Benihana Inc. Reports Fiscal Second Quarter 2010 Results
-- Foodservice Equipment & Supplies, 11/25/2009 7:33:00 AM
PRESS RELEASE - MIAMI--(BUSINESS WIRE)--Benihana Inc. (NASDAQ: BNHNA; BNHN), operator of the nation’s largest chain of Japanese theme and sushi restaurants, today reported results for its 12-week fiscal second quarter ended October 11, 2009.
Richard C. Stockinger, Chief Executive Officer, said, "In the fiscal second quarter, we experienced a lower than expected comparable sales trend which pressured our operating margins. Additionally, we launched our Benihana Teppanyaki Renewal Program, which is focused on improving guest perceptions as they relate to image, quality, consistency, and lack-of-Japan. The decline in sales, its impact on operating margins, and incremental cost increases associated with the Renewal Program negatively impacted our results, and we failed to meet the leverage ratio required under our credit agreement with Wachovia. That agreement has now been amended.”
Mr. Stockinger continued, “Despite the difficult challenges posed by the sluggish national economy, we believe that the substantial investments we have made—both through the extensive physical renovations we have completed to date and the ongoing Renewal Program—are necessary to ensure and enhance the long-term success of the Benihana Teppanyaki brand. While there can be no assurance that the Renewal Program will ultimately prove successful, we do believe that we are acting in the best long-term interest of the business, and are confident that these efforts will create significant value for our shareholders over time. At the same time, we are sensitive to the need to conserve cash and increase operating efficiencies, and toward that end, have hired a new Chief Operating Officer (Chris Ames) who has been charged with identifying opportunities to more effectively manage costs from restaurant operations, further developing and strengthening the restaurant operations management teams, and improving overall operating procedures.”
Fiscal Second Quarter 2010 Results
For the fiscal second quarter of 2010, total revenues decreased 0.9% to $69.3 million, compared to $70.0 million in fiscal second quarter 2009. Total restaurant sales decreased 0.8% to $69.0 million in the second fiscal quarter 2010 from $69.6 million in the second fiscal quarter 2009.
Company-wide comparable restaurant sales for the fiscal second quarter 2010 were (9.9%), including (12.2%) at Benihana teppanyaki, 0.2% at RA Sushi, and (14.3%) at Haru. During the period, Benihana teppanyaki represented approximately 64.4% of consolidated restaurant sales, while RA Sushi and Haru accounted for 24.7% and 10.9% of consolidated restaurant sales, respectively. There were a total of 1,179 store-operating weeks in the second fiscal quarter 2010 compared to 1,055 store-operating weeks in the second fiscal quarter 2009.
Restaurant operating profit for the fiscal second quarter of 2010 was $4.7 million, or 6.8% of restaurant sales, compared to $9.0 million, or 12.9% of restaurant sales a year-ago.
Marketing, general and administrative expenses for the fiscal second quarter of 2010 totaled $6.8 million, or 9.9% of restaurant sales, compared to $5.7 million, or 8.3% of restaurant sales in the same period last year.
Loss from operations was $1.9 million for the fiscal second quarter of 2010, compared to income from operations of $3.4 million in the prior year quarter.
Net loss for the fiscal second quarter of 2010 was $0.8 million, or $0.07 in diluted loss per share, compared to net income of $2.0 million, or $0.11 in diluted earnings per share in the same quarter last year.
Financing
As of the end of the fiscal second quarter 2010, the Company was not in compliance with the required leverage ratio under the terms of the line of credit with Wachovia, N.A. On November 23, 2009, Wachovia waived such noncompliance and the terms of the credit line were amended, as further discussed in our quarterly report on Form 10-Q, which is being filed concurrently. Under the amended terms, the amount available to borrow has been reduced to $40.5 million with further reductions over the remaining term. Additionally, the required financial covenants have been amended to provide additional operating flexibility. Consequently, the applicable margins charged on the borrowings will substantially increase.
In anticipation of the scheduled maturity of the line of credit and in response to scheduled reductions in the amounts to be made available to the Company under the facility, the Board of Directors has appointed a special committee of independent directors to explore supplemental and alternative sources of financing that may be available to the Company. As a result, the special committee has authorized the filing of a Registration Statement on Form S-3 under the Securities Act of 1933 covering the sale of an indeterminate amount of the Company’s Class A Common Stock, Common Stock, preferred stock, debt securities, and subscription rights for an aggregate initial offering price totaling approximately $30,000,000. The Company also has under consideration the call of a special meeting of shareholders to consider and act upon an amendment to the Certificate of Incorporation increasing its authorized capital stock, which may be necessary in order to complete such a financing.
Development
The Company completed its Company-owned development plans for fiscal year 2010 with the opening of a RA Sushi restaurant in Leawood, Kansas during the fiscal second quarter. In addition, during the fiscal third quarter 2010, a new franchise partner is scheduled to open the first Benihana teppanyaki restaurant in Buenos Aires, Argentina.
Withdrawal of Previous Fiscal Year 2010 Guidance
The continuing uncertainty in the current economic environment, as well as the impact on operations stemming from the implementation of the Benihana Teppanyaki Renewal Program, has obscured the Company’s ability to forecast results for the remainder of the fiscal year with sufficient confidence. The Company is therefore withdrawing the guidance previously provided for fiscal year 2010.
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