The Krystal Company Reports 1st Quarter
Increases in Sales, Improved Operating Income and Emergence From
Chapter 11
CHATTANOOGA, Tenn., April 24, 1997 -
KRYSQ), an operator and franchisor of quick-service hamburger
restaurants, today reported net income for the first quarter
ended March 30, 1997 of $403,000, or five cents per share, versus
a comparable net loss of $146,000, or two cents per share, for
the first quarter of 1996, before deducting professional fees and
other expenses in both periods related to the Company's Chapter
11 proceedings and an extraordinary item charge in 1997 related
to early extinguishment of debt. The effects of these two unusual
items reduced net income in the first quarter of 1997 by nine
cents per share and increased the net loss in the first quarter
of 1996 by eight cents per share. After the special charges were
made, a net loss of $263,000, or four cents per share, was
reported for the first quarter of 1997 versus a net loss of
$746,000, or 10 cents per share, for the first quarter of 1996.
Total revenues for the quarter were $59.2 million, up
approximately 2.6% from the previous year's comparable period.
Restaurant sales were up 2.5% to $57.3 million. Company-owned
same restaurant sales for the quarter were up 4.4% versus the
same period in 1996. According to Carl D. Long, Chief Executive
Officer of The Krystal Company, the sales increase can be
attributed to several factors, including price increases, new
advertising and promotional programs, continuing improvements in
operations at the restaurant level and the mild winter weather in
the southeast in 1997 compared to 1996.
The Company had 249 restaurants open at the end of the first
quarter of 1997 compared to 254 at the end of the first quarter
of 1996. The Company opened no new restaurants in the first
quarter of 1997 or 1996. Franchisees and licensees opened two new
restaurants in the first quarter of 1997 compared to one in the
first quarter of 1996.
First quarter revenues included franchise and license fees and
royalties of $748,000 compared with $651,000 in the first quarter
of 1996, an increase of 14.9%. Krystal had 90 franchised or
licensed restaurants in operation at the end of the first quarter
of 1997 compared to 80 at the end of the first quarter of 1996.
Sales by franchisees and licensees were $15.5 million for the
first quarter, up 13.4% over the same period in 1996.
Separately, the Company announced that its Plan of
Reorganization was confirmed on April 10, 1997 allowing the
Company to emerge from Chapter 11 on April 23, 1997. Krystal
sought Chapter 11 protection in order to resolve fully and
completely all Fair Labor Standards Act (FLSA) wage claims filed
against the Company and has previously announced settlement of
those claims. Mr. Long said
"All other valid claims against the Company will be paid in
full under the terms of the Plan of Reorganization."
Founded in 1932, The Krystal Company is one of the oldest
fast-food chains in the United States. Krystal owns and operates
249 restaurants in Alabama, Arkansas, Florida, Georgia, Kentucky,
Mississippi, South Carolina and Tennessee. Krystal franchisees
and licensees operate 90 restaurants located in Alabama,
Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina and Tennessee.
First quarter: 1997 1996
Revenues $59,163,000 $57,667,000
Net income (loss) before the effect of
reorganization item (a) and
extraordinary item (b) $ 403,000
(146,000)
Net income (loss) $ (263,000) $
(746,000)
Average shares 7,484,000 7,522,000
Net income (loss) per share before the
effect of reorganization item (a) and
extraordinary item (b) $ .05 $
(.02)
Net income (loss) per share $ (.04) $
(.10)
(a) Reorganization item represents administrative costs incurred in
connection with Chapter 11 proceeding.
(b) Extraordinary item represents a write off of unamortized
financing
costs in conjunction with extinguishment of debt.
THE KRYSTAL COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
For the Three Months Ended
March 30, March 31,
1997 1996
Revenues:
Restaurant sales $ 57,264 $ 55,876
Franchise fees 41 33
Royalties 707 618
Other revenue 1,151 1,140
Total 59,163 57,667
Costs and expenses:
Cost of restaurant
sales 47,483 46,769
Deprec. and amort.
expense 2,622 2,802
Gen. and admin.
expenses 6,717 6,440
Other expenses, net 831 963
Total 57,653 56,974
Operating income 1,510 693
Reorganization item:
Professional fees
and other exps. (719) (967)
Interest expense:
Contractual rate
interest (986) (1,009)
Interest related to certain pre-
petition liabilities, net (182) (168)
Interest income 307 250
Loss before benefit from income taxes and
extraordinary item (70) (1,201)
Benefit from income taxes (27) (455)
Loss before extraordinary item (43) (746)
Extraordinary item:
Loss on early extinguishment of debt,
net of applicable income tax benefit
of $134,000 in 1997 220 ---
Net loss $ (263) $ (746)
Loss per common share $ (0.04) $ (0.10)
Wtd. avg. number of common
shares outstanding 7,484 7,522
NOTE: This is not a complete set of financial statements.
Consolidated Balance Sheets
(In thousands)
March 30, Dec. 29
1997 1996
(unaudted) (audited)
ASSETS
Current Assets:
Cash and temporary investments $ 32,952 $ 28,765
Receivables, net 1,712 2,566
Income tax receivables 306 ---
Net investment in direct financing leases -
current portion 451 562
Inventories 1,822 2,156
Deferred tax asset 8,327 8,327
Prepayments and other 577 1,980
Total current assets 46,147 44,356
Net investment in direct financing leases,
excluding current portion 227 305
Property, buildings and equipment, net 90,204 91,173
Leased properties, net 1,601 1,653
Other assets:
Cash surrender value of life insurance 5,746 5,638
Other 786 745
Total other assets 6,532 6,383
Total assets $144,711 $143,870
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,756 $ 4,535
Accrued liabilities 20,844 17,986
Current portion of liabilities subject
to compromise 23,817 ---
Current portion of long-term debt 58 967
Current portion of capital lease obligations 376 454
Income taxes payable --- 822
Total current liabilities 48,851 24,764
Liabilities subject to compromise 34,500 58,317
Long-term debt, excluding current portion 3,654 3,090
Capital lease obligations, excluding current
portion 2,203 2,278
Deferred income taxes 2,287 2,286
Other long-term liabilities 8,743 8,447
Shareholders' equity:
Preferred stock, without par value; 5,000,000
shares authorized; no shares issued and
outstanding --- ---
Common stock, without par value; 15,000,000
shares authorized; shares issued and
outstanding, 7,478,568 at March 30, 1997
and 7,491,768 at December 29, 1996 40,398 40,556
Retained earnings 5,610 5,873
Deferred compensation (1,535) (1,741)
Total shareholders' equity 44,473 44,688
Total liabilities and shareholders' equity $144,711 $143,870
NOTE: This is not a complete set of financial statements.
SOURCE Krystal Company /CONTACT: Cam Scearce, The Krystal
Company, 423-757-1510/
Musicland First Quarter EBITDA Loss
Cut By Two-Thirds
MINNEAPOLIS, Minn., April 24, 1997 - Musicland Stores
Corporation (NYSE: MLG) today announced that earnings before
interest, taxes, depreciation, and amortization (EBITDA), a
measure of operating cash flow, improved by nearly two-thirds in
the first quarter ended March 31, 1997, to a loss of $3.5 million
compared with a loss of $9.7 million in the first quarter last
year. The net loss for the first quarter was $21.0 million, or
$0.63 per share, compared to a loss of $52.6 million, or $1.58
per share, in the same period a year ago. Last year's first
quarter included a $35.0 million pretax restructuring charge
related to the company's underperforming store closing program.
First quarter earnings benefited from the company's
store-closing program and careful cost management. In particular,
the first quarter EBITDA as a percent of sales improved to (.9%)
from (2.5%) because of the closing of unproductive stores, lower
store expense and rent reductions. Additionally, the company
benefited from a more efficient use of advertising dollars.
Jack W. Eugster, chairman and chief executive officer, said,
"We are pleased that the steps we have taken to improve our
business, our store-closing and capital management programs and
strategic realignment, have reduced the first quarter pretax
loss. Despite progress, it is important to note that improved
borrowing flexibility and capacity from our bank group and
uninterrupted shipments from our trade vendors are essential to
the company's continued financial viability. We are currently
negotiating with our banks regarding additional financing and
modification or waivers of loan covenants, which are critical to
the execution of our plans this fall. At this time, the outcome
of our bank group negotiations is uncertain."
Revenues for the quarter decreased 2.0 percent to $376.1
million from $383.6 million for the same period a year ago. First
quarter sales results reflected the closing of 126 stores since
the first quarter of 1996 (including 29 Media Play stores) offset
by a comparable store sales increase of 2.9%. The company faces a
more difficult sales comparison in the second quarter because of
the 1996 releases of audio product such as Hootie and the
Blowfish and Metallica and video titles including "Waiting
to Exhale" and "Aristocats."
Sales for the company's superstore division (Media Play and On
Cue) declined by 2.7% to $130.2 million as a result of the store
count decrease to 224 from 248 at the end of March 1996. However,
the superstore division experienced an increase in
comparable-store sales of 5.6%. Sales in the mall division (Sam
Goody/Musicland and Suncoast Motion Picture Company) declined
1.3% to $243.1 million as a result of a decline in the number of
mall stores to 1,147 from 1,224 at the end of last year's first
quarter. Comparable-store sales for the mall division increased
1.8%, offsetting the decline from store closings.
Square footage for Musicland Stores Corporation totaled 8.4
million at March 31, 1997, a 14.6 percent decrease from 9.9
million in the same period a year earlier. The company freed
additional working capital by closing 43 Sam Goody/Musicland
stores, 19 Media Play stores, nine Suncoast stores, two On Cue
stores and one U.K. store, for a total of 74 closings in the
first quarter. At the end of the quarter, the company operated a
total of 1,392 stores (68 Media Play stores, 156 On Cue stores,
413 Suncoast stores, 734 Sam Goody/Musicland stores and 21 United
Kingdom stores) in 49 states, the United Kingdom, Puerto Rico and
the Virgin Islands.
Forward-looking statements in this news release, if any, are
made under the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Certain important factors could
cause results to differ materially from those anticipated by the
forward-looking statements, including the impact of changing
economic or business conditions, the impact of competition, the
availability of favorable credit and trade terms, the success of
new music and video releases, other risk factors inherent in the
entertainment industry and other factors discussed from time to
time in reports filed by the company with the Securities and
Exchange Commission.
MUSICLAND STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended
March 31,
1997 1996
Sales $376,080 $383,570
Cost of sales 249,617 253,737
Selling, general and administrative expenses 129,946 139,489
Operating loss before depreciation,
amortization and restructuring charge (3,483) (9,656)
Depreciation and amortization 9,852 11,559
Restructuring charge - 35,000
Operating loss (13,335) (56,215)
Interest expense 7,648 6,672
Loss before income taxes (20,983) (62,887)
Income taxes
- (10,251) (a)
Net loss $(20,983)
$(52,636) (a)
Net loss per common share $(0.63)
$(1.58) (a)
Weighted average number of shares outstanding 33,481 33,371
(a) Restated for adjustments to reflect the effect of the
December 31, 1996 deferred tax valuation allowance in each
quarter.
MUSICLAND STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
ASSETS
March 31,
1997 1996
Current assets:
Cash and cash equivalents $78,968 $1,393
Inventories 464,031 567,605
Deferred income taxes 11,800
16,187 (a)
Other current assets 11,181 33,179
Total current assets 565,980 618,364
Property, net 249,854 305,532
Goodwill - 97,507
Deferred income taxes 1,200 -
Other assets 6,217 6,022
Total Assets $823,251 $1,027,425
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Revolver $273,000 $296,000
Accounts payable 315,254 316,386
Restructuring reserve 10,735 31,391
Other current liabilities 66,725 68,371
Total current liabilities 665,714 712,148
Long-term debt 122,774 110,000
Other long-term liabilities 53,174 55,266
Deferred income taxes -
6,836 (a)
Stockholders' equity (deficit):
Common stock 343 343
Additional paid-in capital 253,849 254,350
Accumulated deficit (259,632)
(97,547) (a)
Deferred compensation (7,998) (8,998)
Common stock subscriptions (4,973) (4,973)
Total stockholders' equity (deficit) (18,411) 143,175
Total Liabilities and Stockholders'
Equity (Deficit) $823,251 $1,027,425
(a) Adjusted to reflect the effect of the December 31,
1996 deferred tax valuation allowance in each quarter.
MUSICLAND STORES CORPORATION AND SUBSIDIARIES
SALES AND STORE DATA (UNAUDITED)
(Dollars and Square Footage in Millions)
Three Months Ended March 31,
Percent of Total
1997 1996 % Change 1997 1996
Sales:
Superstores $130.2 $133.9 (2.7)% 34.6% 34.9%
Mall stores 243.1 246.4 (1.3) 64.6 64.2
Total (a) 376.1 383.6 (2.0) 100.0 100.0
Comparable store sales
% change (b):
Superstores 5.6% (4.8)% N/A N/A N/A
Mall stores 1.8 (2.3) N/A N/A N/A
Total (a) 2.9 (2.9) N/A N/A N/A
Store count at end
of period:
Superstores 224 248 (9.7) 16.1 16.6
Mall stores 1,147 1,224 (6.3) 82.4 81.9
Total (a) 1,392 1,494 (6.8) 100.0 100.0
Store square footage
at end of period:
Superstores 4.3 5.4 (21.4) 50.4 54.8
Mall stores 4.1 4.4 (6.5) 48.9 44.6
Total (a) 8.4 9.9 (14.6) 100.0 100.0
Superstores include Media Play and On Cue stores.
Mall stores include Sam Goody/Musicland and Suncoast stores.
(a) The totals include other divisions which individually are not
significant.
(b) Comparable store sales percentages are computed for stores open
for
a full year during the three-month periods ended March 31, 1997
and
1996.
SOURCE Musicland Stores Corporation/CONTACT: Beth Heming
(Media), 612-931-8040 or Jim Nermyr (Investors), 612-931-8007,
both of Musicland/