Perkins & Marie Callender’s Inc. Reports Results for the Third Quarter

Perkins & Marie Callender’s Inc. (together with its consolidated subsidiaries, the “Company”, “PMCI” or “we”) is reporting its financial results for the third quarter ended October 3, 2010.

Highlights for the Third Quarter of 2010:

• Perkins restaurants’ comparable sales decreased by 2.8% and Marie Callender’s restaurants’ comparable sales decreased by 4.1% in the third quarter of 2010 compared to the third quarter of 2009.  
• Since the beginning of 2010, five Perkins franchised restaurants have opened and two corporate restaurants have closed. In addition, two corporate and two franchised Marie Callender’s restaurants have closed.

J. Trungale, President and Chief Executive Officer of Perkins & Marie Callender’s Inc., commented, “During the third quarter 2010, sales and traffic trends at both Perkins and Marie Callender’s continued to be adversely affected by the languishing economy, including declines in consumer confidence and sluggish consumer spending and increased commodity costs. While we remain consistently focused on ensuring positive dining experiences at all of our restaurants and serving high quality food at a strong price-value ratio, we continue to strive for operational, financial and capital efficiencies to ease the burdens stemming from the negative economic environment.”

Financial Results for the Third Quarter of 2010

Revenues in the third quarter of 2010 decreased 5.9% to $108.7 million from $115.5 million in the third quarter of 2009.  The decrease resulted from a $4.3 million decrease in sales in the restaurant segment and a $2.5 million decrease in the Foxtail segment.  Company-owned Perkins comparable restaurant sales decreased by 2.8% and Company-owned Marie Callender’s comparable restaurant sales decreased by 4.1% in the third quarter of 2010 as compared to the third quarter of 2009.

Food cost for the quarter ended October 3, 2010 decreased to 25.4% of food sales from 25.7% for the quarter ended October 4, 2009.  Restaurant segment food cost was up by 1.0 percentage point to 25.4% of food sales in the quarter ended October 3, 2010, primarily due to higher sugar, pork, coffee, dairy, seafood and egg costs.  In the Foxtail segment, food cost decreased to 52.9% of food sales in the third quarter of 2010 from 57.9% in the third quarter of 2009, primarily due to higher sales margins and improved pie manufacturing efficiencies.

Labor and benefits costs, as a percentage of total revenues, increased by 0.3 percentage points to 34.5% in the third quarter of 2010 as compared to the prior year’s third quarter.  Restaurant segment labor and benefits remained constant at 37.8% in the third quarter of 2010, while the Foxtail segment labor and benefits expense increased from 12.5% in the third quarter of 2009 to 12.8% in the third quarter of 2010.  This increase was due primarily to the impact of fixed labor and benefit costs on a lower sales base as labor and benefits expenses for this segment decreased by approximately $0.3 million during the third quarter of 2010.

Operating expenses for the quarter ended October 3, 2010 were $32.6 million, or 30.0% of total revenues, compared to $33.2 million, or 28.7% of total revenues in the quarter ended October 4, 2009.  Restaurant segment operating expenses increased by 1.1 percentage points to 32.4% of restaurant sales in the third quarter of 2010, due primarily to a decline in revenues and increases in advertising expenses and utilities.  Operating expenses in the Foxtail segment decreased by 1.0 percentage point to 10.4% of segment food sales.

General and administrative expenses were 8.8% of total revenues, a decrease of 0.1 percentage point from the third quarter of 2009.  This decrease is primarily due to lower incentive compensation accruals and legal costs.

Depreciation and amortization was 4.4% and 4.8% of revenues in the third quarters of 2010 and 2009, respectively.  

Interest, net was 9.5% of revenues in the quarter ended October 3, 2010, compared to 8.9% in the quarter ended October 4, 2009.  This expense increased due to an approximate $9.2 million increase in the average debt outstanding during the third quarter of 2010.

Adjusted EBITDA

The Company defines adjusted EBITDA as net income or loss attributable to PMCI before income taxes or benefits, interest expense (net), depreciation and amortization, asset impairments and closed store expenses, pre-opening expenses, management fees, certain non-recurring income and expense items and other income and expense items unrelated to operating performance.  The Company considers adjusted EBITDA to be an important measure of the performance of core operations because adjusted EBITDA excludes various income and expense items that are not indicative of the Company’s operating performance.  The Company believes that adjusted EBITDA is useful to investors in evaluating the Company’s ability to incur and service debt, make capital expenditures and meet working capital requirements.  The Company also believes that adjusted EBITDA is useful to investors in evaluating the Company’s operating performance compared to that of other companies in the same industry, as the calculation of adjusted EBITDA eliminates the effects of financing, income taxes and the accounting effects of capital spending, all of which may vary from one company to another for reasons unrelated to overall operating performance.  The Company’s calculation of adjusted EBITDA is not necessarily comparable to that of other similarly titled measures reported by other companies.  Adjusted EBITDA is not a presentation made in accordance with U.S. generally accepted accounting principles and accordingly should not be considered as an alternative to, or more meaningful than, earnings from operations, cash flows from operations or other traditional indications of a company’s operating performance or liquidity.  The following table provides a reconciliation of net loss to adjusted EBITDA:

About the Company

Perkins & Marie Callender’s Inc. operates two restaurant concepts:  (1) full-service family dining restaurants, which serve a wide variety of high quality, moderately-priced breakfast, lunch and dinner entrees, under the name Perkins Restaurant and Bakery, and (2) mid-priced, casual-dining restaurants specializing in the sale of pies and other bakery items under the name Marie Callender’s Restaurant and Bakery.  As of October 3, 2010, the Company owned and operated 161 Perkins restaurants and franchised 319 Perkins restaurants.  The Company also owned and operated 75 Marie Callender’s restaurants, two Callender’s Grill restaurants, an East Side Mario’s restaurant and 12 Marie Callender’s restaurants under partnership agreements.  Franchisees owned and operated 37 Marie Callender’s restaurants and one Marie Callender’s Grill.

Conference Call

Perkins & Marie Callender’s Inc. has scheduled a conference call for Thursday, December 2, 2010, at 1:00 p.m. (CST) to review third quarter of 2010 earnings.  The dial-in number for the conference call is (866) 207-2203, and the conference ID number is 24726624.  A taped playback of this call will be available two hours following the call through midnight (EST) on Thursday, December 9, 2010.  The taped playback can be accessed by dialing (800) 642-1687 and by using access code number 24726624.

Forward-Looking Statements

This press release may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements, written, oral or otherwise made, may be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will,” or the negative thereof or other variations thereon or comparable terminology.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections.  While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control.  These and other important factors may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements.  Factors affecting these forward-looking statements include, among others, the following:

• macroeconomic conditions, consumer preferences and demographic patterns, both nationally and in particular regions in which we operate;
• our substantial indebtedness;
• our liquidity and capital resources;
• competitive pressures and trends in the restaurant industry;
• prevailing prices and availability of food, labor, raw materials, supplies and energy;
• a failure to obtain timely deliveries from our suppliers or other supplier issues;
• our ability to successfully implement our business strategy;
• relationships with franchisees and the financial health of franchisees;
• legal proceedings and regulatory matters; and
• our development and expansion plans.

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements.  The forward-looking statements included in this press release are made only as of the date hereof.  We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.