Industry News | October 27, 2000

Checkers Continues Profitability

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Checkers Drive-In Restaurants, Inc. (Nasdaq: CHKR) today reported financial results for its third fiscal quarter ended September 11, 2000. As the merger with Rally's Hamburgers, Inc. on August 9, 1999 was accounted for as a reverse acquisition, Rally's was deemed the acquiring company for accounting purposes. Accordingly, the historical financial results for the combined entity prior to August 9, 1999 are those of Rally's. The results reported for the third quarter of fiscal 2000 include 12 weeks of activity for both Rally's and Checkers while the 1999 financial results represents Rally's for the periods stated and Checkers financial results only for the post-merger four week period ended September 6, 1999.

Results for the third quarter ended September 11, 2000 are as follows:

•Net income increased $2.2 million, to $809,000, or $.08 per diluted share for the third quarter of fiscal 2000, compared to a net loss of $1.4 million or $.19 per diluted share during the third quarter of fiscal 1999.

• Total revenues decreased $7.8 million to $37.8 million for the third quarter of fiscal 2000 compared with revenues of $45.6 million during the third quarter of fiscal 1999. The decrease in revenue is primarily attributable to the sale of 231 restaurants to franchisees during the past 12 months. Same-store sales at the company-owned Checkers and Rally's restaurants declined by 3.1 percent and 8.6 percent, respectively, as compared to the third quarter of 1999.

• On September 29, 2000, the Company completed the sale of 28 Rally's Restaurants in Kentucky to a franchisee for $8.0 million. The Company has used proceeds from this transaction to reduce its borrowings under its credit facility to $17.7 million.

Year-to-date results for the 36-week period ended September 11, 2000 are as follows:

• Net income increased $4.5 million to $1.9 million or $.20 per diluted share for the three quarters ended September 11, 2000 as compared to a net loss of $2.6 million or $.40 per diluted share for the three quarters ended September 6, 1999.

• Total revenues increased $25 million or 22.3% to $137.1 million for the three quarters ended September 11, 2000 compared with $112.1 million for the three quarters ended September 6, 1999. The increase was partially attributable to the operations of the Checkers restaurants as a result of the merger and to an increase in franchise revenues and fees. However, the increases are offset by lost revenue in the markets that were sold to franchisees. Same-store sales at the company-owned Checkers and Rally's restaurants declined .5% and 5.5%, respectively, year-to-date compared to the same 36 weeks of the prior year.

"I am pleased to report that we have achieved consecutive profitable quarters, but more importantly, we achieved profitability while undertaking needed fundamental changes in our structure, said Daniel Dorsch, president and chief executive officer. "In January, this company needed major surgery and there was no simple solution. The sale of 231 company-operated restaurants and our building manufacturing facility, changes to management controls, a new training department, extensive restaurant repairs and maintenance, a restructuring of the field management team, a successful new Screamin Chicken product rollout, improved franchisee relations, reductions in overhead expense, and a restructure of our debt were essential to restoring the prospects of long term profitability. We accomplished every goal stated herein.''

"Equally important was the implementation of significant improvements to our culture during the third quarter that will not immediately show up in earnings but will positively affect the company," Dorsch continued. "Setting a company up for long term success is a much bigger job than reducing food and labor costs. We will now accelerate our efforts in building our franchise system with new domestic and international store growth. I am very impressed with the strong desire of our franchise partners to build this company all over again.''