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P.F. Chang's Earns $0.56 Per Share and Increases Fiscal 2009 Earnings Guidance

SCOTTSDALE, Ariz.--(BUSINESS WIRE)--Apr. 22, 2009-- P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) today reported consolidated income from continuing operations(1) of $13.4 million for the first quarter ended March 29, 2009 compared to $10.0 million for the first quarter of the prior year. Net income(2) for the first quarter of fiscal 2009 totaled $13.3 million compared to $9.6 million for the first quarter of the prior year.

Income from continuing operations(1) per diluted share for the first quarter of fiscal 2009 was $0.56 compared to $0.41 for the first quarter of the prior year. Net income(2) per diluted share was $0.56 compared to $0.40 in the prior year.

(000 except per share data)  

1Q09

  1Q08
Revenues $ 309,837   $ 305,917
 
Income from continuing operations(1) $ 13,392 $ 9,978
Net income(2) $ 13,349 $ 9,649
 
Diluted income per share:
Income from continuing operations(1) $ 0.56 $ 0.41
Net income(2) $ 0.56 $ 0.40
 
Weighted average shares - diluted 23,795 24,295
 

(1) Income from continuing operations refers to Income from continuing operations, net of tax attributable to PFCB common stockholders

(2) Net income refers to Net income attributable to PFCB common stockholders

For the first quarter of 2009, consolidated revenues were $309.8 million compared to $305.9 million for the first quarter of 2008. Sales at company-owned P.F. Chang’s China Bistro restaurants accounted for $235.1 million of consolidated revenues and sales at the Company’s Pei Wei Asian Diner restaurants accounted for $74.7 million of consolidated revenues.

During the first quarter of fiscal 2009, both restaurant concepts experienced a reduction in overall guest traffic as well as a slight decline in average check reflecting the net impact of menu mix changes. Comparable store sales at the Bistro declined 6.6% during the first quarter with decreases of 4.8%, 7.0%, and 8.5% in January, February and March, respectively. Comparable store sales at Pei Wei declined 2.2% during the first quarter with decreases of 4.1% and 2.5% in January and February, respectively, and an increase of 0.3% in March.

During the first quarter of 2009, the Company opened one new Bistro and one new Pei Wei restaurant.

2009 Expectations

Due to expectations that the current negative sales environment will continue through the remainder of 2009, the Company anticipates a significant decline in average weekly sales during fiscal 2009, with an estimated decrease of approximately 6% to 7% at the Bistro and approximately 4% to 5% at Pei Wei. Consolidated revenues for fiscal 2009 are expected to increase 1% to 2% compared to fiscal 2008.

Despite lower anticipated average weekly sales, the Company currently projects that fiscal 2009 restaurant operating margins will be better than previously expected due to incremental operational improvement opportunities. As a result, the Company has increased full year earnings expectations and anticipates fiscal 2009 EPS from continuing operations will range from $1.45 to $1.50 per share.

The Company currently expects to open eight new Bistro restaurants and six new Pei Wei restaurants during fiscal 2009. As a result, the Company continues to anticipate a significant reduction in preopening expenses for fiscal 2009 compared to fiscal 2008. Gross capital expenditures for fiscal 2009 are expected to approximate $45.0 million to $55.0 million.

International Expansion

As previously announced, the Company is pursuing the international expansion of its P.F. Chang’s China Bistro restaurants and has recently entered into a development and license agreement with M.H. Alshaya, the Middle East’s leading retailer, to develop 34 Bistro restaurants throughout the Middle East over the next 10 years.

SFAS 160 - Noncontrolling Interests

As a result of adopting SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51, at the start of fiscal 2009, the Company has changed its income statement presentation of noncontrolling interests (previously shown as minority interest). Minority interest is no longer separately reported as a reduction to net income but is instead shown below net income under the heading “net income attributable to noncontrolling interests.” The calculation of earnings per share remains unchanged and continues to be based on income attributable to PFCB. The Company’s first quarter Form 10-Q filing with the SEC will contain additional information regarding the accounting and reporting impact of the Company’s adoption of SFAS 160.

The Company is hosting a conference call today at 1:00 pm ET in which management will provide further details on the current quarter results. A webcast of the call can be accessed through the company’s website at http://www.pfcb.com.

P.F. Chang’s China Bistro owns and operates two restaurant concepts in the Asian niche. P.F. Chang’s China Bistro features a blend of high-quality, traditional Chinese cuisine and American hospitality in a sophisticated, contemporary bistro setting. Pei Wei Asian Diner offers a modest menu of freshly prepared pan-Asian cuisine in a relaxed, warm environment offering attentive counter service and take-out flexibility.

Note with respect to non-GAAP financial measures contained within Supplemental Financial Information

In addition to using GAAP results in evaluating the Company’s business, management measures restaurant operating income to assess the performance of its existing restaurant concepts. Restaurant operating income includes all ongoing costs related to operating the Company’s restaurants but excludes preopening expenses and partner investment expense. Because these costs are solely related to expansion of the Company’s business, they make an accurate assessment of the health of its ongoing operations more difficult and are therefore excluded. Additionally, general and administrative expenses are only included in the Company’s consolidated financial presentation as these costs relate to support of both restaurant concepts and are generally not specifically identifiable to individual restaurant operations. As the Company’s expansion is funded entirely from its ongoing restaurant operations, restaurant operating income is a primary consideration of management when determining whether and when to open additional restaurants. The non-GAAP financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Please see the non-GAAP to GAAP reconciliation at the bottom of pages 5 through 7 of this press release for a reconciliation of restaurant operating income to the most directly comparable GAAP measure, income from operations.

Note with respect to forward looking statements

The statements contained in this press release that are not purely historical, including the Company’s estimates of its earnings, revenues and anticipated new restaurants, are forward-looking statements. The accuracy of these forward-looking statements may be affected by certain risks and uncertainties, including, but not limited to, failure of the Company’s existing or new restaurants to achieve expected results; changes in general economic and political conditions that affect consumer spending; changes in food costs; the financial performance of restaurants concentrated in certain geographic areas; litigation; the Company’s inability to retain key personnel; potential labor shortages that may delay planned openings; changes in government legislation that may increase labor costs; intense competition in the restaurant industry; tax returns that may be subjected to audits and could have material adverse impact; rising insurance costs; the inability to develop and construct the Company’s restaurants within projected budgets and time periods; failure to comply with governmental regulations; changes in how the Company accounts for certain aspects of the its partnership program; the Company’s ability to successfully expand its operations; implementation of new accounting software; and other risks described in the Company’s recent SEC filings.

P.F. Chang's China Bistro, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
   
13 Weeks Ended
March 29, March 30,
2009 2008
Revenues $ 309,837 $ 305,917
Costs and expenses:
Cost of sales 83,072 83,530
Labor 100,707 103,381
Operating 50,691 48,061
Occupancy 17,378 17,626
General and administrative 19,814 18,521
Depreciation and amortization 18,496 16,370
Preopening expense 488 2,819
Partner investment expense   (464)   411
Total costs and expenses   290,182   290,719
Income from operations 19,655 15,198
Interest and other income (expense), net   (940)   (934)
Income from continuing operations before taxes 18,715 14,264
Provision for income taxes   (4,953)   (3,581)
Income from continuing operations, net of tax 13,762 10,683
Loss from discontinued operations, net of tax   (43)   (329)
Net income 13,719 10,354
Less: Net income attributable to noncontrolling interests   370   705
Net income attributable to PFCB $ 13,349 $ 9,649
 
Basic income per share:

Income from continuing operations attributable to PFCB common stockholders

$ 0.57 $ 0.42

Loss from discontinued operations, net of tax, attributable to PFCB common stockholders

  (0.00)   (0.02)
Net income attributable to PFCB common stockholders $ 0.57 $ 0.40
 
Diluted income per share:

Income from continuing operations attributable to PFCB common stockholders

$ 0.56 $ 0.41

Loss from discontinued operations, net of tax, attributable to PFCB common stockholders

  (0.00)   (0.01)
Net income attributable to PFCB common stockholders $ 0.56 $ 0.40
 
Weighted average shares used in computation:
Basic   23,442   23,972
Diluted   23,795   24,295
 
Amounts attributable to PFCB common stockholders:
Income from continuing operations, net of tax $ 13,392 $ 9,978
Loss from discontinued operations, net of tax   (43)   (329)
Net income $ 13,349 $ 9,649
P.F. Chang's China Bistro, Inc.
Supplemental Financial Information
                           
2007 1Q08   2Q08   3Q08   4Q08   2008 1Q09
 
Units 306 322 331 337 348 348 350
Sales weeks 14,443 4,122 4,256 4,328 4,464 17,170 4,531
AWS 75,067 74,216 70,849 68,363 66,039 69,780 68,382
 
Revenues 1,084,193 305,917 301,533 295,877 294,797 1,198,124 309,837
 
Operating costs
Cost of sales 297,242 83,530 82,132 80,368 79,600 325,630 83,072
Labor 364,074 103,381 99,971 98,059 95,500 396,911 100,707
Operating 172,147 48,061 49,366 52,201 49,339 198,967 50,691
Occupancy 62,164 17,626 17,511 17,270 17,402 69,809 17,378
Net income attributable to noncontrolling interests 4,169 705 487 367 374 1,933 370
Depreciation & amortization 55,988 16,370 17,150 17,235 17,956 68,711 18,496
Restaurant operating income 128,409 36,244 34,916 30,377 34,626 136,163 39,123
 
Development costs
Preopening expenses 14,310 2,819 1,808 1,519 2,311 8,457 488
Partner investment expense (2,012 ) 411 (500 ) 99 (364 ) (354 ) (464 )
 
Other expenses

General and administrative (1)

66,968 18,521 19,128 18,152 21,687 77,488 19,814
Interest and other (income) expense, net 100 934 949 895 584 3,362 940
Provision for income taxes 12,420 3,581 3,636 2,057 2,919 12,193 4,953
Income from continuing operations 36,623 9,978 9,895 7,655 7,489 35,017 13,392
Loss from discontinued operations, net of tax (4,560 ) (329 ) (525 ) (4,693 ) (2,044 ) (7,591 ) (43 )
Net income attributable to PFCB 32,063 9,649 9,370 2,962 5,445 27,426 13,349
 
Income from continuing operations per FDS $ 1.41 $ 0.41 $ 0.41 $ 0.32 $ 0.31 $ 1.45 $ 0.56
 
Fully diluted shares (FDS) 25,899 24,295 24,247 23,927 23,851 24,080 23,795
 
Revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 27.4 % 27.3 % 27.2 % 27.2 % 27.0 % 27.2 % 26.8 %
Labor 33.6 % 33.8 % 33.2 % 33.1 % 32.4 % 33.1 % 32.5 %
Operating 15.9 % 15.7 % 16.4 % 17.6 % 16.7 % 16.6 % 16.4 %
Occupancy 5.7 % 5.8 % 5.8 % 5.8 % 5.9 % 5.8 % 5.6 %
Net income attributable to noncontrolling interests 0.4 % 0.2 % 0.2 % 0.1 % 0.1 % 0.2 % 0.1 %
Depreciation & amortization   5.2 %   5.4 %     5.7 %     5.8 %     6.1 %     5.7 %   6.0 %
Restaurant operating income   11.8 %   11.8 %     11.6 %     10.3 %     11.7 %     11.4 %   12.6 %
Preopening expenses 1.3 % 0.9 % 0.6 % 0.5 % 0.8 % 0.7 % 0.2 %
Partner investment expense (0.2 %) 0.1 % (0.2 %) 0.0 % (0.1 %) (0.0 %) (0.1 %)
General and administrative (1) 6.2 % 6.1 % 6.3 % 6.1 % 7.4 % 6.5 % 6.4 %
Interest and other (income) expense, net 0.0 % 0.3 % 0.3 % 0.3 % 0.2 % 0.3 % 0.3 %
Provision for income taxes   1.1 %   1.2 %     1.2 %     0.7 %     1.0 %     1.0 %   1.6 %
Income from continuing operations   3.4 %   3.3 %     3.3 %     2.6 %     2.5 %     2.9 %   4.3 %
Loss from discontinued operations, net of tax   (0.4 %)   (0.1 %)     (0.2 %)     (1.6 %)     (0.7 %)     (0.6 %)   (0.0 %)
Net income attributable to PFCB   3.0 %   3.2 %     3.1 %     1.0 %     1.8 %     2.3 %   4.3 %
 

Reconciliation of Non-GAAP Financial Information to GAAP measures:

Restaurant operating income 128,409 36,244 34,916 30,377 34,626 136,163 39,123
Add: Net income attributable to noncontrolling interests 4,169 705 487 367 374 1,933 370
Less: General and administrative (1) (66,968 ) (18,521 ) (19,128 ) (18,152 ) (21,687 ) (77,488 ) (19,814 )
Less: Preopening expenses (14,310 ) (2,819 ) (1,808 ) (1,519 ) (2,311 ) (8,457 ) (488 )
Less: Partner investment expense   2,012     (411 )     500       (99 )     364       354     464  
Income from operations   53,312     15,198       14,967       10,974       11,366       52,505     19,655  
 
Note: Consolidated results include the impact of Shared Services and Other as well as the Bistro and Pei Wei concepts
(1) Consolidated general and administrative expenses includes the costs of supporting the Company, including all concepts
Concept: P.F. Chang's China Bistro
Supplemental Financial Information
                           
2007 1Q08   2Q08   3Q08   4Q08   2008 1Q09
 
Units 172 177 182 182 189 189 190
Sales weeks 8,289 2,275 2,330 2,355 2,413 9,373 2,458
AWS 102,486 103,763 99,502 96,139 93,427 98,127 95,661
Revenues 849,743 236,089 231,972 226,443 225,459 919,963 235,141
 
Operating costs
Cost of sales 232,578 64,410 62,999 61,430 61,072 249,911 62,963
Labor 282,919 79,318 76,153 74,387 72,109 301,967 76,051
Operating 131,863 36,324 36,603 38,556 37,600 149,083 36,973
Occupancy 47,059 12,981 12,730 12,536 12,423 50,670 12,441
Net income attributable to noncontrolling interests 3,351 497 370 271 223 1,361 179
Depreciation & amortization 42,294 12,265 12,794 12,771 13,261 51,091 13,728
Restaurant operating income 109,679 30,294 30,323 26,492 28,771 115,880 32,806
 
Revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 27.4 % 27.3 % 27.2 % 27.1 % 27.1 % 27.2 % 26.8 %
Labor 33.3 % 33.6 % 32.8 % 32.9 % 32.0 % 32.8 % 32.3 %
Operating 15.5 % 15.4 % 15.8 % 17.0 % 16.7 % 16.2 % 15.7 %
Occupancy 5.5 % 5.5 % 5.5 % 5.5 % 5.5 % 5.5 % 5.3 %
Net income attributable to noncontrolling interests 0.4 % 0.2 % 0.2 % 0.1 % 0.1 % 0.1 % 0.1 %
Depreciation & amortization 5.0 % 5.2 %   5.5 %   5.6 %   5.9 %   5.6 % 5.8 %
Restaurant operating income 12.9 % 12.8 %   13.1 %   11.7 %   12.7 %   12.6 % 14.0 %
 
 
 
 
 

Reconciliation of Non-GAAP Financial Information to GAAP measures:

Restaurant operating income 109,679 30,294 30,323 26,492 28,771 115,880 32,806
Add: Net income attributable to noncontrolling interests 3,351 497 370 271 223 1,361 179
Less: Preopening expenses (9,012 ) (1,729 ) (1,271 ) (732 ) (1,945 ) (5,677 ) (294 )
Less: Partner investment expense 3,358   245     500     103     218     1,066   148  
Income from operations 107,376   29,307     29,922     26,134     27,267     112,630   32,839  
 

Note: General and administrative expenses are reflected in the Company’s consolidated results

Concept: Pei Wei Asian Diner (A)
Supplemental Financial Information
                           
2007 1Q08   2Q08   3Q08   4Q08   2008 1Q09
 
Units 134 145 149 155 159 159 160
Sales weeks 6,154 1,847 1,926 1,973 2,051 7,797 2,073
AWS 38,095 37,806 36,117 35,192 33,806 35,675 36,011
Revenues 234,450 69,828 69,561 69,434 69,338 278,161 74,696
 
Operating costs
Cost of sales 64,664 19,120 19,133 18,938 18,528 75,719 20,109
Labor 81,155 24,063 23,818 23,672 23,391 94,944 24,656
Operating 40,284 11,737 12,763 13,645 11,739 49,884 13,718
Occupancy 15,105 4,645 4,781 4,734 4,979 19,139 4,937
Net income attributable to noncontrolling interests 818 208 117 96 151 572 191
Depreciation & amortization 12,278 3,774 3,995 4,119 4,270 16,158 4,350
Restaurant operating income 20,146 6,281 4,954 4,230 6,280 21,745 6,735
 
Revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 27.6 % 27.4 % 27.5 % 27.3 % 26.7 % 27.2 % 26.9 %
Labor 34.6 % 34.5 % 34.2 % 34.1 % 33.7 % 34.1 % 33.0 %
Operating 17.2 % 16.8 % 18.3 % 19.7 % 16.9 % 17.9 % 18.4 %
Occupancy 6.4 % 6.7 % 6.9 % 6.8 % 7.2 % 6.9 % 6.6 %
Net income attributable to noncontrolling interests 0.3 % 0.3 % 0.2 % 0.1 % 0.2 % 0.2 % 0.3 %
Depreciation & amortization 5.2 % 5.4 %   5.7 %   5.9 %   6.2 %   5.8 % 5.8 %
Restaurant operating income 8.6 % 9.0 %   7.1 %   6.1 %   9.1 %   7.8 % 9.0 %
 
 
 
 
 

Reconciliation of Non-GAAP Financial Information to GAAP measures:

Restaurant operating income 20,146 6,281 4,954 4,230 6,280 21,745 6,735
Add: Net income attributable to noncontrolling interests 818 208 117 96 151 572 191
Less: Preopening expenses (5,298 ) (1,090 ) (537 ) (787 ) (366 ) (2,780 ) (194 )
Less: Partner investment expense (1,346 ) (656 )   -     (202 )   146     (712 ) 316  
Income from operations 14,320   4,743     4,534     3,337     6,211     18,825   7,048  
 
Note: General and administrative expenses are reflected in the Company’s consolidated results
 
(A) All current and historical operating results related to closed Pei Wei restaurants are reflected within discontinued operations for all periods presented.
P.F. Chang's China Bistro
                   
Supplemental Sales Information (Company Owned)
 
Year of Unit Opening (1)
 
Pre-2002   2002   2003   2004   2005   2006   2007   2008   2009   Total
 
Units 64 14 18 18 18 20 20 17 1 190
 
Sales (000)
 
1Q09 90,049 17,380 23,552 18,967 19,752 22,320 23,344 19,653 118 235,135
 
 
Average Weekly Sales (AWS)
 
1Q09 108,231 95,496 100,651 81,054 84,412 85,846 89,784 88,928 118,392 95,661
 
 
 
Year-Over-Year Change in AWS (2)
 
1Q09 -6.6% -5.1% -6.4% -6.5% -6.5% -6.2% -13.5% -20.0% - -7.4%
 
 
 
Year-Over-Year Change Comp Store Sales (3)
 
Units 64 14 18 18 18 20 16 - - 168
 
1Q09 -6.6% -5.1% -6.4% -6.5% -6.5% -6.2% -10.4% - - -6.6%
 
 
 
(1) Includes all restaurants opened in the period indicated.
(2) A unit is included in the year-over-year change in AWS in the thirteenth month of operation.
(3) A unit becomes comparable in the eighteenth month of operation.
Pei Wei Asian Diner
                   
Supplemental Sales Information
 
Year of Unit Opening (1)
 
Pre-2002 2002 2003 2004 2005 2006 2007 2008 2009 Total
 
Units 5 11 17 19 23 27 32 25 1 160
 
Sales (000)
 
1Q09 2,690 5,502 8,729 10,036 10,874 12,762 13,386 10,374 298 74,651
 
 
 
Average Weekly Sales (AWS)
 
1Q09 41,380 38,474 39,498 40,632 36,367 36,359 32,179 31,920 49,652 36,011
 
 
 
Year-Over-Year Change in AWS (2)
 
1Q09 -4.5% -3.9% -2.4% -2.3% -2.1% -0.3% -3.6% -22.7% - -3.6%
 
 
 
Year-Over-Year Change Comp Store Sales (3)
 
Units 5 11 17 19 23 27 31 - - 133
 
1Q09 -4.5% -3.9% -2.4% -2.3% -2.1% -0.3% -2.9% - - -2.2%
 
 
 
(1) Includes all restaurants opened in the period indicated.
(2) A unit is included in the year-over-year change in AWS in the thirteenth month of operation.
(3) A unit becomes comparable in the eighteenth month of operation.

Source: P.F. Chang's China Bistro, Inc.

P.F. Chang's China Bistro, Inc.
Investor:
Allison Schulder, 480-888-3000
allison.schulder@pfcb.com
or
Media:
Dig Communications
Pete Marino, 312-339-8833
pmarino@digcommunications.com

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