For the fourth quarter ended January 1, 2001, Checkers reported net income of $2.1 million before a $1.7 million non-cash stock-based compensation charge taken in the fourth quarter of 2000 or post-charge net income of $0.4 million or $0.04 per diluted share. This compares with a net loss of ($23.3) million or ($2.48) per share for the fourth quarter of fiscal 1999. Total revenue decreased to $44.1 million for the fourth quarter of fiscal 2000 from $89.7 million for the fourth quarter of fiscal 1999. This decrease was also due to the sale of company-owned restaurants to franchisees during fiscal 2000. Accordingly, royalty revenue and franchise fees, which are included in total revenue, increased to $5.7 million compared to $5.2 million for the fourth quarter of fiscal 1999.
Checkers' merged with Rally's Hamburgers, Inc. on August 9, 1999. The merger was accounted for as a reverse acquisition, as Rally's was deemed the acquiring company for accounting purposes. Accordingly, the historical financial results for the Company prior to August 9, 1999 are those of Rally's only. The financial results reported above for fiscal 2000 include a full year's activity for both Checkers and Rally's, while the fiscal 1999 financial results present Rally's for the full fiscal year and Checkers for the post-merger period from August 9, 1999 to January 3, 2000.
Checkers' turnaround began with the hiring of Daniel J. Dorsch, a 25-year veteran of the franchise food business, in December 1999. At that time, Checkers had approximately $80.8 million of outstanding debt, and reported net losses of $25.9 million for fiscal 1999. Additionally, Checkers' received a going concern opinion on its fiscal 1999 financial statements. During the year ended January 1, 2001, the Company repaid $40.3 million of debt through the sale of 167 company-owned restaurants and its modular building facility. In addition Checkers closed six restaurants, which were not producing positive cash flow results. Corporate overhead was also reduced through the elimination of certain administrative functions.
While the sales of company-owned restaurants were made primarily to raise the needed capital to reduce our existing debt, this allowed our corporate operations employees to join as franchisees and with franchisees in our system. Once the majority of the market sales were completed in the fourth quarter of fiscal 2000, we again reduced the size of our administrative staff by four senior positions and three operations vice presidents.
The company also undertook a program to upgrade all of their company-owned restaurants. These upgrades included general repairs, new landscape, paint, menu-board upgrades, and headset devices to provide faster service. While these investments were made for our future, the expenses were taken in fiscal 2000.
Highlights of fiscal year 2000:
* Checkers hires a new CEO, Daniel J. Dorsch
* Checkers reports consecutive quarterly profits for the 2nd, 3rd, & 4th quarters of fiscal 2000
* 167 Company restaurants sold to franchisees as part of the debt repayment plan
* Champion modular building facility was sold
* Cultural changes to refocus on restaurant management and franchisee success
* Restaurants were cleaned up and the image restored
* Debt reduced by $40.3 million
* Checkers opens first company-owned Checkers® restaurant since 1994 on July 7, 2000
* Senior management is restructured and joint management with Santa Barbara Restaurant Group, Inc. is terminated
* MARC USA is selected as Checkers new advertising agency, launching a brand new campaign "You Gotta Eat(sm)" in January 2001
* Signed franchise and area development agreements that are expected to result in an additional 150 Checkers® and Rally's Hamburgers® franchised restaurants over the next five years
Wendy Beck, Checkers Chief Financial Officer commented, "Dan is the CEO Checkers needed years ago. With his passion, his energy and his enthusiasm for the people in the restaurant industry, Dan is the right person to lead this Company. We have returned to the foundation that Checkers was built on -- a great product, served fresh and fast. We have also returned to a limited menu and reinstated signature products.'' Beck continued, "In addition, our outdated technology in our restaurants is being replaced with state-of-the-art NCR POS equipment that will further improve speed of service while increasing controls and reporting tools. Overall, I am thrilled with the progress we have already made."
Checkers' chief executive officer and President, Daniel J. Dorsch commented, "I am delighted with the company as it stands today, considering our new leadership team has only been at it for one year, but we are nowhere near our potential. It gives me great pleasure to take a company like Checkers and Rally's to the next level. Just one year ago, we were being counted out. While the profit numbers reported for the year are not big, they are quite amazing when you consider where we came from. Our debt and interest loads were growing and our comparable restaurant sales saw years of declining numbers. But things changed. Our attitude changed, our belief changed and our results changed. I think we have the American story right here at Checkers. We put the right team in place, set a mission, and came to believe in our products, our people, and our franchisees. We listened, we worked and we made a difference.'' Dorsch further continued, "I am happy to report that we ended the year with positive net income numbers, a feat that many did not think would happen. But more importantly, we believe we laid the foundation to set our future in a positive direction.''
As of March 7, 2001, Checkers Drive-In Restaurants, Inc. and its franchisees own 423 Checkers operating primarily in the Southeastern United States and 425 Rally's operating primarily in the Midwestern United States. Checkers is headquartered in Clearwater, Florida. For more information about the company, please visit www.checkers.com .
