P.F. Chang's China Bistro, Inc. (NASDAQ: PFCB) today reported financial results for the first quarter ended April 1, 2012. In a separate press release, P.F. Chang's also announced today that it has entered into a definitive merger agreement with Centerbridge Partners ("Centerbridge") that will result in P.F. Chang's becoming a private company.

Total revenues were $318.9 million in the first quarter of fiscal 2012 as compared to $317.4 million in the prior year. Net income for the first quarter of fiscal 2012 was $6.3 million as compared to $10.6 million for the first quarter of fiscal 2011, and diluted net income per share was $0.30 and $0.46, respectively.

Net income per share for the first quarter of fiscal 2012 would have been approximately $0.05 higher (or $0.35 per share) when adjusting for:

  • The unfavorable impact of one-time professional fees ($0.05 per share).
  • The unfavorable impact of non-cash share-based compensation expense adjustments ($0.04 per share).
  • The net favorable benefit of additional state income tax credits ($0.04 per share).

Comparable store sales decreased 0.6% at the Bistro and 1.7% at Pei Wei in the first quarter of 2012 due, in both cases, to declines in guest traffic. Monthly comparable store sales trends for January, February and March were 0.7%, 0.1% and -2.8%, respectively, at the Bistro and -1.4%, -3.3% and -0.5%, respectively, at Pei Wei.

Net Income to EBITDA
The following table sets forth a reconciliation of net income to EBITDA (amounts in thousands, except percentages):

  13 Weeks Ended
April 1,   April 3,
2012 2011
Total revenues $ 318,908   $ 317,369  
 
Net income $ 6,276 $ 10,596
Add:
Provision for income taxes (322 ) 4,555
Interest and other income (expense), net (313 ) (204 )
Depreciation and amortization 20,817   19,698  
EBITDA $ 26,458   $ 34,645  
 
EBITDA as a percent of total revenues 8.3 % 10.9 %
 

Quarterly Dividend
The Board of Directors authorized a cash dividend payment of $0.275 per share on the Company's outstanding common stock. The next quarterly dividend is payable on May 25, 2012 to shareholders of record at the close of business on May 11, 2012.

Conference Call Information
As a result of the announcement that P.F. Chang's has entered into a definitive merger agreement with Centerbridge that will result in P.F. Chang's becoming a private company, the first quarter 2012 earnings conference call and webcast scheduled for 8:30 am Eastern Time on May 1, 2012, has been cancelled. During the pendency of the transaction, the Company will make earnings releases consistent with its current schedule, but will suspend earnings conference calls and webcasts.

Definitions
The following definitions apply to these terms as used throughout this release:

  • Net income refers to net income attributable to PFCB common stockholders.
  • Comparable store sales changes include company-operated restaurants and represent the change in period-over-period sales for the comparable restaurant base. A restaurant becomes comparable in its eighteenth month of operation.

About the Company
P.F. Chang's China Bistro, Inc. owns and operates two restaurant concepts in the Asian niche. P.F. Chang's China Bistro features a blend of high-quality, Chinese-inspired cuisine and attentive service in a high energy contemporary bistro setting. Pei Wei Asian Diner offers a menu of freshly prepared, wok-seared, contemporary pan-Asian cuisine in a relaxed, warm environment with friendly attentive counter service and take-out flexibility. In addition, the Company has extended its brands to international markets, domestic airport locations and retail products, all of which are operated under licensing agreements. The Company has also announced an agreement to acquire a majority equity ownership position in True Food Kitchen, a Fox Restaurant Concept specializing in healthy, locally sourced and globally inspired meals.

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 believes that EBITDA provides useful information about the Company's operating performance, its capacity to incur and service debt, fund capital expenditures and other corporate uses. EBITDA, a non-GAAP financial measure, is defined by the Company as net income before provision for income taxes, interest and other income (expense), net and depreciation and amortization. The non-GAAP financial information presented in the table above should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Management also 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. Preopening and partner investment expenses are excluded because they vary in timing and magnitude and are not related to the health of ongoing operations. Additionally, general and administrative expenses are generally not specifically identifiable to individual business units and are only included in the Company's consolidated financial presentation as these costs relate to support of both restaurant concepts and the extension of the Company's brands into international markets, domestic airports and retail products. As the Company's expansion is funded entirely from its ongoing restaurant operations, restaurant operating income is one consideration 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 6 through 8 of this press release for a reconciliation of restaurant operating income to the most directly comparable GAAP measure, income from operations.

Forward Looking Statements
This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve significant risks and uncertainties. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including all statements regarding information regarding the intent, belief or current expectation of the Company and members of its senior management team. Forward-looking statements include, without limitation, statements regarding business combinations and similar transactions, prospective performance and opportunities and the outlook for the Company's businesses, performance and opportunities and regulatory approvals, the anticipated timing of filings and approvals relating to the transaction; the expected timing of the completion of the transaction; the ability to complete the transaction considering the various closing conditions; and any assumptions underlying any of the foregoing. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from those currently anticipated due to a number of risks and uncertainties. Risks and uncertainties that could cause the actual results to differ from expectations contemplated by forward looking statements include: uncertainties as to the timing of the tender offer and merger; uncertainties as to how many of the Company stockholders will tender their stock in the offer; the possibility that competing offers will be made; the possibility that various closing conditions for the transaction may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; the effects of disruption from the transaction making it more difficult to maintain relationships with employees, customers, other business partners or governmental entities; other business effects, including the effects of industry, economic or political conditions outside of the Company's control; transaction costs; actual or contingent liabilities. In addition, the Company's actual performance and financial results may differ materially from those currently anticipated due to a number of risk and uncertainties, including, but not limited to, failure of the Company's existing or new restaurants to achieve expected results; damage to our brands or reputation; inability to successfully expand our operations; changes in general economic conditions and dependence on sales concentrated in certain geographic areas; intense competition in the restaurant industry; changes in government legislation that may increase labor costs; litigation; adverse public or medical opinions about the health effects of consuming our products; failure to comply with governmental regulations; changes in food costs; the inability to retain key personnel; federal and state tax rules could negatively impact results of operations and financial position; fluctuating insurance requirements and costs; seasonality of the Company's business; adverse impact if information technology and computer systems do not perform properly. More detailed information about the Company and the risk factors that may affect the realization of any forward-looking statements is set forth in the Company's filings with the SEC, including its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q, as well as the tender offer documents to be filed by Wok Acquisition Corp. (the "Purchaser") and the solicitation/recommendation statement to be filed by the Company. All of the materials related to the offer (and all other offer documents filed with the SEC) will be available at no charge from the SEC through its website at www.sec.gov. Investors and security holders may also obtain free copies of the documents filed by the Company with the SEC by contacting the Company Investor Relations at 7676 E. Pinnacle Peak Road, Scottsdale, AZ 85255, telephone number (480) 888-3000 or investorrelations@pfcb.com. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as expressly required by law.

Notice to Investors
The tender offer described in this press release has not yet commenced. This press release is neither an offer to purchase nor a solicitation of an offer to sell any securities. The solicitation and the offer to buy shares of the Company common stock will be made pursuant to an offer to purchase and related materials that the Purchaser intends to file with the SEC. At the time the offer is commenced, the Purchaser will file a tender offer statement on Schedule TO with the SEC, and thereafter the Company will file a solicitation/recommendation statement on Schedule 14D-9 with respect to the offer. The tender offer statement (including an offer to purchase, a related letter of transmittal and other offer documents) and the solicitation/recommendation statement will contain important information that should be read carefully and considered before any decision is made with respect to the tender offer. These materials will be sent free of charge to all stockholders of the Company when available. In addition, all of these materials (and all other materials filed by the Company with the SEC) will be available at no charge from the SEC through its website at www.sec.gov. Free copies of the offer to purchase, the related letter of transmittal and certain other offering documents will be made available at Centerbridge's offices at 375 Park Avenue, 12th Floor, telephone number (212) 672-5000. Investors and security holders may also obtain free copies of the documents filed by the Company with the SEC by contacting the Company Investor Relations at 7676 E. Pinnacle Peak Road, Scottsdale, AZ 85255, telephone number (480) 888-3000 or investorrelations@pfcb.com.

Additional Information about the Merger and Where to Find It
In connection with the proposed transaction, the Company will file a proxy statement with the SEC. Additionally, the Company will file other relevant materials with the SEC in connection with the proposed acquisition of the Company pursuant to the terms of an Agreement and Plan of Merger by and among the Company, Wok Parent LLC, a Delaware limited liability company, and the Purchaser, Wok Acquisition Corp., a Delaware corporation and an indirect wholly-owned subsidiary of Wok Parent LLC. The materials to be filed by the Company with the SEC may be obtained free of charge at the SEC's web site at www.sec.gov. After the Company's filing thereof, investors and stockholders will also be able to obtain free copies of the proxy statement from the Company by contacting the Company Investor Relations at 7676 E. Pinnacle Peak Road, Scottsdale, AZ 85255, telephone number (480) 888-3000 or investorrelations@pfcb.com. INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY STATEMENT AND THE OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED MERGER BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES TO THE MERGER.

The Company and its respective directors, executive officers and other members of their management and employees, under the SEC rules, may be deemed to be participants in the solicitation of proxies of the Company stockholders in connection with the proposed transaction. Investors and security holders may obtain more detailed information regarding the names, affiliations and interests of certain of the Company's executive officers and directors in the solicitation by reading the Company's proxy statement for its 2012 annual meeting of stockholders, the Annual Report on Form 10-K for the fiscal year ended January 1, 2012, and the proxy statement and other relevant materials which may be filed with the SEC in connection with the transaction when and if they become available. Information concerning the interests of the Company's potential participants, which may, in some cases, be different than those of the Company's stockholders generally, will be set forth in the proxy statement relating to the transaction when it becomes available.

P.F. Chang's China Bistro, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
   
13 Weeks Ended
April 1, April 3,
2012 2011
Revenues:
Restaurant sales $ 317,156 $ 316,304
Restaurant licensing 1,056 684
Retail licensing 696   381  
Total revenues 318,908   317,369  
Costs and expenses:
Cost of sales 86,681 83,322
Labor 110,010 106,464
Operating 54,286 53,807
Occupancy 18,799 18,425
General and administrative 22,481 20,280
Depreciation and amortization 20,817 19,698
Preopening expense 494 398
Partner investment expense (330 ) (126 )
Total costs and expenses 313,238   302,268  
Income from operations 5,670 15,101
Interest and other income (expense), net 313   204  
Income from continuing operations before taxes 5,983 15,305
Provision for income taxes 322   (4,555 )
Income from continuing operations, net of tax 6,305 10,750
Income from discontinued operations, net of tax --  

3

 

Net income 6,305 10,753
Less net income attributable to noncontrolling interests 29   157  
Net income attributable to PFCB $ 6,276   $ 10,596  
 
Basic income per share:
Income from continuing operations attributable to PFCB common stockholders $ 0.30 $ 0.47
Income from discontinued operations, net of tax, attributable to PFCB common stockholders 0.00   0.00  
Net income attributable to PFCB common stockholders $ 0.30   $ 0.47  
 
Diluted income per share:
Income from continuing operations attributable to PFCB common stockholders $ 0.30 $ 0.46
Income from discontinued operations, net of tax, attributable to PFCB common stockholders 0.00   0.00  
Net income attributable to PFCB common stockholders $ 0.30   $ 0.46  
 
Weighted average shares used in computation:
Basic 21,171   22,523  
Diluted 21,263   22,901  
 
Cash dividends declared per share $ 0.275   $ 0.21  
 
Amounts attributable to PFCB:
Income from continuing operations, net of tax $ 6,276 $ 10,593
Income from discontinued operations, net of tax --  

3

 

Net income attributable to PFCB $ 6,276   $ 10,596  
 
P.F. Chang's China Bistro, Inc.
             
Supplemental Financial Information
                   
1Q11   2Q11   3Q11   4Q11   2011 1Q12
 
Units 372 374 375 377 377 374
Sales weeks 4,819 4,852 4,859 4,885 19,415 4,855
Average weekly sales (AWS) 65,637 63,817 61,530 63,082 63,512 65,326
 
Revenues
Restaurant sales 316,304 309,641 298,976 308,155 1,233,076 317,156
Restaurant licensing 684 649 764 968 3,065 1,056
Retail licensing 381 724 877 632 2,614 696
Total revenues 317,369 311,014 300,617 309,755 1,238,755 318,908
 
Operating costs
Cost of sales 83,322 82,175 77,821 82,453 325,771 86,681
Labor 106,464 105,321 102,146 105,371 419,302 110,010
Operating 53,807 52,471 54,456 53,316 214,050 54,286
Occupancy 18,425 18,681 18,390 20,368 75,864 18,799
Net income attributable to noncontrolling interests 157 120 39 30 346 29
Depreciation & amortization 19,698 20,149 20,046 20,462 80,355 20,817
Asset impairment charges -- 631 4,799 5,056 10,486 --

Restaurant operating income

35,496 31,466 22,920 22,699 112,581 28,286
 
Development costs
Preopening expense 398 213 629 808 2,048 494
Partner investment expense (126 ) (50 ) (60 ) -- (236 ) (330 )
 
Other expenses
General and administrative (1) 20,280 19,164 12,664 17,980 70,088 22,481
Interest and other (income) expense, net (204 ) (128 ) 947 (327 ) 288 (313 )
Provision for income taxes 4,555 3,143 2,439 116 10,253 (322 )
Income from continuing operations 10,593 9,124 6,301 4,122 30,140 6,276
Income from discontinued operations, net of tax 3 (32 ) 10 (44 ) (63 ) --
Net income attributable to PFCB 10,596 9,092 6,311 4,078 30,077 6,276
 
Income from continuing operations per FDS $ 0.46 $ 0.40 $ 0.29 $ 0.19 $ 1.36 $ 0.30
 
Fully diluted shares (FDS) 22,901 22,581 21,758 21,175 22,104 21,263
 
Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 26.3 % 26.4 % 25.9 % 26.6 % 26.3 % 27.2 %
Labor 33.5 % 33.9 % 34.0 % 34.0 % 33.8 % 34.5 %
Operating 17.0 % 16.9 % 18.1 % 17.2 % 17.3 % 17.0 %
Occupancy 5.8 % 6.0 % 6.1 % 6.6 % 6.1 % 5.9 %
Net income attributable to noncontrolling interests 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Depreciation & amortization 6.2 % 6.5 % 6.7 % 6.6 % 6.5 % 6.5 %
Asset impairment charges 0.0 %   0.2 %   1.6 %   1.6 %   0.8 % 0.0 %
Restaurant operating income 11.2 %   10.1 %   7.6 %   7.3 %   9.1 % 8.9 %
Preopening expense 0.1 % 0.1 % 0.2 % 0.3 % 0.2 % 0.2 %
Partner investment expense 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % (0.1 )%
General and administrative (1) 6.4 % 6.2 % 4.2 % 5.8 % 5.7 % 7.0 %
Interest and other (income) expense, net (0.1 )% 0.0 % 0.3 % (0.1 )% 0.0 % (0.1 )%
Provision for income taxes 1.4 %   1.0 %   0.8 %   0.0 %   0.8 % (0.1 )%
Income from continuing operations 3.3 %   2.9 %   2.1 %   1.3 %   2.4 % 2.0 %
Income from discontinued operations, net of tax 0.0 %   0.0 %   0.0 %   0.0 %   0.0 % 0.0 %
Net income attributable to PFCB 3.3 %   2.9 %   2.1 %   1.3 %   2.4 % 2.0 %
 
Reconciliation of Non-GAAP Financial Information to GAAP measures:
Restaurant operating income 35,496 31,466 22,920 22,699 112,581 28,286
Add: Net income attributable to noncontrolling interests 157 120 39 30 346 29
Less: General and administrative (1) (20,280 ) (19,164 ) (12,664 ) (17,980 ) (70,088 ) (22,481 )
Less: Preopening expense (398 ) (213 ) (629 ) (808 ) (2,048 ) (494 )
Less: Partner investment expense 126     50     60     --     236   330  
Income from operations 15,101     12,259     9,726     3,941     41,027   5,670  
 
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 as well as Global Brand Development initiatives.

Concept: P.F. Chang's China Bistro
Supplemental Financial Information
             
                   
1Q11   2Q11   3Q11   4Q11   2011 1Q12
 
Units 201 201 202 204 204 204
Sales weeks 2,613 2,613 2,610 2,636 10,472 2,652
AWS 90,181 88,487 85,494 87,725 87,972 89,696
Year-over-year change comparable store sales (A) 0.5 % -2.5 % -3.7 % -2.4 % -2.1 % -0.6 %
 
Total revenues 235,782 231,226 223,118 231,253 921,379 237,976
 
Operating costs
Cost of sales 61,333 60,759 57,677 61,660 241,429 64,865
Labor 79,792 78,442 76,273 79,120 313,627 83,147
Operating 38,783 38,442 40,602 38,367 156,194 39,772
Occupancy 13,074 13,125 12,955 13,602 52,756 13,388
Net income attributable to noncontrolling interests 79 69 20 18 186 21
Depreciation & amortization 14,384 14,550 14,455 14,989 58,378 15,149
Asset impairment charges -- -- 3,503 5,056 8,559 --
Restaurant operating income 28,337 25,839 17,633 18,441 90,250 21,634
 
Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 26.0 % 26.3 % 25.9 % 26.7 % 26.2 % 27.3 %
Labor 33.8 % 33.9 % 34.2 % 34.2 % 34.0 % 34.9 %
Operating 16.4 % 16.6 % 18.2 % 16.6 % 17.0 % 16.7 %
Occupancy 5.5 % 5.7 % 5.8 % 5.9 % 5.7 % 5.6 %
Net income attributable to noncontrolling interests 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Depreciation & amortization 6.1 % 6.3 % 6.5 % 6.5 % 6.3 % 6.4 %
Asset impairment charges 0.0 %   0.0 %     1.6 %     2.2 %     0.9 %   0.0 %  
Restaurant operating income 12.0 %   11.2 %     7.9 %     8.0 %     9.8 %   9.1 %  
 
Reconciliation of Non-GAAP Financial Information to GAAP measures:
Restaurant operating income 28,337 25,839 17,633 18,441 90,250 21,634
Add: Net income attributable to noncontrolling interests 79 69 20 18 186 21
Less: Preopening expense 2 (28 ) (604 ) (721 ) (1,351 ) (12 )
Less: Partner investment expense --     --     --     --     --   --  
Income from operations 28,418     25,880     17,049     17,738     89,085   21,643  
 

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

(A)

A unit becomes comparable in the eighteenth month of operation.

Concept: Pei Wei Asian Diner (A)
Supplemental Financial Information
             
                   
1Q11   2Q11   3Q11   4Q11   2011 1Q12
 
Units 171 173 173 173 173 170
Sales weeks 2,206 2,239 2,249 2,249 8,943 2,203
AWS 36,501 35,022 33,730 34,194 34,854 35,942
Year-over-year change comparable store sales (B) -0.2 % -2.7 % -3.6 % -1.9 % -2.1 % -1.7 %
 
Total revenues 80,522 78,415 75,858 76,902 311,697 79,180
 
Operating costs
Cost of sales 21,989 21,416 20,144 20,793 84,342 21,816
Labor 26,672 26,879 25,873 26,251 105,675 26,863
Operating 15,024 14,029 13,854 14,949 57,856 14,514
Occupancy 5,351 5,556 5,435 6,766 23,108 5,411
Net income attributable to noncontrolling interests 78 51 19 12 160 8
Depreciation & amortization 4,767 4,929 4,910 4,772 19,378 4,955
Asset impairment charges -- 631 1,296 -- 1,927 --
Restaurant operating income 6,641 4,924 4,327 3,359 19,251 5,613
 
Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 27.3 % 27.3 % 26.6 % 27.0 % 27.1 % 27.6 %
Labor 33.1 % 34.3 % 34.1 % 34.1 % 33.9 % 33.9 %
Operating 18.7 % 17.9 % 18.3 % 19.4 % 18.6 % 18.3 %
Occupancy 6.6 % 7.1 % 7.2 % 8.8 % 7.4 % 6.8 %
Net income attributable to noncontrolling interests 0.1 % 0.1 % 0.0 % 0.0 % 0.1 % 0.0 %
Depreciation & amortization 5.9 % 6.3 % 6.5 % 6.2 % 6.2 % 6.3 %
Asset impairment charges 0.0 %     0.8 %     1.7 %     0.0 %     0.6 %   0.0 %  
Restaurant operating income 8.2 %     6.3 %     5.7 %     4.4 %     6.2 %   7.1 %  
 
Reconciliation of Non-GAAP Financial Information to GAAP measures:
Restaurant operating income 6,641 4,924 4,327 3,359 19,251 5,613
Add: Net income attributable to noncontrolling interests 78 51 19 12 160 8
Less: Preopening expense (400 ) (185 ) (25 ) (87 ) (697 ) (482 )
Less: Partner investment expense 126     50     60     --     236   330  
Income from operations 6,445     4,840     4,381     3,284     18,950   5,469  
 
Note: General and administrative expenses are reflected in the Company's consolidated results.
(A)   All results related to the ten Pei Wei restaurants that closed during 2008 are reflected within discontinued operations for all periods presented.
(B) A unit becomes comparable in the eighteenth month of operation.

Investors:
P.F. Chang's China Bistro, Inc.
Allison Schulder, 480-888-3000
allison.schulder@pfcb.com
or
Media:
Joele Frank, Wilkinson Brimmer Katcher
Matt Sherman / Averell Withers / Joe Berg
212-335-4449