Champps Entertainment, Inc. (NASDAQ: CMPP) (�Champps� or �the
Company�) today announced results for its fiscal 2007 third quarter
ended April 1, 2007. Total revenues for the third quarter decreased
4.8 percent to $49.2 million, compared with revenues of $51.7
million for the third quarter of last year. Comparable same store
sales decreased 4.3 percent for third quarter of fiscal 2007
compared to third quarter of fiscal 2006. Comparable food sales
decreased 3.4 percent, while comparable alcohol sales decreased 6.5
percent for the third quarter 2007 compared to third quarter of
fiscal 2006. The Company ended the quarter with $17.3 million of
cash, reflective of a $7.9 million increase in cash since the
beginning of the fiscal year. No borrowings are outstanding under
the Company�s credit facility and no share repurchases were made
this quarter. The $15 million of convertible notes payable due
December 2007 remain outstanding1. The average dining room guest
check, excluding alcoholic beverages, was approximately $14.07 for
the third quarter of fiscal 2007 compared to $13.73 for the third
quarter of fiscal 2006, a 2.5 percent increase. During the third
quarter of fiscal 2007, food sales and alcoholic beverage sales
represented 71.5 percent and 28.5 percent of total sales,
respectively. During the third quarter of fiscal 2006, food and
alcoholic beverage sales represented 70.9 percent and 29.1 percent
of total sales, respectively. In January 2007, the Company closed
one underperforming restaurant in Phoenix, Arizona. Previously, the
Company had closed three underperforming locations in May 2006. The
results for these locations along with associated closure and exit
costs have been classified as discontinued operations for all
periods presented. Also, in January 2007, the lease expired for a
franchised restaurant located in Omaha, Nebraska which was not
renewed. The net loss for the third quarter 2007 was $0.6 million,
or $0.04 loss per diluted share compared to net loss of $1.9
million, or $0.15 loss per diluted share in the same quarter last
year. An additional income tax expense of $0.4 million was recorded
in the third quarter of fiscal 2007 related to a charge to
establish a valuation allowance on certain income tax credits whose
full realization is not more likely than not based on the income
trends of the Company. Also, this quarter the Company incurred $0.5
million (pre-tax) for potential company sale expense related to
legal and board of directors� special committee costs associated
with the potential sale of the Company as discussed below. Included
in the net loss for the third quarter fiscal 2006 was $2.1 million
(pre-tax) for asset impairment charges and restaurant
closings/disposals. A discontinued operations loss of $0.2 million
(net of tax), or $0.01 loss per diluted share, was recorded in this
year�s third quarter compared to a discontinued loss of $1.4
million (net of tax), or $0.11 loss per diluted share recorded in
last year�s third quarter. �January and February�s sales this year
were down 6.3 percent, which was due in part to the inclement
weather experienced in our Midwest and Eastern markets, including
the typically busy Valentine�s Day and President�s Day weekend,�
noted Mike O�Donnell, Champps� Chairman, President, and Chief
Executive Officer. �However, we did see March sales which, while
still negative on a comparable basis, were only down 1.1 percent,
which is encouraging from a trend perspective especially
considering that we also experienced inclement weather during St.
Patrick�s Day. For March, food sales were down 0.4 percent and
liquor sales were down 2.5 percent. Additionally, we experienced a
positive same store sales increase in April.� O�Donnell added, �We
remain committed to focusing on the basics of our business and our
previously disclosed initiatives as the best way for us to meet our
goals of increased sales and profitability. We have continued the
roll-out of our new cash flow partnership bonus plan and now have
20 general managers and five directors of operation who are
participating. Our 'visioneering' culture-based training program
which communicates our foundational ideas, principles and
stakeholder commitments remains a focus along with other training
programs to improve management tenure and operational
effectiveness. Additionally, we plan to open new restaurants moving
forward, with our first new restaurant since 2005 scheduled to open
in the fourth quarter of calendar 2007 and we are actively pursuing
franchise opportunities.� Adjusted diluted income per share from
continuing operations without the income tax valuation expense,
potential company sale expenses and impairment items, would have
been $0.02 for the third quarter of fiscal 2007 compared with
adjusted diluted income per share from continuing operations of
$0.06 in last year�s fiscal third quarter. A reconciliation of
non-GAAP financial measures is provided in the financial schedules
accompanying this press release. Unadjusted, the diluted loss per
share for the third quarter of fiscal 2007 included $0.05 of income
tax valuation expense and potential company sale expenses, while
the diluted loss per share for the third quarter of fiscal 2006
included $0.10 of asset impairment charges and restaurant
closings/disposals. Product costs increased to 28.2 percent of
sales in the most recent quarter from 28.1 percent of sales
compared to the third quarter of the last fiscal year. Labor costs
increased to 33.0 percent of sales from 31.4 percent of sales for
the same period last fiscal year due in part to higher wage costs
as a result of an increase in the tipped minimum wage in certain
states, primarily Ohio and Colorado, as well as the de-leveraging
effects associated with lower sales and higher bonus costs as a
result of the rollout of the partnership bonus program, which
started in March 2006. Other operating costs were 16.3 percent of
sales in this year�s third quarter compared to 15.5 percent of
sales in the same quarter last year. The increase in other
operating costs was due primarily to higher marketing costs.
Occupancy expense while down $0.1 million, was 10.4 percent of
sales in the third quarter of fiscal 2007 and 10.1 percent of sales
in the third quarter of fiscal 2006, reflective of the lower sales.
Depreciation and amortization expense was 5.3 percent of sales in
both the third quarters of fiscal 2007 and fiscal 2006. General and
administrative expenses for the third quarter were $3.2 million, or
6.4 percent of sales, compared to $3.7 million, or 7.2 percent of
revenues in the comparable period last fiscal year. General and
administrative expenses decreased as a result of lower legal costs
and reduced support staff levels partially offset by higher bonus
expense as a result of the rollout of the partnership bonus program
to directors of operations, which started in May 2006. A net loss
of $7.1 million, or $0.54 loss per diluted share, was reported for
the first nine months of fiscal 2007 compared with net income of
$0.4 million, or $0.03 income per diluted share, reported in the
first nine months of the prior fiscal year. An additional income
tax expense of $7.8 million was recorded in the first nine months
of fiscal 2007 related to charges to establish a valuation
allowance on certain income tax credits whose full realization is
not more likely than not based on the income trends of the Company.
Also, in the first nine months of fiscal 2007 the Company incurred
$0.5 million (pre-tax) of potential company sale expenses related
to legal and board of directors� special committee costs associated
with the potential sale of the Company as further discussed below
and $0.5 million (pre-tax) of asset impairment charges. Included in
net income for the first nine months of fiscal 2006 income was $2.1
million (pre-tax) for asset impairment charges and restaurant
closings / disposals. A discontinued operations loss of $0.3
million (net of tax), or $0.02 loss per diluted share, was recorded
in this year�s first nine months compared to a discontinued loss of
$1.8 million (net of tax), or $0.14 loss per diluted share recorded
in last year�s first nine months. Adjusted diluted income per share
from continuing operations without the income tax valuation
expense, potential company sale expenses and impairment items would
have been $0.12 for the first nine months of fiscal 2007 compared
with adjusted diluted income per share from continuing operations
of $0.27 in last year�s first nine months. A reconciliation of
non-GAAP financial measures is provided in the financial schedules
accompanying this press release. Unadjusted, the diluted loss per
share for the first nine months of fiscal 2007 included $0.64 of
income tax valuation expense, potential company sale expense and
impairment charges while the diluted income per share for the first
nine months of fiscal 2006 included $0.10 of impairment expense. As
previously disclosed, on January 11, 2007, it was announced that a
Special Committee of the Board of Directors had entered into a
letter of intent with Kinderhook Industries, LLC to sell all of the
Company�s assets (other than certain tax assets) to a new entity to
be formed by Kinderhook, for a purchase price of $75 million in
cash, plus the assumption of all of the Company�s liabilities,
including outstanding debt. On March 1, 2007, the Company announced
that the letter of intent expired pursuant to its terms and that
the Special Committee was continuing to pursue a sale of the
Company and that it had received indications of interest from a
number of potential purchasers. There can be no assurance that any
transaction will be agreed upon or consummated. The Company's
management does not plan to have a conference call this quarter to
discuss earnings. About Champps Entertainment, Inc. Champps
Entertainment, Inc. owns and operates 49 and franchises/licenses 12
restaurants in 21 states. Champps, which competes in the upscale
casual dining segment, offers an extensive menu consisting of
freshly prepared food, coupled with exceptional service. Champps
creates an exciting environment through the use of videos, music,
sports and promotions. Safe Harbor Statement Certain statements
made in this press release are forward-looking statements based on
management's current experience and expectations. These
forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Such statements involve certain risks and uncertainties that could
cause actual results to differ materially from those in the
forward-looking statements. Such forward-looking statements include
statements regarding our strategic initiatives; the realization or
non-realization of deferred tax assets; impairment charges and
closing of restaurants; new menu and operating initiatives critical
to improvement in same store sales; the absence of new store
openings in the remainder of fiscal 2007 and a return to modest
growth in fiscal 2008 including franchise growth efforts; future
uses of cash for stock repurchases or exit costs; decision to
pursue a sale of the Company; and the results of the Company's
efforts to solicit competing proposals for the acquisition of the
Company, among others. Among the factors that could cause future
results to differ materially from those provided in this press
release are: the ability of the Company to successfully implement
our strategic initiatives to improve same store sales; the ability
to make and fund stock repurchases; the ability to realize or not
realize deferred tax assets through generation of future taxable
income, tax planning strategies or other means; the ability to
finalize the transaction contemplated by the letter of intent; the
impact of intense competition in the casual dining restaurant
industry; the Company's ability to control restaurant operating
costs, which are impacted by commodity prices, minimum wage and
other employment laws, fuel and energy costs, consumer perceptions
of food safety, changes in consumer tastes and trends, and general
business and economic conditions. Information on significant
potential risks and uncertainties that may also cause such
differences include, but are not limited to, those mentioned by the
Company from time to time in its filings with the SEC. The words
"may," "believe," "estimate," "expect," "plan," "intend,"
"project," "anticipate," "should" and similar expressions and
variations thereof identify certain of such forward-looking
statements, which speak only as of the dates on which they were
made. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events, or otherwise. Readers are cautioned
that any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and,
therefore, readers should not place undue reliance on these
forward-looking statements. 1 If the debt is not converted, or
repaid as part of a sale transaction (see below), the Company
expects to either pay the debt off with available cash, proceeds
from credit facility borrowings, refinance term debt, or utilize a
combination of these sources. CHAMPPS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended
and Nine Months Ended April 1, 2007 (Dollars in thousands, except
per share data) (Unaudited) � Three Months Ended Nine Months Ended
April 1, April 2, April 1, April 2, 2007� 2006� 2007� 2006� Revenue
Sales $ 49,055� $ 51,485� $ 150,482� $ 157,177� Franchising and
royalty, net 173� 174� 525� 468� Total revenue 49,228� 51,659�
151,007� 157,645� � Costs and expenses Cost of sales and operating
expenses Product costs 13,868� 14,462� 42,959� 44,082� Labor costs
16,191� 16,192� 48,944� 49,428� Other operating expense 7,990�
7,987� 24,130� 23,905� Occupancy 5,092� 5,208� 15,343� 15,572�
Pre-opening expense -� 78� -� 157� General and administrative
expense 3,164� 3,710� 9,906� 10,539� Depreciation and amortization
2,586� 2,739� 7,778� 8,262� Severance -� 5� (136) 110� Asset
impairment charges and restaurant closings/disposals -� 2,136� 530�
2,136� Potential company sale expense 499� -� 499� -� Other expense
157� 131� 269� 286� Income from operations (319) (989) 785� 3,168�
Interest expense, net 153� 237� 632� 913� Expense (income) related
to predecessor companies -� (2) 12� (5) Income (loss) from
continuing operations, before tax (472) (1,224) 141� 2,260� Income
tax expense (133) (700) 6,941� 26� Income (loss) from continuing
operations (339) (524) (6,800) 2,234� Loss on discontinued
operations, net of tax 232� 1,405� 326� 1,798� Net income (loss) $
(571) $ (1,929) $ (7,126) $ 436� � Basic income (loss) per share:
Income (loss) from continuing operations $ (0.03) $ (0.04) $ (0.52)
$ 0.17� Loss from discontinued operations, net of tax (0.01) (0.11)
(0.02) (0.14) Net income (loss) $ (0.04) $ (0.15) $ (0.54) $ 0.03�
� Diluted income (loss) per share: Income (loss) from continuing
operations $ (0.03) $ (0.04) $ (0.52) $ 0.17� Loss from
discontinued operations, net of tax (0.01) (0.11) (0.02) (0.14) Net
income (loss) $ (0.04) $ (0.15) $ (0.54) $ 0.03� � Basic weighted
average shares outstanding 13,086� 13,194� 13,104� 13,135� �
Diluted weighted average shares outstanding 13,086� 13,194� 13,104�
13,188� CHAMPPS ENTERTAINMENT, INC.Supplemental Information(Stated
as a percentage of restaurant sales)(Unaudited) Three Months Ended
� Nine Months Ended April 1, April 2, April 1, April 2, 2007� 2006�
2007� 2006� Store weeks 637� 637� 1,911� 1,911� Average weekly
sales 77,009� 80,824� 78,745� 82,249� � Product costs 28.2% 28.1%
28.6% 28.1% Labor costs 33.0% 31.4% 32.5% 31.4% Other operating
expenses 16.3% 15.5% 16.0% 15.2% Occupancy 10.4% 10.1% 10.2% 9.9%
Pre-opening expenses 0.0% 0.2% 0.0% 0.1% � Total cost of sales and
operating expenses 87.9% 85.3% 87.3% 84.7% � Depreciation and
amortization 5.3% 5.3% 5.2% 5.3% � Total cost of sales, operating
expenses and depreciation and amortization 93.2% 90.6% 92.5% 90.0%
� General and administrative expense 6.4% 7.2% 6.6% 6.7% (Stated as
a percentage of revenue) � Champps Entertainment, Inc. Selected
Balance Sheet Information (In thousands) (Unaudited) � April 1,
July 2, 2007� 2006� Cash and cash equivalents $ 17,309� $ 9,449�
Total assets 129,729� 136,702� Total debt 14,858� 14,707� Total
shareholders' equity 69,839� 76,728� � Champps Entertainment, Inc.
Selected Cash Flow Information (In thousands) (Unaudited) � Nine
Months Ended April 1, April 2, 2007� 2006� Net cash provided by
operating activities $ 8,966� $ 11,067� Net cash used in investing
activities (627) (3,289) Net cash provided by (used in) financing
activities (479) 751� Net change in cash and cash equivalents $
7,860� $ 8,529� Reconciliation of Non-GAAP Results to GAAP Results
In addition to the results provided in accordance with Generally
Accepted Accounting Principles (�GAAP�) throughout this press
release, for the three months and nine months ended April 1, 2007
and April 2, 2006, the Company has provided �adjusted diluted net
income (loss) per share from continuing operations,� a non-GAAP
measurement that excludes the impact of the income tax valuation
allowance expense, potential company sale expenses and asset
impairment charges. The non-GAAP measurement is intended to
supplement the presentation to the Company�s financial results in
accordance with GAAP. The Company believes that the presentation of
this item provides additional information to facilitate the
comparison of past and present financial results. Adjusted diluted
net income (loss) per share from continuing operations should not
be considered in isolation or construed as a substitute for net
income (loss) per share or other operations data or cash flow data
prepared in accordance with GAAP for purposes of analyzing our
profitability or liquidity. Adjusted diluted net income (loss) per
share from continuing operations, as calculated, may not be
comparable to similarly titled measures reported by other
companies. Three Months Ended April 1, 2007 Reported �
IncomeTaxValuation � After-TaxPotential CompanySale Expense �
After-TaxImpairmentCharge � Adjusted Income (loss) from continuing
operations $ (339) $ 404� $ 302� $ -� $ 367� Loss on discontinued
operations, net of tax 232� -� -� -� $ 232� Net income (loss) (571)
404� 302� -� $ 135� � Diluted income (loss) per share: Income
(loss) from continuing operations $ (0.03) $ 0.03� $ 0.02� $ -� $
0.02� Loss on discontinued operations, net of tax (0.01) -� -� -�
(0.01) Net income (loss) (0.04) 0.03� 0.02� -� 0.01� Three Months
Ended April 2, 2006 Reported � IncomeTaxValuation �
After-TaxPotential CompanySale Expense � After-TaxImpairmentCharge
� Adjusted Income (loss) from continuing operations $ (524) $ -� $
-� $ 1,292� $ 768� Loss on discontinued operations, net of tax
1,405� -� -� -� $ 1,405� Net income (loss) (1,929) -� -� 1,292� $
(637) � Diluted income (loss) per share: Income (loss) from
continuing operations $ (0.04) $ -� $ -� $ 0.10� $ 0.06� Loss on
discontinued operations, net of tax (0.11) -� -� -� (0.11) Net
income (loss) (0.15) -� -� 0.10� (0.05) Nine Months Ended April 1,
2007 Reported � IncomeTaxValuation � After-TaxPotential CompanySale
Expense � After-TaxImpairmentCharge � Adjusted Income (loss) from
continuing operations $ (6,800) $ 7,785� $ 302� $ 321� $ 1,608�
Loss on discontinued operations, net of tax 326� -� -� -� $ 326�
Net income (loss) (7,126) 7,785� 302� 321� $ 1,282� � Diluted
income (loss) per share: Income (loss) from continuing operations $
(0.52) $ 0.59� $ 0.02� $ 0.03� $ 0.12� Loss on discontinued
operations, net of tax (0.02) -� -� -� (0.02) Net income (loss)
(0.54) 0.59� 0.02� 0.03� 0.10� Nine Months Ended April 2, 2006
Reported � IncomeTaxValuation � After-TaxPotential CompanySale
Expense � After-TaxImpairmentCharge � Adjusted Income from
continuing operations $ 2,234� $ -� $ -� $ 1,292� $ 3,526� Loss on
discontinued operations, net of tax 1,798� -� -� -� $ 1,798� Net
income 436� -� -� 1,292� $ 1,728� � Diluted income (loss) per
share: Income from continuing operations $ 0.17� $ -� $ -� $ 0.10�
$ 0.27� Loss on discontinued operations, net of tax (0.14) -� -� -�
(0.14) Net income 0.03� -� -� 0.10� 0.13�
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