obtain the services of qualified personnel at acceptable wages. The Cautionary statements regularly filed by the Company in its most recent annual report to the Securities and Exchange Commission on Form 10-K and its Quarterly Reports to the SEC on Forms 10-Q are incorporated herein by reference. Investors are specifically referred to such Cautionary statements for a discussion of factors which could affect the Company’s operations and forward-looking statements made in this communication.
– FINANCIAL HIGHLIGHTS FOLLOW –

 

 

MAX & ERMA’S RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                 
    August 5, 2007        
    (UNAUDITED)     October 29, 2006  
ASSETS
Current Assets:
                
Cash and Equivalents
   $ 2,182,210     $ 2,491,877  
Inventories
     1,238,260       1,260,537  
Other Current Assets
     2,874,786       3,820,938  
 
            
Total Current Assets
     6,295,256       7,573,352  
 
                
Property – At Cost
     108,067,125       103,704,895  
Less Accumulated Depreciation and Amortization
     56,496,990       52,896,054  
 
            
Property – Net
     51,570,135       50,808,841  
 
                
Deferred Income Taxes and Other Assets
     16,158,537       13,972,472  
 
            
Total
   $ 74,023,928     $ 72,354,665  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
                
Current Liabilities:
                
Current Maturities of Long-Term Obligations
   $ 2,795,843     $ 2,729,989  
Accounts Payable
     6,707,446       4,829,677  
Accrued Payroll and Related Taxes
     2,638,174       2,770,583  
Accrued Liabilities
     5,690,203       5,925,532  
 
            
Total Current Liabilities
     17,831,666       16,255,781  
 
                
Long-Term Obligations – Less Current Maturities
     43,277,774       43,065,227  
 
                
Stockholders’ Equity:
                
Preferred Stock – $.10 Par Value;
Authorized 500,000 Shares – None Outstanding
                
Common Stock – $.10 Par Value;
Authorized 5,000,000 Shares,
Issued and Outstanding 2,554,474 Shares
At 08/5/07 and 2,551,974 Shares at 10/29/06
     255,446       255,196  
Additional Paid-In Capital
     1,184,040       982,697  
Retained Earnings
     11,475,002       11,795,764  
 
            
Total Stockholders’ Equity
     12,914,488       13,033,657  
 
            
Total
   $ 74,023,928     $ 72,354,665  
 
            

 

 

MAX & ERMA’S RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                                 
    Twelve Weeks Ended     Forty Weeks Ended  
    August 5, 2007     August 6, 2006     August 5, 2007     August 6, 2006  
REVENUES:
   $ 39,201,281     $ 40,646,117     $ 135,857,076     $ 141,044,845  
 
                                
COSTS AND EXPENSES:
                                
Costs of Goods Sold
     9,813,242       10,226,514       33,973,015       35,979,771  
Payroll and Benefits
     13,025,873       13,325,262       43,938,773       45,273,003  
Other Operating Expenses
     13,443,840       13,414,347       45,206,962       46,760,200  
Pre-Opening Expenses
     39,599       28,139       52,667       36,288  
Impairment of Assets
     431,000       339,000       431,000       843,524  
Administrative Expenses
     3,540,209       3,298,643       11,219,616       11,151,354  
 
                        
Total Operating Expenses
     40,293,763       40,631,905       134,822,033       140,044,140  
 
                        
Operating Income (Loss)
     (1,092,482 )     14,212       1,035,043       1,000,705  
Interest Expense
     777,546       806,152       2,619,051       2,276,207  
Minority Interest in Income of Affiliated Partnership
     19,252       19,251       57,755       57,754  
 
                        
 
                                
LOSS BEFORE INCOME TAXES
     (1,889,280 )     (811,191 )     (1,641,763 )     (1,333,256 )
 
                                
INCOME TAXES (CREDIT)
     (921,000 )     (516,000 )     (1,321,000 )     (1,168,000 )
 
                        
NET LOSS
   $ (968,280 )   $ (295,191 )   $ (320,763 )   $ (165,256 )
 
                        
 
                                
NET LOSS PER SHARE:
                                
Basic
   $ (0.38 )   $ (0.12 )   $ (0.13 )   $ (0.06 )
 
                        
Diluted
   $ (0.38 )   $ (0.12 )   $ (0.13 )   $ (0.06 )
 
                        
 
                                
SHARES OUTSTANDING:
                                
Basic
     2,555,664       2,551,974       2,554,545       2,550,731  
 
                        
Diluted
     2,555,664       2,551,974       2,554,545       2,550,731