California Pizza Kitchen Announces Financial Results For the Second Quarter of 2010

LOS ANGELES  (Profitable.com)  California Pizza Kitchen, Inc. (Nasdaq: CPKI) today reported revenues and net income for the second quarter ended July 4, 2010.

Highlights for the second quarter of 2010 relative to the second quarter of 2009 were as follows:

  • Total revenues decreased 4.6% to $163.1 million
  • Comparable restaurant sales decreased 5.9%
  • Net income of $4.2 million, or $0.17 per diluted share

Rick Rosenfield and Larry Flax, co-CEOs of California Pizza Kitchen, stated “Earnings were at the high end of our recent guidance, but reflect the impact of not conducting the Thank You Card Program during the second quarter, as we did in 2009. With that challenging comparison behind us, we are encouraged that third quarter comparable restaurant sales to date are negative 0.9% and we are excited that our 2010 Thank You Card Program is now underway and runs through October 8th. The program has proven to be popular with guests and we are thrilled to raise the level of excitement this year with a cash grand prize of $100,000.”

Rosenfield and Flax continued, “Additionally, the new menu items rolled out in June continue to perform extremely well. Product innovation remains a hallmark of our brand and we will continue to create unique, craveable menu items to drive traffic. We also look forward to the August launch of two new licensed products outside the frozen category in line with our strategy of leveraging the brand in this higher margin channel.”

Rosenfield and Flax added, “As we look to the remainder of this year and into 2011, we plan to maximize long-term value for our shareholders by driving the brand through menu innovation and by enhancing free cash flow and return on invested capital, both inside and outside the restaurants’ four walls.”

Rosenfield and Flax concluded, “As a reminder, on April 12, 2010, we announced that the Company was exploring strategic alternatives. This process is continuing and the Company does not expect to make further comment unless its Board of Directors has approved a specific course of action.”

Average weekly sales for the Company’s 196 full service restaurants were $61,491 in the second quarter of 2010 compared to $64,171 in the same quarter last year.

During the second quarter, the Company opened a new full-service restaurant in Murray, UT. The Company’s franchise partners also opened quick-service restaurants in the King of Prussia Service Plaza in Philadelphia, PA; the Honolulu International Airport in Honolulu, HI; the Kahului Airport (OGG) in Maui, HI; a kiosk in the Fresno Yosemite Airport in Fresno, CA; and in Dodger Stadium in Los Angeles, CA; as well as a full service restaurant in the Coyoacán neighborhood of Mexico City, Mexico.

Finally, the Company outlined its financial guidance for the third quarter of 2010 based on the following assumptions:

  • Comparable restaurant sales between negative 1.0% and positive 1.0%
  • Opening four Company-owned full service restaurants
  • Opening two international franchised full service restaurants
  • Opening one domestic franchise restaurant
  • Earnings estimated in the range of $0.17-$0.19 per diluted share

The Company will host a conference call today at approximately 4:30 pm ET. A webcast of the conference call can be accessed at www.cpk.com.

California Pizza Kitchen, Inc., founded in 1985, is a leading casual dining chain featuring an imaginative line of hearth-baked pizzas, including the original BBQ Chicken Pizza, and a broad selection of distinctive pastas, salads, appetizers, soups, sandwiches and desserts. The average guest check is approximately $15.00. Of the chain’s 261 restaurants as of August 5, 2010, 206 are Company-owned and 55 operate under franchise or license agreements. CPK premium pizzas are available to sports and entertainment fans at three Southern California venues including Dodger Stadium, Angel Stadium of Anaheim and STAPLES Center. Included in the Company’s portfolio of concepts is LA Food Show Grill & Bar, which has locations in Manhattan Beach and Beverly Hills, California. The Company also has a licensing arrangement with Nestle S.A. to manufacture and distribute a line of California Pizza Kitchen premium frozen products. For more details, visit www.cpk.com.

This release includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include projections of earnings, revenue or other financial items, statements of the plans, strategies and objectives of management for future operations, statements concerning proposed new products or developments, statements regarding future economic conditions or performance, statements of belief and statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” ”expect” “anticipate,” “guidance,” “forecast” and similar words.

This release may also include measures that are not based on any standardized methodology prescribed by U.S. generally accepted accounting principles (“GAAP”) and are not necessarily comparable to similar measures presented by other companies. This may include non-GAAP earnings per diluted share or other information. The Company believes that this non-GAAP information is useful as an additional means for investors to evaluate the Company’s operating performance, when reviewed in conjunction with the Company’s GAAP financial statements. This amount is not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating the Company’s business and operations.

Investors are cautioned that forward-looking statements are not guarantees of future performance and, therefore, undue reliance should not be placed on them. Our actual results may and will likely differ materially from the expectations referred to herein. Among the key factors that may have a direct bearing on our operating results, performance and financial condition are changing consumer preferences and demands, the execution of our expansion strategy, the continued availability of qualified employees and our management team, the maintenance of reasonable food and supply costs, our relationships with our distributors and numerous other matters discussed in the Company’s filings with the Securities and Exchange Commission. California Pizza Kitchen undertakes no obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

                 
Selected Unaudited Consolidated Financial and Operating Data
(Dollars in thousands, except for per share and operating data)
                 
                 
    13 Weeks Ended   26 Weeks Ended
    July 4,   June 28,   July 4,   June 28,
      2010       2009       2010       2009  
                 
Statement of Income:                
                 
Revenues:                
Restaurant sales   $ 160,265     $ 167,975     $ 314,694     $ 326,703  
Royalties from licensing agreement     1,425       1,773       2,470       2,924  
Domestic franchise revenues     813       702       1,485       1,325  
International franchise revenues     547       481       1,096       1,047  
Total revenues     163,050       170,931       319,745       331,999  
                 
Costs and expenses:                
Food, beverage and paper supplies     37,043       40,102       73,430       78,085  
Labor     59,867       62,577       118,679       123,679  
Direct operating and occupancy     36,604       36,017       71,687       70,813  
Cost of sales     133,514       138,696       263,796       272,577  
                 
General and administrative     13,282       12,879       26,024       25,547  
Pre-opening costs     600       972       902       1,701  
                 
Operating income before depreciation and amortization, store closure costs and litigation and settlement costs (1)     15,654       18,384       29,023       32,174  
                 
Depreciation and amortization     9,506       9,313       18,641       18,666  
Store closure costs                 466        
Litigation and settlement costs     480       238       769       561  
Total costs and expenses     157,382       162,098       310,599       319,052  
                 
Operating income     5,668       8,833       9,146       12,947  
                 
Interest income (expense), net     6       (188 )     (30 )     (497 )
                 
Income before income tax provision     5,674       8,645       9,116       12,450  
Income tax provision     1,482       2,547       2,425       3,760  
Net income   $ 4,192     $ 6,098     $ 6,691     $ 8,690  
                 
Net income per common share:                
Basic   $ 0.17     $ 0.25     $ 0.28     $ 0.36  
Diluted   $ 0.17     $ 0.25     $ 0.27     $ 0.36  
                 
Shares used in computing net income per common share (in thousands):                
                 
Basic     24,338       24,029       24,292       23,942  
Diluted     25,210       24,152       24,785       23,967  
                 
Operating Data:                
Locations open at end of period     258       255       258       255  
                 
Company-owned full service restaurants open at end of period     196       197       196       197  
                 
Average weekly company-owned full service restaurant sales   $ 61,491     $ 64,171     $ 60,285     $ 62,749  
                 
18-month comparable company-owned restaurant sales decrease     -5.9 %     -6.5 %     -4.2 %     -6.3 %
                 
                 
(1) This is a non-GAAP measure and is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. We believe this measure provides additional information to facilitate the comparison of our past and present financial results and provides an additional means for investors to evaluate business performance. However, use of this measure should not be construed as an indication that our future results will be unaffected by excluded items.
                             
                             
                             
                             
    13 Weeks Ended       26 Weeks Ended
    July 4,       June 28,       July 4,       June 28,
    2010       2009       2010       2009
                             
Statement of Income Percentages (1):                            
                             
Revenues:                            
Restaurant sales   98.3 %       98.3 %       98.4 %       98.4 %
Royalties from licensing agreement   0.9 %       1.0 %       0.8 %       0.9 %
Domestic franchise revenues   0.5 %       0.4 %       0.5 %       0.4 %
International franchise revenues   0.3 %       0.3 %       0.3 %       0.3 %
Total revenues   100.0 %       100.0 %       100.0 %       100.0 %
                             
Costs and expenses:                            
Food, beverage and paper supplies   23.1 %       23.9 %       23.3 %       23.9 %
Labor   37.4 %       37.3 %       37.7 %       37.9 %
Direct operating and occupancy   22.8 %       21.4 %       22.8 %       21.7 %
Cost of sales   83.3 %       82.6 %       83.8 %       83.5 %
                             
General and administrative   8.1 %       7.5 %       8.1 %       7.7 %
Pre-opening costs   0.4 %       0.6 %       0.3 %       0.5 %
                             
Operating income before depreciation and amortization, store closure costs and litigation and settlement costs   9.6 %       10.8 %       9.1 %       9.7 %
                             
Depreciation and amortization   5.8 %       5.4 %       5.8 %       5.6 %
Store closure costs   0.0 %       0.0 %       0.1 %       0.0 %
Litigation and settlement costs   0.3 %       0.1 %       0.2 %       0.2 %
Total costs and expenses   96.5 %       94.8 %       97.1 %       96.1 %
                             
Operating income   3.5 %       5.2 %       2.9 %       3.9 %
                             
Other expense:                            
Interest income (expense), net   0.0 %       -0.1 %       0.0 %       -0.1 %
                             
Income before income tax provision   3.5 %       5.1 %       2.9 %       3.8 %
Income tax provision   0.9 %       1.5 %       0.8 %       1.1 %
Net income   2.6 %       3.6 %       2.1 %       2.7 %
                             
 
(1) Percentages are expressed as a percentage of total revenue except for cost of sales which is expressed as a percentage of restaurant sales.
         
Selected Consolidated Balance Sheet Information
(Dollars in thousands)
         
         
    July 4,   January 3,
    2010   2010
         
Cash and cash equivalents   $ 9,009   $ 21,424
Total assets     337,000     350,258
Total debt         22,300
Stockholders’ equity     199,787     189,250
                         
California Pizza Kitchen, Inc.
Units Summary
                         
                         
        Total Units at               Total Units at
  Second Quarter 2010     April 4, 2010   Opened     Closed     July 4, 2010
  Company-owned full service domestic     196   1     1     196
  Company-owned ASAP domestic     7       1     6
  Company-owned LA Food Show     2           2
  Franchised domestic     16   3         19
  Franchised international     28   1         29
  Campus, sports & entertainment venues (seasonal)     4   2         6
  Total     253   7     2     258