Industry News | March 6, 2002

Checkers Drive-In Restaurants Sets a New Pace Earnings Release

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Checkers Drive-In Restaurants, Inc., announced sales from corporate restaurants in the fourth quarter increased 21 percent to $46 million from $38 million for the same period in 2000. Total revenues including franchise royalty and fee income in the fourth quarter increased 16 percent to $51 million from $44 million for the same period in 2000. The increase in corporate restaurant sales was a result of both higher same store sales growth and the re-acquisition of 41 franchise stores since the end of the fourth quarter of 2000.

Same-store sales growth for the year ended December 31, 2001 increased 11.2 percent over the previous year. Fourth quarter 2001, year-over-year same store sales growth increased 4.1 percent over the prior year's fourth quarter. The first half of this year's fourth quarter same store sales growth slowed in response to the events of September 11th, but rebounded to over 12 percent during the second half of the fourth quarter.

Royalty income for the year ended 2001 increased from the previous year by $1.1 million or 7.5 percent. The improvement was primarily due to the re-franchising of 188 company stores during 2000. However, by the end of the fourth quarter of 2001, 58 net franchise stores closed from the fourth quarter of the previous year. As a result, royalty income in the fourth quarter of 2001 decreased by 11 percent from the fourth quarter of 2000. Year-over-year franchise same store sales growth for the year ended 2001 increased 1.5 percent from the year 2000.

CFO David Koehler commented, "`I was recruited by Mr. Dorsch to make a difference on a team that had already taken the bold steps to turn around the company. Checkers is back; we are now re-building financially with plans for growing sales, profits, and new restaurants. Beginning with our newest business intelligent analytical tools and our new POS store level computer systems—Checkers is again on track.''

In addition to focusing on increasing sales volume, the company improved store-level margins. During the fourth quarter of 2001, cost of sales, as a percentage of restaurant sales, decreased from the fourth quarter of 2000 by 3.0 percent or 65.4 percent, down to 62.4 percent. In comparison to the three quarters ended September 10, 2001, year-to-date cost of sales decreased by 3.6 percent or 66.0 percent down to 62.4 percent.

Advertising for the year-ended 2001 decreased $2.3 million from $10.4 to $8.1, or a 0.8 percent decrease as a percent of restaurant sales.

The company says it continued to strengthen it balance sheet by building cash and paying down debt. Total cash balances increased by 284 percent from $ 2.8 million to $10.5 million as of December 31, 2001.

Daniel J. Dorsch, CEO and president, said, "I am delighted with the progress we have achieved during the past two years at Checkers Drive-In Restaurants. We have improved nearly every aspect of the business we operate: from debt reduction; profitability growth; operational improvements; culture; franchise relations; and shareholder value. The road ahead for Checkers Drive-In Restaurants has been cleared of many obstacles we once faced. Changes do not happen overnight and this has been a process of managing through all the issues. We will continue our disciplined approach to making Checkers Drive-In Restaurants the place to work, eat, invest and talk about.''

Dorsch continued: "There is a reason some people are successful in the restaurant industry and a reason others are not. You need to deal with everything that comes along in a manner that will build on the success of the Company, including the hard stuff like taking appropriate reserves and investing in food, labor and maintenance with focus on the long term. In my opinion we are now 'back on track' and positioned as well as any other chain in the quick-serve industry.''

As of December 31, 2001, Checkers Drive-In Restaurants, Inc., and its franchisees own 417 Checkers operating primarily in the southeastern United States and 404 Rally's operating primarily in the midwestern United States.