Attached files
file | filename |
---|---|
EX-32.3 - EXHIBIT 32.3 - P F CHANGS CHINA BISTRO INC | c91250exv32w3.htm |
EX-31.2 - EXHIBIT 31.2 - P F CHANGS CHINA BISTRO INC | c91250exv31w2.htm |
EX-31.3 - EXHIBIT 31.3 - P F CHANGS CHINA BISTRO INC | c91250exv31w3.htm |
EX-31.1 - EXHIBIT 31.1 - P F CHANGS CHINA BISTRO INC | c91250exv31w1.htm |
EX-32.2 - EXHIBIT 32.2 - P F CHANGS CHINA BISTRO INC | c91250exv32w2.htm |
EX-32.1 - EXHIBIT 32.1 - P F CHANGS CHINA BISTRO INC | c91250exv32w1.htm |
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 27, 2009
or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number: 0-25123
P.F. Changs China Bistro, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 86-0815086 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
7676 East Pinnacle Peak Road | ||
Scottsdale, Arizona | 85255 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code:
(480) 888-3000
(480) 888-3000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports, and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes o No þ
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ
As of September 27, 2009, there were 23,139,612 outstanding shares of the registrants
Common Stock.
TABLE OF CONTENTS
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Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 31.3 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 | ||||||||
Exhibit 32.3 |
1
Table of Contents
PART I
FINANCIAL INFORMATION
FINANCIAL INFORMATION
Item 1. | Financial Statements |
P.F. CHANGS CHINA BISTRO, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 27, | December 28, | |||||||
2009 | 2008 | |||||||
(Unaudited) | (Note 1) | |||||||
ASSETS | ||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 23,065 | $ | 40,951 | ||||
Inventories |
5,012 | 4,930 | ||||||
Other current assets |
41,414 | 51,643 | ||||||
Total current assets |
69,491 | 97,524 | ||||||
Property and equipment, net |
507,228 | 524,004 | ||||||
Goodwill |
6,819 | 6,819 | ||||||
Intangible assets, net |
22,539 | 24,270 | ||||||
Other assets |
17,183 | 14,746 | ||||||
Total assets |
$ | 623,260 | $ | 667,363 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 17,105 | $ | 15,203 | ||||
Construction payable |
3,649 | 4,358 | ||||||
Accrued expenses |
65,910 | 71,162 | ||||||
Unearned revenue |
24,009 | 31,115 | ||||||
Current portion of long-term debt,
including $1,153 and $3,502 due to
related parties at September 27, 2009
and December 28, 2008, respectively |
1,531 | 5,753 | ||||||
Total current liabilities |
112,204 | 127,591 | ||||||
Lease obligations |
112,290 | 113,178 | ||||||
Long-term debt, including $131 and $1,073 due
to related parties at September 27, 2009 and
December 28, 2008, respectively |
41,330 | 82,496 | ||||||
Other liabilities |
21,579 | 14,691 | ||||||
Total liabilities |
287,403 | 337,956 | ||||||
Commitments and contingencies (Note 10) |
| | ||||||
Equity: |
||||||||
PFCB common stockholders equity: |
||||||||
Common stock, $0.001 par value,
40,000,000 shares authorized: 23,139,612 shares and 24,114,107
shares issued and outstanding at
September 27, 2009 and December 28,
2008, respectively |
28 | 27 | ||||||
Additional paid-in capital |
214,007 | 206,667 | ||||||
Treasury stock, at cost, 4,754,274
shares and 3,634,979 shares at
September 27, 2009 and December 28,
2008, respectively |
(135,546 | ) | (106,372 | ) | ||||
Accumulated other comprehensive loss |
(472 | ) | (755 | ) | ||||
Retained earnings |
252,421 | 221,259 | ||||||
Total PFCB common stockholders equity |
330,438 | 320,826 | ||||||
Noncontrolling interests |
5,419 | 8,581 | ||||||
Total equity |
335,857 | 329,407 | ||||||
Total liabilities and equity |
$ | 623,260 | $ | 667,363 | ||||
See accompanying notes to unaudited consolidated financial statements.
2
Table of Contents
P.F. CHANGS CHINA BISTRO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, | September 28, | September 27, | September 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues |
$ | 290,329 | $ | 295,877 | $ | 901,526 | $ | 903,327 | ||||||||
Costs and expenses: |
||||||||||||||||
Cost of sales |
76,364 | 80,368 | 239,093 | 246,030 | ||||||||||||
Labor |
95,713 | 98,059 | 294,531 | 301,411 | ||||||||||||
Operating |
50,883 | 52,201 | 150,383 | 149,628 | ||||||||||||
Occupancy |
17,566 | 17,270 | 52,347 | 52,407 | ||||||||||||
General and administrative |
20,408 | 18,152 | 60,745 | 55,801 | ||||||||||||
Depreciation and amortization |
19,055 | 17,235 | 56,126 | 50,755 | ||||||||||||
Preopening expense |
1,550 | 1,519 | 2,499 | 6,146 | ||||||||||||
Partner investment expense |
18 | 99 | (537 | ) | 10 | |||||||||||
Total costs and expenses |
281,557 | 284,903 | 855,187 | 862,188 | ||||||||||||
Income from operations |
8,772 | 10,974 | 46,339 | 41,139 | ||||||||||||
Interest and other income (expense), net |
85 | (895 | ) | (1,292 | ) | (2,778 | ) | |||||||||
Income from continuing operations before taxes |
8,857 | 10,079 | 45,047 | 38,361 | ||||||||||||
Provision for income taxes |
(2,477 | ) | (2,057 | ) | (12,538 | ) | (9,274 | ) | ||||||||
Income from continuing operations, net of tax |
6,380 | 8,022 | 32,509 | 29,087 | ||||||||||||
Loss from discontinued operations, net of tax |
(17 | ) | (4,693 | ) | (534 | ) | (5,547 | ) | ||||||||
Net income |
6,363 | 3,329 | 31,975 | 23,540 | ||||||||||||
Less: Net income attributable to noncontrolling interests |
155 | 367 | 813 | 1,559 | ||||||||||||
Net income attributable to PFCB |
$ | 6,208 | $ | 2,962 | $ | 31,162 | $ | 21,981 | ||||||||
Basic income per share: |
||||||||||||||||
Income from continuing operations attributable to PFCB common stockholders |
$ | 0.27 | $ | 0.33 | $ | 1.38 | $ | 1.16 | ||||||||
Loss from discontinued operations, net of tax, attributable to PFCB common stockholders |
0.00 | (0.20 | ) | (0.03 | ) | (0.24 | ) | |||||||||
Net income attributable to PFCB common stockholders |
$ | 0.27 | $ | 0.13 | $ | 1.35 | $ | 0.92 | ||||||||
Diluted income per share: |
||||||||||||||||
Income from continuing operations attributable to PFCB common stockholders |
$ | 0.27 | $ | 0.32 | $ | 1.35 | $ | 1.14 | ||||||||
Loss from discontinued operations, net of tax, attributable to PFCB common stockholders |
0.00 | (0.20 | ) | (0.03 | ) | (0.23 | ) | |||||||||
Net income attributable to PFCB common stockholders |
$ | 0.27 | $ | 0.12 | $ | 1.32 | $ | 0.91 | ||||||||
Weighted average shares used in computation: |
||||||||||||||||
Basic |
22,810 | 23,613 | 23,103 | 23,828 | ||||||||||||
Diluted |
23,285 | 23,927 | 23,535 | 24,156 | ||||||||||||
Amounts attributable to PFCB: |
||||||||||||||||
Income from continuing operations, net of tax |
$ | 6,225 | $ | 7,655 | $ | 31,696 | $ | 27,528 | ||||||||
Loss from discontinued operations, net of tax |
(17 | ) | (4,693 | ) | (534 | ) | (5,547 | ) | ||||||||
Net income attributable to PFCB |
$ | 6,208 | $ | 2,962 | $ | 31,162 | $ | 21,981 | ||||||||
See accompanying notes to unaudited consolidated financial statements.
3
Table of Contents
P.F. CHANGS CHINA BISTRO, INC.
CONSOLIDATED STATEMENT OF EQUITY
(In thousands)
(Unaudited)
(Unaudited)
PFCB Common Stockholders | ||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||
Additional | other | |||||||||||||||||||||||||||||||
Common Stock | paid-in | Treasury | comprehensive | Retained | Noncontrolling | |||||||||||||||||||||||||||
Shares | Amount | capital | stock | loss | earnings | interests | Total | |||||||||||||||||||||||||
Balances, December 28, 2008 |
24,114 | $ | 27 | $ | 206,667 | $ | (106,372 | ) | $ | (755 | ) | $ | 221,259 | $ | 8,581 | $ | 329,407 | |||||||||||||||
Issuance of common stock under stock option plans |
155 | 1 | 1,365 | | | | | 1,366 | ||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan |
34 | | 774 | | | | | 774 | ||||||||||||||||||||||||
Shares withheld for taxes on restricted stock, net of forfeitures |
(44 | ) | | (633 | ) | | | | | (633 | ) | |||||||||||||||||||||
Purchases of treasury stock |
(1,119 | ) | | | (29,174 | ) | | | | (29,174 | ) | |||||||||||||||||||||
Share-based compensation expense(1) |
| | 5,787 | | | | | 5,787 | ||||||||||||||||||||||||
Tax benefit
from share-based compensation, net |
| | 1,077 | | | | | 1,077 | ||||||||||||||||||||||||
Unrealized
gain on derivatives |
| | | | 283 | | | 283 | ||||||||||||||||||||||||
Distributions to noncontrolling interest partners |
| | | | | | (1,475 | ) | (1,475 | ) | ||||||||||||||||||||||
Contributions from noncontrolling interest partners |
| | | | | | 30 | 30 | ||||||||||||||||||||||||
Purchases of noncontrolling interests |
| | (1,030 | ) | | | | (2,345 | ) | (3,375 | ) | |||||||||||||||||||||
Partner investment expense |
| | | | | | (537 | ) | (537 | ) | ||||||||||||||||||||||
Partner bonus expense, imputed |
| | | | | | 352 | 352 | ||||||||||||||||||||||||
Net income |
| | | | | 31,162 | 813 | 31,975 | ||||||||||||||||||||||||
Balances, September 27, 2009 |
23,140 | $ | 28 | $ | 214,007 | $ | (135,546 | ) | $ | (472 | ) | $ | 252,421 | $ | 5,419 | $ | 335,857 | |||||||||||||||
(1) | Share-based compensation expense includes equity-settled awards only. |
See accompanying notes to unaudited consolidated financial statements.
4
Table of Contents
P.F. CHANGS CHINA BISTRO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended | ||||||||
September 27, | September 28, | |||||||
2009 | 2008 | |||||||
Operating Activities: |
||||||||
Net income |
$ | 31,975 | $ | 23,540 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
56,126 | 51,702 | ||||||
Share-based compensation |
7,821 | 6,451 | ||||||
Partner investment expense |
(537 | ) | 10 | |||||
Partner bonus expense, imputed |
352 | 716 | ||||||
Deferred income taxes |
3,330 | 2,365 | ||||||
Tax benefit from share-based compensation, net |
(1,077 | ) | (323 | ) | ||||
Non-cash asset impairment and net lease termination charges in discontinued operations |
706 | 7,510 | ||||||
Other |
92 | 82 | ||||||
Changes in operating assets and liabilities: |
||||||||
Inventories |
(82 | ) | (28 | ) | ||||
Other current assets |
11,958 | 370 | ||||||
Other assets |
(1,031 | ) | (1,647 | ) | ||||
Accounts payable |
1,902 | (2,937 | ) | |||||
Accrued expenses |
(7,419 | ) | 4,962 | |||||
Unearned revenue |
(7,106 | ) | (6,458 | ) | ||||
Lease obligations |
(54 | ) | 12,640 | |||||
Other long-term liabilities |
1,186 | 576 | ||||||
Net cash provided by operating activities |
98,142 | 99,531 | ||||||
Investing Activities: |
||||||||
Capital expenditures |
(38,859 | ) | (69,439 | ) | ||||
Capitalized interest |
(198 | ) | (585 | ) | ||||
Net cash used in investing activities |
(39,057 | ) | (70,024 | ) | ||||
Financing Activities: |
||||||||
Repayments of long-term debt |
(45,424 | ) | (11,510 | ) | ||||
Purchases of treasury stock |
(29,174 | ) | (10,014 | ) | ||||
Purchases of noncontrolling interests |
(3,375 | ) | (6,754 | ) | ||||
Proceeds from stock options exercised and employee stock purchases |
1,507 | 1,009 | ||||||
Distributions to noncontrolling interest partners |
(1,475 | ) | (2,750 | ) | ||||
Payments of capital lease obligations |
(137 | ) | (127 | ) | ||||
Contributions from noncontrolling interest partners |
30 | 225 | ||||||
Tax benefit from share-based compensation, net |
1,077 | 323 | ||||||
Net cash used in financing activities |
(76,971 | ) | (29,598 | ) | ||||
Net decrease in cash and cash equivalents |
(17,886 | ) | (91 | ) | ||||
Cash and cash equivalents at the beginning of the period |
40,951 | 24,055 | ||||||
Cash and cash equivalents at the end of the period |
$ | 23,065 | $ | 23,964 | ||||
Supplemental Disclosure of Cash Flow Information: |
||||||||
Cash paid for interest |
$ | 2,870 | $ | 4,200 | ||||
Cash paid for income taxes, net of refunds |
$ | 10,798 | $ | 6,716 | ||||
Supplemental Disclosure of Non-Cash Items: |
||||||||
Purchases of noncontrolling interests through issuance of long-term debt |
$ | | $ | 2,431 | ||||
Change in construction payable |
$ | (709 | ) | $ | (6,636 | ) |
See accompanying notes to unaudited consolidated financial statements.
5
Table of Contents
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Basis of Presentation
As of September 27, 2009, P.F. Changs China Bistro, Inc. (the Company or PFCB) owned and
operated 192 full service restaurants throughout the United States under the name of P.F. Changs
China Bistro (the Bistro). The Company also owned and operated 164 quick casual restaurants under
the name of Pei Wei Asian Diner (Pei Wei).
The accompanying unaudited consolidated financial statements have been prepared in accordance with
U.S. generally accepted accounting principles (GAAP) for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the three and nine
month periods ended September 27, 2009 are not necessarily indicative of the results that may be
expected for the year ending January 3, 2010.
The consolidated balance sheet at December 28, 2008 has been derived from the audited consolidated
financial statements at that date, but does not include all of the information and footnotes
required by GAAP for complete financial statements. For further information, refer to the
consolidated financial statements and notes thereto included in the Companys Annual Report on Form
10-K for the fiscal year ended December 28, 2008.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from those estimates.
Principles of Consolidation and Presentation
The Companys consolidated financial statements include the accounts and operations of the Company
and its majority-owned subsidiaries. All material balances and transactions between the
consolidated entities have been eliminated. Beginning fiscal 2009, noncontrolling interests
(previously shown as minority interest) are reported below net income under the heading Net income
attributable to noncontrolling interests in the consolidated income statements and shown as a
component of equity in the consolidated balance sheets. See Recent Accounting Literature for
further discussion.
Recent Accounting Literature
FASB Accounting Standards Codification
(Accounting Standards Update (ASU) 2009-01)
In June 2009, FASB approved the FASB Accounting Standards Codification (the Codification) as the
single source of authoritative nongovernmental GAAP. All existing accounting standard documents,
such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and
other related literature, excluding guidance from the Securities and Exchange Commission (SEC),
have been superseded by the Codification. All other non-grandfathered, non-SEC accounting
literature not included in the Codification has become nonauthoritative. The Codification did not
change GAAP, but instead introduced a new structure that combines all authoritative standards into
a comprehensive, topically organized online database. The Codification is effective for interim or
annual periods ending after September 15, 2009, and impacts the Companys financial statements as
all future references to authoritative accounting literature will be referenced in accordance with
the Codification. There have been no changes to the content of the Companys financial statements
or disclosures as a result of implementing the Codification during the quarter ended September 27,
2009.
As a result of the Companys implementation of the Codification during the quarter ended September
27, 2009, previous references to new accounting standards and literature are no longer applicable.
In the current quarter financial statements, the Company will provide reference to both new and old
guidance to assist in understanding the impacts of recently adopted accounting literature,
particularly for guidance adopted since the beginning of the current fiscal year but prior to the
Codification.
6
Table of Contents
Subsequent Events
(Included in Accounting Standards Codification (ASC) 855 Subsequent Events, previously SFAS No.
165 Subsequent Events)
SFAS No. 165 established general standards of accounting for and disclosure of events that occur
after the balance sheet date, but before the financial statements are issued or available to be
issued (subsequent events). An entity is required to disclose the date through which subsequent
events have been evaluated and the basis for that date. For public entities, this is the date the
financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are
within the scope of other GAAP and did not result in significant changes in the subsequent events
reported by the Company. SFAS No. 165 became effective for interim or annual periods ending after
June 15, 2009 and did not impact the Companys consolidated financial statements. The Company
evaluated for subsequent events through October 21, 2009, the issuance date of the Companys
financial statements. No recognized or non-recognized subsequent events were noted.
Determination of the Useful Life of Intangible Assets
(Included in ASC 350 Intangibles Goodwill and Other, previously FSP SFAS No. 142-3
Determination of the Useful Lives of Intangible Assets)
FSP SFAS No. 142-3 amended the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset under previously
issued goodwill and intangible assets topics. This change was intended to improve the consistency
between the useful life of a recognized intangible asset and the period of expected cash flows used
to measure the fair value of the asset under topics related to business combinations and other
GAAP. The requirement for determining useful lives must be applied prospectively to intangible
assets acquired after the effective date and the disclosure requirements must be applied
prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP
SFAS No. 142-3 became effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. The adoption of FSP SFAS No.
142-3 did not impact the Companys consolidated financial statements.
Noncontrolling Interests
(Included in ASC 810 Consolidation, previously SFAS No. 160 Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB No. 51)
SFAS No. 160 changed the accounting and reporting for minority interests such that they will be
recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160
became effective for fiscal years beginning after December 15, 2008 with early application
prohibited. The Company implemented SFAS No. 160 at the start of fiscal 2009 and no longer records
an intangible asset when the purchase price of a noncontrolling interest exceeds the book value at
the time of buyout. Any excess or shortfall for buyouts of noncontrolling interests in mature
restaurants is recognized as an adjustment to additional paid-in capital in stockholders equity.
Any shortfall resulting from the early buyout of noncontrolling interests will continue to be
recognized as a benefit in partner investment expense up to the initial amount recognized at the
time of buy-in. Additionally, operating losses can be allocated to noncontrolling interests even
when such allocation results in a deficit balance (i.e. book value can go negative).
The Company presents noncontrolling interests (previously shown as minority interest) as a
component of equity on its consolidated balance sheets. Minority interest expense is no longer
separately reported as a reduction to net income on the consolidated income statement, but is
instead shown below net income under the heading net income attributable to noncontrolling
interests. The adoption of SFAS No. 160 did not have any other material impact on the Companys
consolidated financial statements.
Consolidation of Variable Interest Entities Amended
(To be included in ASC 810 Consolidation, SFAS No. 167 Amendments to FASB Interpretation No.
46(R))
SFAS No. 167 amends FASB Interpretation No. 46(R) Consolidation of Variable Interest Entities
regarding certain guidance for determining whether an entity is a variable interest entity and
modifies the methods allowed for determining the primary beneficiary of a variable interest entity.
The amendments include: (1) the elimination of the exemption for qualifying special purpose
entities, (2) a new approach for determining who should consolidate a variable-interest entity, and
(3) changes to when it is necessary to reassess who should consolidate a variable-interest entity.
SFAS No. 167 is effective for the first annual reporting period beginning after November 15, 2009,
with earlier adoption prohibited. The Company will adopt SFAS No. 167 in fiscal 2010 and does not
anticipate any material impact on the Companys consolidated financial statements.
2. Discontinued Operations
Discontinued operations include results attributable to 10 Pei Wei restaurants that were closed
during the fourth quarter of 2008 and Taneko Japanese Tavern (Taneko), a third restaurant concept
developed in 2006 whose assets were sold on August 1, 2008. Loss from discontinued operations
includes both the historical results of operations as well as estimated and actual lease
termination costs associated with the 10 closed Pei Wei restaurants and Taneko.
7
Table of Contents
Loss from discontinued operations, net of tax is comprised of the following (in thousands):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, | September 28, | September 27, | September 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues |
$ | | $ | 2,536 | $ | | $ | 8,960 | ||||||||
Loss from discontinued
operations before
income tax
benefit(1) |
(28 | ) | (7,712 | ) | (876 | ) | (9,079 | ) | ||||||||
Income tax benefit |
11 | 3,019 | 342 | 3,532 | ||||||||||||
Loss from discontinued
operations, net of tax |
$ | (17 | ) | $ | (4,693 | ) | $ | (534 | ) | $ | (5,547 | ) | ||||
(1) | The three and nine month periods ended September 27, 2009 include the net impact of
non-cash charges and credits recognized in connection with lease settlement activity. The
three and nine month periods ended September 28, 2008 include a $7.5 million non-cash asset
impairment charge related to the write-off of the carrying value of long-lived assets
associated with the 10 Pei Wei store closures. |
The Company is pursuing lease termination agreements with each of the closed Pei Wei
restaurants landlords as well as potential sub-tenant agreements. Lease termination agreements for
six of the ten locations were executed as of September 27, 2009.
Activity associated with the lease termination accrual is summarized below (in thousands):
Lease | ||||
Termination | ||||
Accrual | ||||
Balance, December 28, 2008 |
$ | 2,379 | ||
Cash payments |
(1,957 | ) | ||
Charges |
1,402 | |||
Balance, September 27, 2009 |
$ | 1,824 | ||
Charges include additional amounts recognized based on availability of new information which led to
updated estimates of anticipated lease termination costs for certain closed locations where the
accrual recorded at the time of lease termination was insufficient. Cash payments include
settlement payments and ongoing rent payments. From store closure date through September 27, 2009,
the Company has recognized and reported in discontinued operations a total of $4.0 million in lease
termination charges for the closed Pei Wei locations. The lease termination accrual is included in
accrued expenses on the consolidated balance sheets with the timing of payments uncertain.
3. Income from Continuing Operations Attributable to PFCB per Share
Basic income from continuing operations attributable to PFCB per share is computed based on the
weighted average number of shares of common stock outstanding during the period. Diluted income
from continuing operations attributable to PFCB per share is computed based on the weighted average
number of shares of common stock and potentially dilutive securities, which includes options,
restricted stock and restricted stock units (RSUs) outstanding under the Companys equity plans
and the employee stock purchase plan. For the three months ended September 27, 2009 and September
28, 2008, 1.7 million and 2.3 million, respectively, of the Companys shares were excluded from the
calculation due to their anti-dilutive effect. For the nine months ended September 27, 2009 and
September 28, 2008, 2.2 million and 2.3 million, respectively, of the Companys shares were
excluded from the calculation due to their anti-dilutive effect.
4. Intangible Assets
Intangible assets were historically recognized upon the Companys buyout of noncontrolling
interests when the Companys purchase price exceeded the imputed fair value at the time of the
partners original investment. Beginning December 29, 2008, an intangible asset is no longer
recognized upon buyout of noncontrolling interests. See Recent Accounting Literature for a
discussion on noncontrolling interests. Instead, any excess of the Companys purchase price over
the imputed fair value is recognized as additional paid-in capital in equity. Intangible assets
outstanding as of December 28, 2008 continue to be amortized over their useful lives.
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Intangible assets consist of the following (in thousands):
September 27, | December 28, | |||||||
2009 | 2008 | |||||||
Intangible assets, gross |
$ | 29,863 | $ | 29,863 | ||||
Accumulated amortization |
(7,324 | ) | (5,593 | ) | ||||
Intangible assets, net |
$ | 22,539 | $ | 24,270 | ||||
5. Accrued Expenses
Accrued expenses consist of the following (in thousands):
September 27, | December 28, | |||||||
2009 | 2008 | |||||||
Accrued payroll |
$ | 19,050 | $ | 25,409 | ||||
Accrued insurance |
17,705 | 16,130 | ||||||
Sales and use tax payable |
5,234 | 5,026 | ||||||
Property tax payable |
3,925 | 4,151 | ||||||
Accrued rent |
3,608 | 4,315 | ||||||
Other accrued expenses |
16,388 | 16,131 | ||||||
Total accrued expenses |
$ | 65,910 | $ | 71,162 | ||||
6. Long-Term Debt
Credit Facility
On August 31, 2007, the Company entered into a senior credit facility (Credit Facility) with
several commercial financial institutions, which allows for borrowings of up to $150.0 million.
The Credit Facility expires on August 30, 2013 and contains customary representations, warranties,
negative and affirmative covenants, including a requirement to maintain a maximum leverage ratio,
as defined, of 2.5:1 and a minimum fixed charge coverage ratio, as defined, of 1.25:1, as well as
customary events of default and certain default provisions that could result in acceleration of the
amounts due under the Credit Facility. The Company was in compliance with these restrictions and
conditions as of September 27, 2009 as the Companys leverage ratio was 1.26:1 and the fixed charge
coverage ratio was 2.10:1.
The Credit Facility is guaranteed by the Companys material existing and future domestic
subsidiaries. As of September 27, 2009, the Company had borrowings outstanding under the Credit
Facility totaling $40.0 million as well as $11.2 million committed for the issuance of letters of
credit, which is required by insurance companies for the Companys workers compensation and
general liability insurance programs. The Company repaid $40.0 million of the previously
outstanding borrowings under the Credit Facility during the first half of fiscal 2009. Available
borrowings under the Credit Facility were $98.8 million at September 27, 2009.
Interest Rate Swap
During the second quarter of fiscal 2008, the Company entered into an interest rate swap with a
notional amount of $40.0 million. The purpose of this transaction is to provide a hedge against the
effects of changes in interest rates on a portion of the Companys current variable rate
borrowings. The Company has designated the interest rate swap as a cash flow hedge of its exposure
to variability in future cash flows attributable to interest payments on a $40.0 million tranche of
floating rate debt.
Under the terms of the interest rate swap, the Company pays a fixed rate of 3.32% on the $40.0
million notional amount and receives payments from its counterparty based on the 1-month LIBOR rate
for a term ending on May 20, 2010, effectively resulting in a fixed rate on the LIBOR component of the $40.0 million notional amount. Interest rate differentials paid
or received under the swap agreement are recognized as adjustments to interest expense.
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At September 27, 2009 and December 28, 2008, the recorded fair value of the interest rate swap was
a liability of $0.8 million and $1.2 million, respectively ($0.5 million and $0.8 million, net of
tax, respectively). The interest rate swap is reported in the consolidated balance sheets within
accrued expenses at September 27, 2009 and other liabilities at December 28, 2008 and is offset by
a corresponding amount in equity, representing net unrealized losses included in accumulated other
comprehensive loss. Such amounts will be recognized in the consolidated income statement over the
remainder of the term ending on May 20, 2010. For the three and nine months ended September 27,
2009, a $0.1 million and $0.3 million unrealized gain, respectively, was recorded in other
comprehensive loss. For the three and nine months ended September 28, 2008, an unrealized loss of
$46,000 and $47,000, respectively, was recorded in other comprehensive loss. There was no hedge
ineffectiveness recognized during the three and nine month periods ended September 27, 2009 and
September 28, 2008.
7. Fair Value Measurements
The Companys financial assets and financial liabilities measured at fair value are summarized
below (in thousands):
Fair Value Measurements as of September 27, 2009 | ||||||||||||||||||||
Quoted Prices in | ||||||||||||||||||||
Active Markets | ||||||||||||||||||||
for Identical | Significant Other | Significant | ||||||||||||||||||
September 27, | Assets/Liabilities | Observable Inputs | Unobservable Inputs | |||||||||||||||||
2009 | (Level 1) | (Level 2) | (Level 3) | Valuation Technique | ||||||||||||||||
Money markets |
$ | 16,302 | $ | | $ | 16,302 | $ | | market approach | |||||||||||
401(k) Restoration Plan investments |
3,109 | | 3,109 | | market approach | |||||||||||||||
Interest rate swap liability |
(762 | ) | | (762 | ) | | income approach | |||||||||||||
Total |
$ | 18,649 | $ | | $ | 18,649 | $ | | ||||||||||||
The Company invests excess cash in money market funds and reflects these amounts within cash and
cash equivalents on the consolidated balance sheet at a net value of 1:1 for each dollar invested.
Money market investments held by the Company were invested primarily in government backed
securities at September 27, 2009.
The Companys 401(k) Restoration Plan investments are considered trading securities and are
reported at fair value based on third party broker statements and are reflected within other assets
in the consolidated balance sheet. The realized and unrealized holding gains and losses related to
these investments are recorded in interest and other income (expense), net in the consolidated
income statements.
The fair value of the Companys interest rate swap is estimated using the net present value of a
series of cash flows on both the fixed and floating legs of the swap and is reflected within
accrued expenses in the consolidated balance sheet. These cash flows are based on yield curves
which take into account the contractual terms of the derivative, including the period to maturity
and market-based parameters such as interest rates and volatility. The yield curves used in the
valuation model are based on published data for counterparties with an AA rating. Market practice
in pricing derivatives initially assumes all counterparties have the same credit quality. The
Company mitigates derivative credit risk by transacting with highly rated counterparties.
Management has evaluated credit and nonperformance risks and believes them to be insignificant and
not warranting a credit adjustment at September 27, 2009. See Note 6 for a discussion of the
Companys interest rate swap.
8. Share-Based Compensation
Equity-Classified Awards
The Company may grant stock options for a fixed number of shares to certain employees and directors
with an exercise price equal to or greater than the fair value of the shares at the date of grant.
The Company also may grant restricted stock and RSUs with the fair value determined based on the
Companys closing stock price on the date of grant. The estimated fair value of share-based
compensation is amortized to expense over the vesting period.
Share-based compensation expense recognized for equity-classified awards is based on awards
ultimately expected to vest, and as such, it must be reduced for estimated or actual forfeitures.
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if
actual forfeitures differ from those estimates.
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The fair value for options granted was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions:
Nine Months Ended | ||||
September 28, 2008(1) | ||||
Options | ||||
Weighted average risk-free
interest rate |
3.1 | % | ||
Expected life of options (years) |
5.5 | |||
Expected stock volatility |
35.0 | % | ||
Expected dividend yield |
0.0 | % |
(1) | There were no stock options granted during the three months ended September 28, 2008 or the
three and nine months ended September 27, 2009. |
Liability-Classified Awards
Performance Units
During the first quarter of fiscal 2009, the Company awarded 600,000 performance units to each of
the Companys Co-Chief Executive Officers pursuant to the Companys 2006 Equity Incentive Plan.
Each award will vest on January 1, 2012, at which time the value of such awards, if any, will be
determined and paid in cash.
The cash value of the performance units will be equal to the amount, if any, by which the Companys
final average stock price, as defined in the agreements, exceeds the strike price. The strike price
will be adjusted, either up or down, based on the percentage change in the Russell 2000 Index
during the performance period, as defined in the agreements, which approximates three years. The
total value of the performance units is subject to a maximum value of $12.50 per unit. If the
Companys stock appreciation is less than the Russell 2000 Index, the performance units will have
no value. In the event of an executives involuntary separation without cause or a change in
control (as both terms are defined in each Chief Executive Officers employment agreement) prior to
the end of the performance period, the performance period will end and the maximum value per unit
may be calculated at a reduced amount. Additionally, if the Companys final average stock price
declines compared to the original strike price, the total value of the performance units, if any,
will be reduced by 50 percent.
The performance units are classified as liability awards and reported within other liabilities in
the consolidated balance sheet, as they will be cash-settled at the end of the performance period.
The fair value of the performance units is remeasured at each reporting period until the awards are
settled. At September 27, 2009, the fair value per performance unit was $5.59 calculated using a
Monte-Carlo simulation model which incorporates the historical performance, volatility and
correlation of the Companys stock price and the Russell 2000 Index. At September 27, 2009, the
recorded liability of the performance units was $1.4 million.
Cash-Settled Awards
During the second quarter of fiscal 2009, the Company issued cash-settled stock appreciation rights
(SARs) and cash-settled stock-based awards (stock-based awards) to members of its Board of
Directors. The cash value of the SARs will be based on the appreciation of the Companys stock
price on the date of settlement compared to the Companys stock price on the date of grant. The
cash value of the stock-based awards will be based on the Companys stock price on the date of
settlement. At the election of each applicable director, the settlement date of stock-based awards
was deferred until the earlier of the date they cease serving on the Companys Board of Directors
or a change in control of the Company. During the third quarter of fiscal 2009, the Company granted
stock-based awards to eligible employees in conjunction with its annual long-term incentive award
grant. Both SARs and stock-based awards are classified as liability awards and reported within
other liabilities in the consolidated balance sheet, as they will be paid in cash on the settlement
date.
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The fair value of the cash-settled awards was estimated using a Black-Scholes option pricing model
with the following weighted average assumptions:
Three and Nine Months Ended | ||||||||
September 27, 2009(1) | September 27, 2009(1) | |||||||
Stock-Based Awards | SARs | |||||||
Weighted average
risk-free interest rate |
1.6 | % | 1.9 | % | ||||
Expected life of
cash-settled awards
(years) |
3.5 | 4.0 | ||||||
Expected stock volatility |
48.3 | % | 45.2 | % | ||||
Expected dividend yield |
0.0 | % | 0.0 | % |
(1) | There were no liability
awards granted during the three and nine months ended September
28, 2008. |
The fair value of SARs is equal to the value calculated per the Black-Scholes model. The fair
value of stock-based awards is equal to the sum of the value calculated per the Black-Scholes model
and the Companys stock price at the reporting date. The fair value of cash-settled awards will be
remeasured at each reporting period until the awards are settled. At September 27, 2009, the
recorded liability of cash-settled awards was $0.6 million. Share-based compensation expense for
both performance units and cash-settled awards is recognized ratably over the service period with
fair value fluctuations recognized as cumulative adjustments to share-based compensation expense at
the end of each reporting period.
Share-Based Compensation Expense
Share-based compensation expense from continuing operations for equity and liability-classified
awards is classified as follows (in thousands):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, | September 28, | September 27, | September 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Equity-classified awards: |
||||||||||||||||
Labor |
$ | 68 | $ | 120 | $ | 259 | $ | 416 | ||||||||
General and administrative |
1,607 | 1,845 | 5,528 | 5,992 | ||||||||||||
Liability-classified awards: |
||||||||||||||||
General and administrative |
1,088 | | 2,034 | | ||||||||||||
Total share-based compensation |
2,763 | 1,965 | 7,821 | 6,408 | ||||||||||||
Less: tax benefit |
(786 | ) | (417 | ) | (2,217 | ) | (1,615 | ) | ||||||||
Total share-based
compensation, net of tax |
$ | 1,977 | $ | 1,548 | $ | 5,604 | $ | 4,793 | ||||||||
Share-based compensation expense presented above excludes $5,000 and $43,000 ($3,000 and $28,000,
net of tax) for the three and nine months ended September 28, 2008, respectively, related to
discontinued operations. There was no share-based compensation expense recorded in discontinued
operations for the three and nine months ended September 27, 2009.
Non-vested Share-Based Compensation Expense
At September 27, 2009, non-vested share-based compensation for equity-classified awards (net of
actual forfeitures for options and estimated forfeitures for restricted stock), totaled $5.2
million for stock options and $4.0 million for restricted stock. This expense will be recognized
over the remaining weighted average vesting period, which is approximately 1.3 years for stock
options and 1.6 years for restricted stock.
At September 27, 2009, non-vested share-based compensation for liability-classified awards (based
on current fair value, which is updated each reporting period), totaled $5.3 million for
performance units and $5.6 million for cash-settled awards. This expense will be recognized over
the remaining weighted average vesting period, which is approximately 2.3 years for performance
units and 2.8 years for cash-settled awards.
9. Segment Reporting
The Company operates exclusively in the United States food-service industry and has determined that
its reportable segments based on the Companys methods of internal reporting and management
structure are Bistro and Pei Wei. There were no material amounts of revenues or transfers among
reportable segments.
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The table below presents information about reportable segments (in thousands):
Shared Services | ||||||||||||||||
Total | and Other | Bistro | Pei Wei | |||||||||||||
For the Three Months Ended September 27, 2009: |
||||||||||||||||
Revenues |
$ | 290,329 | $ | | $ | 217,093 | $ | 73,236 | ||||||||
Segment profit |
30,593 | (508 | ) | 25,372 | 5,729 | |||||||||||
Capital expenditures |
18,086 | 554 | 12,948 | 4,584 | ||||||||||||
Depreciation and amortization |
19,055 | 508 | 13,900 | 4,647 | ||||||||||||
For the Three Months Ended September 28, 2008: |
||||||||||||||||
Revenues |
$ | 295,877 | $ | | $ | 226,443 | $ | 69,434 | ||||||||
Segment profit |
30,377 | (345 | ) | 26,492 | 4,230 | |||||||||||
Capital expenditures |
23,647 | (21 | ) | 18,621 | 5,047 | |||||||||||
Depreciation and amortization |
17,235 | 345 | 12,771 | 4,119 | ||||||||||||
For the Nine Months Ended September 27, 2009: |
||||||||||||||||
Revenues |
$ | 901,526 | $ | | $ | 679,378 | $ | 222,148 | ||||||||
Segment profit |
108,233 | (1,415 | ) | 89,711 | 19,937 | |||||||||||
Capital expenditures |
38,859 | 2,517 | 27,738 | 8,604 | ||||||||||||
Depreciation and amortization |
56,126 | 1,415 | 41,274 | 13,437 | ||||||||||||
For the Nine Months Ended September 28, 2008: |
||||||||||||||||
Revenues |
$ | 903,327 | $ | | $ | 694,504 | $ | 208,823 | ||||||||
Segment profit |
101,537 | (1,037 | ) | 87,109 | 15,465 | |||||||||||
Capital expenditures |
69,439 | 178 | 53,794 | 15,467 | ||||||||||||
Depreciation and amortization |
50,755 | 1,037 | 37,830 | 11,888 | ||||||||||||
As of September 27, 2009: |
||||||||||||||||
Total assets |
$ | 623,260 | $ | 21,311 | $ | 492,335 | $ | 109,614 | ||||||||
Goodwill |
6,819 | | 6,566 | 253 | ||||||||||||
As of December 28, 2008: |
||||||||||||||||
Total assets |
$ | 667,363 | $ | 20,478 | $ | 534,224 | $ | 112,661 | ||||||||
Goodwill |
6,819 | | 6,566 | 253 |
In addition to using consolidated GAAP results in evaluating the Companys financial results,
a primary measure used by executive management in assessing the performance of existing restaurant
businesses is segment profitability (sometimes referred to as restaurant operating income).
Segment profitability is defined as income from operations before general and administrative,
preopening and partner investment expenses, but including a deduction for net income attributable
to noncontrolling interests. Because preopening and partner investment expenses are associated with
expansion of the Companys business and vary in timing and magnitude, they make an accurate
assessment of its ongoing operations more difficult and are therefore excluded. Additionally,
general and administrative expenses are only included in the Companys consolidated financial
results as these costs relate to support of both restaurant businesses and are generally not
specifically identifiable to individual restaurant operations. As the Companys expansion is
funded entirely from its ongoing restaurant operations, segment profitability is a consideration
when determining whether and when to open additional restaurants.
Reconciliation of Non-GAAP Financial Information to GAAP measures (in thousands):
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 27, | September 28, | September 27, | September 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Segment profit |
$ | 30,593 | $ | 30,377 | $ | 108,233 | $ | 101,537 | ||||||||
Less: General and administrative |
(20,408 | ) | (18,152 | ) | (60,745 | ) | (55,801 | ) | ||||||||
Less: Preopening expense |
(1,550 | ) | (1,519 | ) | (2,499 | ) | (6,146 | ) | ||||||||
Less: Partner investment expense |
(18 | ) | (99 | ) | 537 | (10 | ) | |||||||||
Less: Interest and other income (expense), net |
85 | (895 | ) | (1,292 | ) | (2,778 | ) | |||||||||
Add: Net income attributable to
noncontrolling interests |
155 | 367 | 813 | 1,559 | ||||||||||||
Income from continuing operations before taxes |
$ | 8,857 | $ | 10,079 | $ | 45,047 | $ | 38,361 | ||||||||
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10. Commitments and Contingencies
The Company is engaged in various legal actions, which arise in the ordinary course of its
business. The Company is also currently under examination by various taxing authorities for years
not closed by the statute of limitations. Although there can be no assurance as to the ultimate
disposition of these matters, it is the opinion of the Companys management, based upon the
information available at this time, that the outcome of these matters, individually or in the
aggregate, will not have a material adverse effect on the results of operations, liquidity or
financial condition of the Company.
In August 2009, the Company entered into an agreement with FRC LLC, d/b/a True Food Kitchen, to
provide debt capital for the early-stage development of True Food Kitchen restaurants. The
agreement provides for up to a $10.0 million loan facility to develop True Food Kitchen restaurants
and can, under certain conditions, be converted by P.F. Changs into a majority equity position in
True Food Kitchen. As of September 27, 2009, no borrowings were outstanding under the loan
facility.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
This information should be read in conjunction with the consolidated financial statements and notes
thereto included in Item 1 of Part I of this Quarterly Report and the audited consolidated
financial statements and notes thereto and Managements Discussion and Analysis of Financial
Condition and Results of Operations for the year ended December 28, 2008 contained in our 2008
Annual Report on Form 10-K.
Some of the statements in this section contain forwardlooking statements, which involve risks and
uncertainties. In some cases, you can identify forward-looking statements by terms such as may,
will, should, expect, plan, intend, forecast, anticipate, believe, estimate, predict, potential,
continue or the negative of these terms or other comparable terminology. The forward-looking
statements contained in this section involve known and unknown risks, uncertainties and situations
that may cause our or our industrys actual results, level of activity, performance or achievements
to be materially different from any future results, levels of activity, performance or achievements
expressed or implied by these statements. Factors that might cause actual events or results to
differ materially from those indicated by these forward-looking statements may include the matters
listed under Risk Factors in Item 1A (a detailed description of which can be found under the
caption Risk Factors in our most recently filed Form 10-K) and elsewhere in this Form 10-Q,
including, but not limited to, failure of our existing or new restaurants to achieve predicted
results, changes in general economic and political conditions that affect consumer spending; our
initiatives to improve the operating performance of our Pei Wei concept; changes in food costs; and
our dependence on the financial performance of restaurants concentrated in certain geographic
areas. Because we cannot guarantee future results, levels of activity, performance or achievements,
you should not place undue reliance on these forward-looking statements.
Overview
We own and operate two restaurant concepts in the Asian niche: P.F. Changs China Bistro (Bistro)
and Pei Wei Asian Diner (Pei Wei).
Bistro
As of September 27, 2009, we owned and operated 192 full service Bistro restaurants that feature a
blend of high quality, traditional Chinese cuisine and attentive service in a high energy
contemporary bistro setting. P.F. Changs was formed in early 1996 with the acquisition of the
four original Bistro restaurants and the hiring of an experienced management team. Utilizing a
partnership management philosophy, we embarked on a strategic expansion of the concept targeted at
major metropolitan areas throughout the United States. We own and operate all of our restaurants
with the exception of two Bistro restaurants located in Hawaii, which are operated under a joint
venture arrangement in which we own a noncontrolling interest.
We intend to open eight new Bistros in 2009, three of which were open by the end of the third
quarter of 2009. We have signed lease agreements for all planned fiscal 2009 development and we
have exercised our lease renewal options for all leases that were scheduled to expire in 2009. Our
Bistro restaurants typically range in size from 6,000 to 7,500 square feet and require an average
total cash investment of approximately $2.8 million to $3.0 million and total invested capital of
approximately $4.0 million per restaurant (net of estimated landlord reimbursements). Total
invested capital includes the present value of the operating lease obligation for the initial lease
term of each property, which can vary greatly depending on the specific trade area. Preopening
expenses are expected to average approximately $350,000 to $400,000 per restaurant during fiscal
2009.
Pei Wei
As of September 27, 2009, we owned and operated 164 quick casual Pei Wei restaurants that serve
freshly prepared, wok-seared, contemporary pan-Asian cuisine in a relaxed, warm environment with
friendly, attentive counter service and take-out flexibility. We opened our first Pei Wei
restaurant in July 2000 in the Phoenix, Arizona area and have expanded the concept significantly
since that time. We closed 10 Pei Wei restaurants during the fourth quarter of 2008 and the results
of these restaurants are reported within discontinued operations in our consolidated income
statements for all periods presented. See Note 2 to our consolidated financial statements for
further discussion.
We intend to open seven new Pei Wei restaurants in 2009, five of which were open by the end of the
third quarter of 2009. We have signed lease agreements for all planned fiscal 2009 development.
Our Pei Wei restaurants are generally 2,800 to 3,400 square feet in size and require an average
total cash investment of approximately $800,000 to $900,000 and total invested capital of
approximately $1.5 million per restaurant (net of estimated landlord reimbursements). Total
invested capital includes the present value of the operating lease obligation for the initial lease
term of each property, which can vary greatly depending on the specific trade area. Preopening
expenses are expected to average approximately $140,000 to $160,000 per restaurant during fiscal
2009.
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Global Brand Development
International
We are actively pursuing international expansion of our Bistro restaurants. During the second
quarter of fiscal 2009, we signed two development and licensing agreements with partners who will
develop and operate Bistro restaurants in international markets.
The first development and licensing agreement was signed with M.H. Alshaya, the Middle Easts
leading retailer, to develop 34 Bistro restaurants throughout the Middle East over the next 10
years. The first restaurant is scheduled to open in Kuwait City during the fourth quarter of
fiscal 2009.
The second development and licensing agreement was signed with Alsea S.A.B. de C.V., the leading
quick service restaurant operator in Mexico, to develop 30 Bistro restaurants in Mexico over the
next 10 years. The first restaurant is scheduled to open in Mexico City during the fourth quarter
of fiscal 2009.
We continue to engage in discussions with additional potential partners regarding expansion of the
Bistro into various international markets.
Retail
In August 2009, we entered into an exclusive licensing agreement with Unilever to develop and
launch a new premium line of frozen Asian-style entrées in the U.S., under the P.F. Changs brand.
The new products are expected to be available in retail outlets during the first half of fiscal
2010.
Other Ventures
In August 2009, we entered into an agreement with FRC LLC, d/b/a True Food Kitchen, to provide debt
capital for the early-stage development of True Food Kitchen restaurants. The agreement provides
for up to a $10.0 million loan facility to develop True Food Kitchen restaurants and can, under
certain conditions, be converted by P.F. Changs into a majority equity position in True Food
Kitchen. As of September 27, 2009, no borrowings were outstanding under the loan facility.
Critical Accounting Policies
Our critical accounting policies are those that require significant judgment. There have been no
material changes to the critical accounting policies previously reported in our 2008 Annual Report
on Form 10-K.
Results of Operations
The following tables set forth certain unaudited quarterly information for the three and nine month
periods ended September 27, 2009 and September 28, 2008, respectively. This quarterly information
has been prepared on a basis consistent with the audited financial statements and, in the opinion
of management, includes all adjustments, consisting of normal recurring adjustments, necessary for
a fair presentation of the information for the periods presented. Our quarterly operating results
may fluctuate significantly as a result of a variety of factors, and operating results for any
quarter are not necessarily indicative of results for a full fiscal year.
One of the factors that has in the past caused fluctuations in our operating results is the amount
and timing of preopening expenses. Historically, we have experienced variability in the amount and
percentage of revenues attributable to preopening expenses. We typically incur the most significant
portion of preopening expenses associated with a given restaurant within the two months immediately
preceding, and the month of, the opening of the restaurant. Additionally, there may be variability
in the amount and percentage of revenues attributable to partner investment expense as a result of
the timing of opening new Pei Wei restaurants where we continue to offer partnership interests and
the timing of our purchases of existing partner interests.
In addition, our experience to date has been that labor and operating costs associated with a newly
opened restaurant for the first several months of operation are materially greater than what can be
expected after that time, both in aggregate dollars and as a percentage of revenues. Accordingly,
the volume and timing of new restaurant openings has historically had a meaningful impact on
preopening, labor, operating and partner investment expenses.
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Noncontrolling Interests
At the beginning of fiscal 2009, we changed our accounting and reporting for minority interests,
which are now recharacterized as noncontrolling interests and classified as a component of equity.
Minority interest expense is no longer separately reported as a reduction to net income on the
consolidated income statements and is instead shown below net income under the heading Net income
attributable to noncontrolling interests. See Note 1 to our consolidated financial statements for
further discussion of noncontrolling interests.
Results for the three months ended September 27, 2009 and September 28, 2008
Our consolidated operating results were as follows (dollars in thousands):
Three Months Ended | ||||||||||||||||||||||||
September 27, | % of | September 28, | % of | % | ||||||||||||||||||||
2009 | Revenues | 2008 | Revenues | Change | Change | |||||||||||||||||||
Revenues |
$ | 290,329 | 100.0 | % | $ | 295,877 | 100.0 | % | $ | (5,548 | ) | (1.9 | %) | |||||||||||
Costs and expenses: |
||||||||||||||||||||||||
Cost of sales |
76,364 | 26.3 | % | 80,368 | 27.2 | % | (4,004 | ) | (5.0 | %) | ||||||||||||||
Labor |
95,713 | 33.0 | % | 98,059 | 33.1 | % | (2,346 | ) | (2.4 | %) | ||||||||||||||
Operating |
50,883 | 17.5 | % | 52,201 | 17.6 | % | (1,318 | ) | (2.5 | %) | ||||||||||||||
Occupancy |
17,566 | 6.1 | % | 17,270 | 5.8 | % | 296 | 1.7 | % | |||||||||||||||
General and administrative |
20,408 | 7.0 | % | 18,152 | 6.1 | % | 2,256 | 12.4 | % | |||||||||||||||
Depreciation and amortization |
19,055 | 6.6 | % | 17,235 | 5.8 | % | 1,820 | 10.6 | % | |||||||||||||||
Preopening expense |
1,550 | 0.5 | % | 1,519 | 0.5 | % | 31 | 2.0 | % | |||||||||||||||
Partner investment expense |
18 | 0.0 | % | 99 | 0.0 | % | (81 | ) | (81.8 | %) | ||||||||||||||
Total costs and expenses |
281,557 | 97.0 | % | 284,903 | 96.3 | % | (3,346 | ) | (1.2 | %) | ||||||||||||||
Income from operations |
8,772 | 3.0 | % | 10,974 | 3.7 | % | (2,202 | ) | (20.1 | %) | ||||||||||||||
Interest and other income (expense), net |
85 | 0.0 | % | (895 | ) | (0.3 | %) | 980 | | |||||||||||||||
Income from continuing operations before taxes |
8,857 | 3.1 | % | 10,079 | 3.4 | % | (1,222 | ) | (12.1 | %) | ||||||||||||||
Provision for income taxes |
(2,477 | ) | (0.9 | %) | (2,057 | ) | (0.7 | %) | (420 | ) | 20.4 | % | ||||||||||||
Income from continuing operations, net of tax |
6,380 | 2.2 | % | 8,022 | 2.7 | % | (1,642 | ) | (20.5 | %) | ||||||||||||||
Loss from discontinued operations, net of tax |
(17 | ) | 0.0 | % | (4,693 | ) | (1.6 | %) | 4,676 | (99.6 | %) | |||||||||||||
Net income |
6,363 | 2.2 | % | 3,329 | 1.1 | % | 3,034 | 91.1 | % | |||||||||||||||
Less: Net income attributable to
noncontrolling interests |
155 | 0.1 | % | 367 | 0.1 | % | (212 | ) | (57.8 | %) | ||||||||||||||
Net income attributable to PFCB |
$ | 6,208 | 2.1 | % | $ | 2,962 | 1.0 | % | $ | 3,246 | | |||||||||||||
Certain percentage amounts may not sum due to rounding. Percentages over 100% are not displayed.
Selected operating statistics for the Bistro were as follows (dollars in thousands):
Three Months Ended | ||||||||||||||||||||||||
September 27, | % of | September 28, | % of | % | ||||||||||||||||||||
2009 | Revenues | 2008 | Revenues | Change | Change | |||||||||||||||||||
Revenues |
$ | 217,093 | 100.0 | % | $ | 226,443 | 100.0 | % | $ | (9,350 | ) | (4.1 | %) | |||||||||||
Costs and expenses: |
||||||||||||||||||||||||
Cost of sales |
56,624 | 26.1 | % | 61,430 | 27.1 | % | (4,806 | ) | (7.8 | %) | ||||||||||||||
Labor |
71,216 | 32.8 | % | 74,387 | 32.9 | % | (3,171 | ) | (4.3 | %) | ||||||||||||||
Operating |
37,487 | 17.3 | % | 38,556 | 17.0 | % | (1,069 | ) | (2.8 | %) | ||||||||||||||
Occupancy |
12,390 | 5.7 | % | 12,536 | 5.5 | % | (146 | ) | (1.2 | %) | ||||||||||||||
Depreciation and amortization |
13,900 | 6.4 | % | 12,771 | 5.6 | % | 1,129 | 8.8 | % | |||||||||||||||
Preopening expense |
1,004 | 0.5 | % | 732 | 0.3 | % | 272 | 37.2 | % | |||||||||||||||
Partner investment expense |
| 0.0 | % | (103 | ) | 0.0 | % | 103 | (100.0 | %) | ||||||||||||||
Net income attributable to noncontrolling interests |
104 | 0.0 | % | 271 | 0.1 | % | (167 | ) | (61.6 | %) |
17
Table of Contents
Selected operating statistics for Pei Wei were as follows (dollars in thousands):
Three Months Ended | ||||||||||||||||||||||||
September 27, | % of | September 28, | % of | % | ||||||||||||||||||||
2009 | Revenues | 2008 | Revenues | Change | Change | |||||||||||||||||||
Revenues |
$ | 73,236 | 100.0 | % | $ | 69,434 | 100.0 | % | $ | 3,802 | 5.5 | % | ||||||||||||
Costs and expenses: |
||||||||||||||||||||||||
Cost of sales |
19,740 | 27.0 | % | 18,938 | 27.3 | % | 802 | 4.2 | % | |||||||||||||||
Labor |
24,497 | 33.4 | % | 23,672 | 34.1 | % | 825 | 3.5 | % | |||||||||||||||
Operating |
13,396 | 18.3 | % | 13,645 | 19.7 | % | (249 | ) | (1.8 | %) | ||||||||||||||
Occupancy |
5,176 | 7.1 | % | 4,734 | 6.8 | % | 442 | 9.3 | % | |||||||||||||||
Depreciation and amortization |
4,647 | 6.3 | % | 4,119 | 5.9 | % | 528 | 12.8 | % | |||||||||||||||
Preopening expense |
546 | 0.7 | % | 787 | 1.1 | % | (241 | ) | (30.6 | %) | ||||||||||||||
Partner investment expense |
18 | 0.0 | % | 202 | 0.3 | % | (184 | ) | (91.1 | %) | ||||||||||||||
Net income attributable to noncontrolling interests |
51 | 0.1 | % | 96 | 0.1 | % | (45 | ) | (46.9 | %) |
Revenues
Our revenues are derived primarily from food and beverage sales. Each segment contributed as
follows:
Bistro: The decrease in revenues was attributable to an $18.7 million decline in revenues for
stores that opened prior to the third quarter of 2008, due to a significant reduction in overall
guest traffic combined with a slight decline in the average check. The decrease was partially
offset by incremental new store revenues of $9.3 million, comprised of a full quarter of
revenues from the seven new stores that opened during the last two quarters of 2008 and revenues
generated by the three new Bistro restaurants that opened during 2009.
Pei Wei: The increase in revenues was attributable to incremental new store revenues of $4.3
million, comprised of a full quarter of revenues from the 10 new stores that opened during the
last two quarters of 2008 and revenues generated by the five new Pei Wei restaurants that opened
during 2009. The increase was partially offset by a $0.5 million decline in revenues for stores
that opened prior to the third quarter of 2008, as well as a slight decline in the average
check, partially offset by a slight increase in overall guest traffic.
Costs and Expenses
Cost of Sales
Cost of sales is comprised of the cost of food and beverages. Each segment contributed as follows:
Bistro: Cost of sales as a percentage of revenues decreased due to the net impact of favorable
product mix shifts combined with operational efficiencies, as well as favorable produce and
non-alcoholic beverage costs.
Pei Wei: Cost of sales as a percentage of revenues decreased due to favorable produce costs as
well as the net impact of favorable product mix shifts combined with operational efficiencies.
These decreases were partially offset by the impact of costs related
to limited time offer menu items.
Labor
Labor expenses consist of restaurant management salaries, hourly staff payroll costs, other
payroll-related items and imputed partner bonus expense. Imputed partner bonus expense represents
the portion of restaurant level operating results that is allocable to certain noncontrolling
partners, but is presented as bonus expense for accounting purposes. Each segment contributed as
follows:
Bistro: Labor expenses as a percentage of revenues decreased primarily due to improved labor
efficiencies in culinary and hospitality positions, the benefit of reduced workers compensation
insurance liabilities resulting from lower than anticipated claim development, and lower
management incentive accruals. These declines were partially offset by the impact of decreased
leverage on lower average weekly sales on the portion of labor expenses that is fixed in nature
as well as higher health insurance costs.
18
Table of Contents
Pei Wei: Labor expenses as a percentage of revenues decreased primarily due to improved labor
efficiencies in culinary and hospitality positions, the benefit of reduced workers compensation
insurance liabilities resulting from lower than anticipated claim development, and lower manager
salaries resulting from reduced management headcount. These declines were partially offset by
higher expenses associated with the utilization of additional key hourly employees and the
impact of decreased leverage on lower average weekly sales on the portion of labor expenses that
is fixed in nature as well as higher health insurance costs.
Operating
Operating expenses consist primarily of various restaurant-level costs such as repairs and
maintenance, utilities and marketing, certain of which are variable and may fluctuate with
revenues. Our experience to date has been that operating costs during the first four to nine months
of a newly opened restaurant are materially greater than what can be expected after that time, both
in aggregate dollars and as a percentage of revenues. Also, expenditures associated with marketing
expenses are discretionary in nature and the timing and amount of marketing spend will vary. Each
segment contributed as follows:
Bistro: Operating expenses as a percentage of revenues increased primarily due to the impact of
decreased leverage on lower average weekly sales on the portion of operating costs that is fixed
in nature as well as higher repairs and maintenance expense. These increases were partially
offset by lower utilities costs resulting from favorable rates and lower usage, as well as lower
marketing spend.
Pei Wei: Operating expenses as a percentage of revenues decreased primarily due to lower
utilities costs resulting from favorable rates, partially offset by higher usage. Lower menu and
printing costs as well as lower disposables supplies expense contributed to the decrease to a
lesser extent. These declines were partially offset by the impact of decreased leverage on lower
average weekly sales on the portion of operating costs that is fixed in nature as well as higher
repairs and maintenance expense.
Occupancy
Occupancy costs include both fixed and variable portions of rent, common area maintenance charges,
property and general liability insurance and property taxes. Each segment contributed as follows:
Bistro: Occupancy costs as a percentage of revenues increased primarily due to the impact of
decreased leverage on lower average weekly sales, partially offset by lower contingent rent
expense.
Pei Wei: Occupancy costs as a percentage of revenues increased primarily due to the impact of
decreased leverage on lower average weekly sales.
General and Administrative
General and administrative expenses are comprised of costs associated with corporate and
administrative functions that support restaurant development and operations and provide
infrastructure to support future growth including, but not limited to, management and staff
compensation, employee benefits, travel, legal and professional fees, technology and market
research.
Consolidated general and administrative costs increased primarily due to higher share-based
compensation expense primarily driven by the performance unit award grants issued to our co-CEOs
during the first quarter of 2009 and the cash-settled liability awards issued during the first
three quarters of fiscal 2009, as well as additional compensation expense resulting from
unrealized holding gains associated with investments in the 401(k) Restoration Plan and higher
management incentive accruals.
Depreciation and Amortization
Depreciation and amortization expenses include the depreciation of fixed assets, gains and losses
on disposal of assets and the amortization of intangible assets, software and non-transferable
liquor license fees.
Depreciation and amortization increased at both Bistro and Pei Wei primarily due to additional
depreciation on restaurants that opened during the last quarter of fiscal 2008 and during fiscal
2009 as well as an increase in retirements of assets that had not been fully depreciated. As a
percentage of revenues, depreciation and amortization increased at both Bistro and Pei Wei due to
the impact of decreased leverage resulting from lower average weekly sales.
19
Table of Contents
Preopening Expense
Preopening expenses, which are expensed as incurred, consist of expenses incurred prior to opening
a new restaurant and are comprised principally of manager salaries and relocation costs, employee
payroll and related training costs. Preopening expenses also
include straight-line rent expense for the period between the possession date of leased premises
and the restaurant opening date. Each segment contributed as follows:
Bistro: Preopening expense increased primarily due to the impact of opening two new restaurants
during the third quarter of 2009 compared to opening no new restaurants during the third quarter
of 2008, partially offset by the timing of expenses for new restaurant openings scheduled for
the remainder of fiscal 2009 compared to fiscal 2008.
Pei Wei: Preopening expense decreased primarily due to the impact of opening three new
restaurants during the third quarter of 2009 compared to opening six new restaurants during the
third quarter of 2008.
Partner Investment Expense
Partner investment expense represents the difference between the imputed fair value of
noncontrolling interests at the time our partners invest in our restaurants and our partners cash
contributions for those ownership interests. Additionally, for those interests that are bought out
prior to the restaurant reaching maturity (typically after five years of operation), partner
investment expense includes a reversal of previously recognized expense for the difference between
the fair value of the noncontrolling interest at inception date and the fair value at the date of
repurchase, to the extent that the former is greater. Each segment contributed as follows:
Bistro: All partner investment expense activity for the Bistro is related to early buyouts of
noncontrolling interests. The change in partner investment expense resulted from fewer early
buyouts of noncontrolling interests during the third quarter of 2009 as compared to the third
quarter of 2008.
Pei Wei: Partner investment expense decreased primarily due to the impact of opening fewer new
restaurants during the third quarter of 2009 compared to the third quarter of 2008, and, to a
lesser extent, the impact of expense reversals related to noncontrolling interest buyouts.
Interest and Other Income (Expense), Net
Interest expense recognized primarily consists of interest costs in excess of amounts capitalized
related to our outstanding credit line and other borrowings, as well as accretion expense related
to our conditional asset retirement obligations. Interest income earned primarily relates to
interest-bearing overnight deposits. Realized and unrealized holding gains (losses) related to
investments in the 401(k) Restoration Plan are included within other income (expense), with a
corresponding offset in general and administrative expense.
The change in consolidated interest and other income (expense), net was primarily due to unrealized
holding gains during the current year compared to unrealized holding losses in the prior year
associated with investments in the 401(k) Restoration Plan and lower interest expense resulting
from the repayment of $40.0 million of outstanding credit line borrowings. We expect to recognize
net interest expense until such time as we further lower our outstanding debt levels or increase
our development.
Provision for Income Taxes
Our effective tax rate from continuing operations, including discrete items and deduction for
noncontrolling interests, was 28.5% for the third quarter of 2009 compared to 21.2% for the third
quarter of 2008. The third quarter of 2008 includes the additional tax benefit of the reduction of
forecasted pretax income for the full year. Prior year quarter also includes the impact of a change
in estimate related to amended tax returns. Besides the effect of the change in estimate related to
amended returns, the income tax rate for the third quarter of both fiscal 2009 and fiscal 2008
differed from the expected provision for income taxes, which is derived by applying the statutory
income tax rate, primarily as a result of FICA tip credits.
Management has evaluated all positive and negative evidence concerning the realizability of
deferred tax assets and has determined that, with the exception of a small amount of state net
operating losses, we will recognize sufficient future taxable income to realize the benefit of our
deferred tax assets.
20
Table of Contents
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests represents the portion of our net income which
is attributable to the collective ownership interests of our noncontrolling partners. In many of
our restaurants, we employ a partnership management structure whereby we have entered into a series
of partnership agreements with our regional managers, certain of our general managers, and certain
of our executive chefs. Each segment contributed as follows:
Bistro: Net income attributable to noncontrolling interests as a percentage of revenues
decreased due to the impact of noncontrolling interest buyouts occurring since the beginning of
fiscal 2008. These buyouts reduced the number of noncontrolling interests from 79 at the
beginning of the third quarter of fiscal 2008 to 29 as of September 27, 2009.
Pei Wei: Net income attributable to noncontrolling interests as a percentage of revenues was
consistent with the prior year primarily due to the impact of 118 noncontrolling interest
buyouts occurring since the beginning of fiscal 2008, offset by the impact of higher restaurant
net income.
Results for the nine months ended September 27, 2009 and September 28, 2008
Our consolidated operating results were as follows (dollars in thousands):
Nine Months Ended | ||||||||||||||||||||||||
September 27, | % of | September 28, | % of | |||||||||||||||||||||
2009 | Revenues | 2008 | Revenues | Change | % Change | |||||||||||||||||||
Revenues |
$ | 901,526 | 100.0 | % | $ | 903,327 | 100.0 | % | $ | (1,801 | ) | (0.2 | %) | |||||||||||
Costs and expenses: |
||||||||||||||||||||||||
Cost of sales |
239,093 | 26.5 | % | 246,030 | 27.2 | % | (6,937 | ) | (2.8 | %) | ||||||||||||||
Labor |
294,531 | 32.7 | % | 301,411 | 33.4 | % | (6,880 | ) | (2.3 | %) | ||||||||||||||
Operating |
150,383 | 16.7 | % | 149,628 | 16.6 | % | 755 | 0.5 | % | |||||||||||||||
Occupancy |
52,347 | 5.8 | % | 52,407 | 5.8 | % | (60 | ) | (0.1 | %) | ||||||||||||||
General and administrative |
60,745 | 6.7 | % | 55,801 | 6.2 | % | 4,944 | 8.9 | % | |||||||||||||||
Depreciation and amortization |
56,126 | 6.2 | % | 50,755 | 5.6 | % | 5,371 | 10.6 | % | |||||||||||||||
Preopening expense |
2,499 | 0.3 | % | 6,146 | 0.7 | % | (3,647 | ) | (59.3 | %) | ||||||||||||||
Partner investment expense |
(537 | ) | (0.1 | %) | 10 | 0.0 | % | (547 | ) | | ||||||||||||||
Total costs and expenses |
855,187 | 94.9 | % | 862,188 | 95.4 | % | (7,001 | ) | (0.8 | %) | ||||||||||||||
Income from operations |
46,339 | 5.1 | % | 41,139 | 4.6 | % | 5,200 | 12.6 | % | |||||||||||||||
Interest and other income (expense), net |
(1,292 | ) | (0.1 | %) | (2,778 | ) | (0.3 | %) | 1,486 | (53.5 | %) | |||||||||||||
Income from continuing operations before taxes |
45,047 | 5.0 | % | 38,361 | 4.2 | % | 6,686 | 17.4 | % | |||||||||||||||
Provision for income taxes |
(12,538 | ) | (1.4 | %) | (9,274 | ) | (1.0 | %) | (3,264 | ) | 35.2 | % | ||||||||||||
Income from continuing operations, net of tax |
32,509 | 3.6 | % | 29,087 | 3.2 | % | 3,422 | 11.8 | % | |||||||||||||||
Loss from discontinued operations, net of tax |
(534 | ) | (0.1 | %) | (5,547 | ) | (0.6 | %) | 5,013 | (90.4 | %) | |||||||||||||
Net income |
31,975 | 3.5 | % | 23,540 | 2.6 | % | 8,435 | 35.8 | % | |||||||||||||||
Less: Net income attributable to noncontrolling interests |
813 | 0.1 | % | 1,559 | 0.2 | % | (746 | ) | (47.9 | %) | ||||||||||||||
Net income attributable to PFCB |
$ | 31,162 | 3.5 | % | $ | 21,981 | 2.4 | % | $ | 9,181 | 41.8 | % | ||||||||||||
Certain percentage amounts may not sum due to rounding. Percentages over 100% are not displayed.
Selected operating statistics for the Bistro were as follows (dollars in thousands):
Nine Months Ended | ||||||||||||||||||||||||
September 27, | % of | September 28, | % of | |||||||||||||||||||||
2009 | Revenues | 2008 | Revenues | Change | % Change | |||||||||||||||||||
Revenues |
$ | 679,378 | 100.0 | % | $ | 694,504 | 100.0 | % | $ | (15,126 | ) | (2.2 | %) | |||||||||||
Costs and expenses: |
||||||||||||||||||||||||
Cost of sales |
179,336 | 26.4 | % | 188,839 | 27.2 | % | (9,503 | ) | (5.0 | %) | ||||||||||||||
Labor |
220,553 | 32.5 | % | 229,858 | 33.1 | % | (9,305 | ) | (4.0 | %) | ||||||||||||||
Operating |
110,833 | 16.3 | % | 111,483 | 16.1 | % | (650 | ) | (0.6 | %) | ||||||||||||||
Occupancy |
37,243 | 5.5 | % | 38,247 | 5.5 | % | (1,004 | ) | (2.6 | %) | ||||||||||||||
Depreciation and amortization |
41,274 | 6.1 | % | 37,830 | 5.4 | % | 3,444 | 9.1 | % | |||||||||||||||
Preopening expense |
1,578 | 0.2 | % | 3,732 | 0.5 | % | (2,154 | ) | (57.7 | %) | ||||||||||||||
Partner investment expense |
(168 | ) | 0.0 | % | (848 | ) | (0.1 | %) | 680 | (80.2 | %) | |||||||||||||
Net income attributable to noncontrolling interests |
428 | 0.1 | % | 1,138 | 0.2 | % | (710 | ) | (62.4 | %) |
21
Table of Contents
Selected operating statistics for Pei Wei were as follows (dollars in thousands):
Nine Months Ended | ||||||||||||||||||||||||
September 27, | % of | September 28, | % of | |||||||||||||||||||||
2009 | Revenues | 2008 | Revenues | Change | % Change | |||||||||||||||||||
Revenues |
$ | 222,148 | 100.0 | % | $ | 208,823 | 100.0 | % | $ | 13,325 | 6.4 | % | ||||||||||||
Costs and expenses: |
||||||||||||||||||||||||
Cost of sales |
59,757 | 26.9 | % | 57,191 | 27.4 | % | 2,566 | 4.5 | % | |||||||||||||||
Labor |
73,978 | 33.3 | % | 71,553 | 34.3 | % | 2,425 | 3.4 | % | |||||||||||||||
Operating |
39,550 | 17.8 | % | 38,145 | 18.3 | % | 1,405 | 3.7 | % | |||||||||||||||
Occupancy |
15,104 | 6.8 | % | 14,160 | 6.8 | % | 944 | 6.7 | % | |||||||||||||||
Depreciation and amortization |
13,437 | 6.0 | % | 11,888 | 5.7 | % | 1,549 | 13.0 | % | |||||||||||||||
Preopening expense |
921 | 0.4 | % | 2,414 | 1.2 | % | (1,493 | ) | (61.8 | %) | ||||||||||||||
Partner investment expense |
(369 | ) | (0.2 | %) | 858 | 0.4 | % | (1,227 | ) | | ||||||||||||||
Net income attributable to noncontrolling interests |
385 | 0.2 | % | 421 | 0.2 | % | (36 | ) | (8.6 | %) |
Percentages over 100% are not displayed.
Revenues
Each segment contributed as follows:
Bistro: The decrease in revenues was attributable to a $48.5 million decline in revenues for
stores that opened prior to 2008, due to a significant reduction in overall guest traffic
combined with a slight decline in the average check. The decrease was partially offset by
incremental new store revenues of $33.4 million, comprised of a full nine months of revenues from
the 17 new stores that opened during 2008 and revenues generated by the three new Bistro
restaurant that opened during 2009.
Pei Wei: The increase in revenues was attributable to incremental new store revenues of $14.9
million, comprised of a full nine months of revenues from the 25 new stores that opened during
2008 combined with the five new Pei Wei restaurants that opened during 2009. Revenues for stores
that opened prior to 2008 decreased $1.6 million primarily due to a decline in the average check.
Costs and Expenses
Cost of Sales
Cost of sales as a percentage of revenues decreased at both Bistro and Pei Wei due to the net
impact of favorable product mix shifts, operational efficiencies, and favorable produce pricing.
These declines were partially offset by higher wok oil costs. We negotiate annual pricing
agreements for many of our key commodities and such contracts provide for favorable produce costs,
consistent beef and seafood costs, and unfavorable poultry costs for fiscal 2009 compared to fiscal
2008.
Labor
Each segment contributed as follows:
Bistro: Labor expenses as a percentage of revenues decreased primarily due to improved labor
efficiencies in culinary and hospitality positions and, to a lesser extent, the benefit of
reduced workers compensation insurance liabilities resulting from lower than anticipated claim
development. These declines were partially offset by the impact of decreased leverage on lower
average weekly sales on the portion of labor expenses that is fixed in nature and, to a lesser
extent, higher health insurance costs.
Pei Wei: Labor expenses as a percentage of revenues decreased primarily due to improved labor
efficiencies in culinary and hospitality positions, lower manager salaries resulting from
reduced management headcount, and the benefit of reduced workers compensation insurance
liabilities resulting from lower than anticipated claim development. These declines were
partially offset by higher expenses associated with the utilization of additional key hourly
employees as well as the impact of decreased leverage on lower average weekly sales on the
portion of labor expenses that is fixed in nature and, to a lesser extent, higher management
incentive accruals.
22
Table of Contents
Operating
Each segment contributed as follows:
Bistro: Operating expenses as a percentage of revenues increased primarily due to the impact of
decreased leverage on lower average weekly sales on the portion of operating costs that is fixed
in nature and higher repairs and maintenance expense, partially offset by lower utilities costs
resulting from favorable rates and lower usage.
Pei Wei: Operating expenses as a percentage of revenues decreased primarily due to lower
utilities costs resulting from favorable rates partially offset by higher usage, and lower menu
printing costs. These declines were offset by higher repairs and maintenance costs and, to a
lesser extent, the impact of decreased leverage on lower average weekly sales on the portion of
operating costs that is fixed in nature.
Occupancy
Each segment contributed as follows:
Bistro: Occupancy costs as a percentage of revenues were consistent with the prior year
primarily due to lower contingent rent expense and, to a lesser extent, decreased general
liability insurance, offset by the impact of decreased leverage on lower average weekly sales.
Pei Wei: Occupancy costs as a percentage of revenues were consistent with the prior year
primarily due to lower property tax expense offset by the impact of decreased leverage on lower
average weekly sales.
General and Administrative
Consolidated general and administrative costs increased primarily due to higher management
incentive accruals and higher share-based compensation expense, primarily resulting from the
performance unit award grants issued to our co-CEOs during the first quarter of 2009 and the
cash-settled liability awards issued during fiscal 2009. To a lesser extent, additional
compensation expense resulting from unrealized holding gains associated with investments in the
401(k) Restoration Plan and higher franchise tax expense also contributed to the increase in
costs.
Depreciation and Amortization
Depreciation and amortization increased at both Bistro and Pei Wei primarily due to additional
depreciation on restaurants that opened during the last quarter of fiscal 2008 and the first three
quarters of fiscal 2009. As a percentage of revenues, depreciation and amortization increased at
both Bistro and Pei Wei primarily due to the impact of decreased leverage resulting from lower
average weekly sales.
Preopening Expense
Each segment contributed as follows:
Bistro: Preopening expense decreased primarily due to the impact of opening three new
restaurants during the first three quarters of 2009 compared to opening 10 new restaurants
during the first three quarters of 2008 and, to a lesser extent, a lower number of scheduled new
restaurant openings for the remainder of fiscal 2009 compared to fiscal 2008.
Pei Wei: Preopening expense decreased primarily due to the impact of opening five new
restaurants during the first three quarters of 2009 compared to opening 21 new restaurants
during the first three quarters of 2008.
Partner Investment Expense
Each segment contributed as follows:
Bistro: All partner investment expense activity for the Bistro is related to early buyouts of
noncontrolling interests. The change in partner investment expense resulted from fewer early
buyouts of noncontrolling interests during the first three quarters of 2009 compared to the
first three quarters of 2008.
Pei Wei: Partner investment expense decreased primarily due to the impact of opening fewer new
restaurants during the first three quarters of 2009 compared to the first three quarters of
2008 and, to a lesser extent, the impact of expense reversals related to noncontrolling
interest buyouts.
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Interest and Other Income (Expense), Net
The change in consolidated interest and other income (expense), net was due to lower interest
expense resulting from the repayment of $40.0 million of our outstanding credit line borrowings.
Additionally, unrealized holding gains during the current year compared to unrealized holding
losses in the prior year associated with investments in the 401(k) Restoration Plan, lower
capitalized interest and lower interest income contributed to the change. We expect to continue to
recognize net interest expense until such time as we further lower our outstanding debt levels or
increase our development.
Provision for Income Taxes
Our effective tax rate from continuing operations, including discrete items and deduction for
noncontrolling interests, was 28.3% for the first three quarters of 2009 compared to 25.2% for the
first three quarters of 2008. Prior fiscal year includes the impact of a change in estimate related
to amended tax returns. Besides the effect of the change in estimate related to the amended
returns, the income tax rate for both fiscal 2009 and fiscal 2008 differed from the expected
provision for income taxes, which is derived by applying the statutory income tax rate, primarily
as a result of FICA tip credits.
Management has evaluated all positive and negative evidence concerning the realizability of
deferred tax assets and has determined that, with the exception of a small amount of state net
operating losses, we will recognize sufficient future taxable income to realize the benefit of our
deferred tax assets.
Net Income Attributable to Noncontrolling Interests
Each segment contributed as follows:
Bistro: Net income attributable to noncontrolling interests as a percentage of revenues
decreased due to the impact of noncontrolling interest buyouts occurring since the beginning of
fiscal 2008. These buyouts reduced the number of noncontrolling interests from 133 at the
beginning of fiscal 2008 to 29 as of September 27, 2009.
Pei Wei: Net income attributable to noncontrolling interests as a percentage of revenues was
consistent with the prior year primarily due to the impact of 118 noncontrolling interest
buyouts occurring since the beginning of fiscal 2008 offset by the impact of higher restaurant
net income.
Liquidity and Capital Resources
Cash Flow
Our primary sources of liquidity are cash provided by operations and borrowings under our Credit
Facility. Historically, our need for capital resources has primarily resulted from our
construction of new restaurants. More recently, our need for capital resources has also been driven
by repayments of long-term debt, repurchases of our common stock and purchases of noncontrolling
interests.
The following table presents a summary of our cash flows for the nine months ended September 27,
2009 and September 28, 2008 (in thousands):
September 27, | September 28, | |||||||
2009 | 2008 | |||||||
Net cash provided by operating activities |
$ | 98,142 | $ | 99,531 | ||||
Net cash used in investing activities |
(39,057 | ) | (70,024 | ) | ||||
Net cash used in financing activities |
(76,971 | ) | (29,598 | ) | ||||
Net decrease in cash and cash equivalents |
$ | (17,886 | ) | $ | (91 | ) | ||
Operating Activities
We have funded our capital requirements since inception through sales of equity securities, debt
financing and cash flows from operations. Net cash provided by operating activities exceeded net
income for the periods shown due principally to the effect of depreciation and amortization, a net
increase in operating liabilities, share-based compensation expense and non-cash lease termination
charges. The change in other current assets during fiscal 2009 is primarily due to the collection
of tenant incentives due from landlords, the timing of prepaid rent, the collection of receivables
from third-party gift card sales and the collection of rebates.
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Investing Activities
We have historically used cash primarily to fund the development and construction of new
restaurants. Investment activities were primarily related to capital expenditures of $38.9 million
and $69.4 million during the first three quarters of fiscal years 2009 and 2008, respectively.
Capital expenditures declined significantly compared to the prior year primarily due to the impact
of opening three new Bistro and five new Pei Wei restaurants in the first three quarters of fiscal
2009 compared to 10 new Bistro and 21 new Pei Wei restaurants in the first three quarters of fiscal
2008.
We intend to open eight new Bistro restaurants and seven new Pei Wei restaurants in fiscal year
2009, of which three Bistro and five Pei Wei restaurants were open by the end of the third quarter.
We expect that our planned future Bistro restaurants will require, on average, a total cash
investment per restaurant of approximately $2.8 million to $3.0 million. We expect to spend
approximately $350,000 to $400,000 per restaurant for preopening costs. Total cash investment per
each Pei Wei restaurant is expected to average $800,000 to $900,000 and we expect to spend $140,000
to $160,000 per restaurant for preopening costs. The anticipated total cash investment per
restaurant is based on recent historical averages. We expect total gross capital expenditures for
fiscal 2009 to approximate $45.0 million to $55.0 million ($40.0 million to $50.0 million, net of
landlord reimbursements).
Financing Activities
Financing activities during the first three quarters of fiscal 2009 and 2008 were primarily
comprised of $45.4 million and $11.5 million, respectively, in debt repayments and $29.2 million
and $10.0 million, respectively, in repurchases of common stock. Financing activities also included
purchases of noncontrolling interests, proceeds from stock options exercised and employee stock
purchases, distributions to noncontrolling interest partners, and the tax benefit from share-based
compensation, net.
Credit Facility
On August 31, 2007, we entered into a senior credit facility (Credit Facility) with several
commercial financial institutions, which allows for borrowings of up to $150.0 million. The Credit
Facility is guaranteed by our material existing and future domestic subsidiaries. The Credit
Facility expires on August 30, 2013 and contains customary representations, warranties, and
negative and affirmative covenants, including a requirement to maintain a maximum leverage ratio,
as defined, of 2.5:1 and a minimum fixed charge coverage ratio, as defined, of 1.25:1, as well as
customary events of default and certain default provisions that could result in acceleration of the
Credit Facility. We were in compliance with these restrictions and conditions as of September 27,
2009 as our leverage ratio was 1.26:1 and the fixed charge coverage ratio was 2.10:1.
As of September 27, 2009, we had borrowings outstanding under the Credit Facility totaling $40.0
million as well as $11.2 million committed for the issuance of letters of credit, which is required
by insurance companies for our workers compensation and general liability insurance programs.
Available borrowings under the Credit Facility were $98.8 million at September 27, 2009. See Item
3 below for a discussion of interest rates and our interest rate swap.
Share Repurchase Program
Under share repurchase programs authorized by our Board of Directors, we have repurchased a total
of 4.8 million shares of our common stock for $135.5 million at an average price of $28.51 since
July 2006. Included in this total are 1.1 million shares of our common stock repurchased during the
first three quarters of 2009 for $29.2 million at an average price of $26.06. At September 27,
2009, there remains $10.8 million available under our current share repurchase authorization of
$100.0 million, which expires in December 2009.
Purchases of Noncontrolling Interests
As of September 27, 2009, there were 43 partners representing 160 noncontrolling interests. During
the first three quarters of fiscal 2009, we had the opportunity to purchase 18 noncontrolling
interests that had reached the five-year threshold period during the year, as well as 59 additional
noncontrolling interests that (i) had reached the end of their initial five-year term in prior
years, (ii) related to partners who left the Company prior to the initial five-year term, or (iii)
related to partners who requested an early buyout of their interest. We purchased 73 of these
noncontrolling interests in their entirety for a total of approximately $3.4 million, all of which
was paid in cash. During the remainder of fiscal 2009, there are no additional noncontrolling
interests that will reach their five-year anniversary.
New Accounting Standards
See Recent Accounting Literature section of Note 1 to our consolidated financial statements for a
summary of new accounting standards.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk primarily from fluctuations in interest rates on our Credit Facility
and other borrowings as well as from changes in commodities prices.
Interest Rates
We have exposure to interest rate risk related to our variable rate borrowings. Our Credit Facility
allows for borrowings of up to $150.0 million with outstanding amounts bearing interest at variable
rates equal to LIBOR plus an applicable margin which is subject to change based on our leverage
ratio. At September 27, 2009, we had borrowings of $40.0 million outstanding under our Credit
Facility as well as unsecured promissory notes totaling $1.6 million.
During the second quarter of fiscal 2008, we entered into an interest rate swap with a notional
amount of $40.0 million to hedge a portion of the cash flows of our variable rate borrowings. We
have designated the interest rate swap as a cash flow hedge of our exposure to variability in
future cash flows attributable to interest payments on a $40.0 million tranche of floating rate
debt borrowed under our Credit Facility. Under the terms of the swap, we pay a fixed rate of 3.32%
on the $40.0 million notional amount and receive payments from the counterparty based on the
1-month LIBOR rate for a term ending on May 20, 2010, effectively resulting in a fixed rate on the
LIBOR component of the $40.0 million notional amount. The effective interest rate on the total
borrowings outstanding under our Credit Facility, including the impact of the interest rate swap
agreement, was 4.1% as of September 27, 2009.
Additionally, by using a derivative instrument to hedge exposures to changes in interest rates, we
expose ourselves to credit risk. Credit risk is the failure of the counterparty to perform under
the terms of the derivative contract. We seek to minimize the credit risk by entering into
transactions with high-quality counterparties whose credit rating is evaluated on a quarterly
basis.
As of September 27, 2009, based on current interest rates and total borrowings outstanding,
including the impact of our interest rate swap, a hypothetical 100 basis point increase in interest
rates would have an insignificant pre-tax impact on our results of operations.
Commodities Prices
We purchase certain commodities such as beef, pork, poultry, seafood and produce. These commodities
are generally purchased based upon market prices established with vendors. These purchase
arrangements may contain contractual features that fix the price paid for certain commodities.
Historically, we have not used financial instruments to hedge commodity prices because these
purchase arrangements help control the ultimate cost paid and any significant commodity price
increases have historically been relatively short-term in nature.
Cash-settled Awards
We issued cash-settled awards during fiscal 2009, including performance units, SARs and stock-based
awards. The fair value of these awards are remeasured at each reporting period until the awards are
settled and is affected by market changes in our stock price and, in the case of performance units,
the relative performance of our stock price to the performance of the Russell 2000 Index. Fair
value fluctuations are recognized as cumulative adjustments to share-based compensation expense.
See Note 8 to our consolidated financial statements for further discussion of the fair value of the
cash-settled awards and fair value fluctuations of cash-settled awards.
Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including our principal
executive officers and principal financial officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our
principal executive officers and principal financial officer concluded that our disclosure controls
and procedures were effective as of the end of the period covered by this report. There have not
been any changes in the Companys internal control over financial reporting during the quarter
ended September 27, 2009, which have materially affected, or are reasonable likely to materially
affect, the Companys internal control over financial reporting.
26
Table of Contents
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Risks that could have a negative impact on our business, revenues and performance results include
risks associated with the following: failure of our existing or new restaurants to achieve
expected results; changes in general economic and political conditions that affect consumer
spending; changes in food costs; the financial performance of restaurants concentrated in certain
geographic areas; litigation; our inability to retain key personnel; potential labor shortages that
may delay planned openings; changes in government legislation that may increase labor costs;
intense competition in the restaurant industry; tax returns may be subjected to audits that could
have material adverse impact; rising insurance costs; the inability to develop and construct our
restaurants within projected budgets and time periods; failure to comply with governmental
regulations; changes in how we account for certain aspects of our partnership program; and our
ability to successfully expand our operations. A more detailed description of each of these risk
factors can be found under the caption Risk Factors in our most recent Form 10-K, filed on
February 11, 2009.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Under share repurchase programs authorized by our Board of Directors, we have repurchased a total
of 4.8 million shares of our common stock for $135.5 million at an average price of $28.51 since
July 2006. Included in this total are 1.1 million shares of our common stock repurchased during
the first three quarters of 2009 for $29.2 million at an average price of $26.06. At September 27,
2009, there remains $10.8 million available under our current share repurchase authorization of
$100.0 million, which expires in December 2009.
The following table sets forth our share repurchases of common stock during each period in the
third quarter of fiscal 2009:
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs | ||||||||||||
June 29, 2009 August 2, 2009 |
97,000 | $ | 32.71 | 97,000 | $ | 17,285,183 | ||||||||||
August 3, 2009 August 30, 2009 |
98,850 | $ | 32.35 | 98,850 | $ | 14,087,386 | ||||||||||
August 31, 2009 September 27, 2009 |
97,500 | $ | 33.35 | 97,500 | $ | 10,835,761 | ||||||||||
Total |
293,350 | 293,350 | $ | 10,835,761 | ||||||||||||
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
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Item 6. Exhibits
Exhibit | ||||
Number | Description Document | |||
3 | (i)(1) | Amended and Restated Certificate of Incorporation. |
||
3 | (ii)(2) | Amended and Restated Bylaws. |
||
4.1 | (3) | Specimen Common Stock Certificate. |
||
4.2 | (3) | Amended and Restated Registration Rights Agreement dated May 1, 1997. |
||
10.28 | (4) | First Amendment to Amended and Restated Employment Agreement between the Company and
Richard L. Federico, as amended, dated February 18, 2009. |
||
10.29 | (4) | First Amendment to Amended and Restated Employment Agreement between the Company and
Robert T. Vivian, as amended, dated February 18, 2009. |
||
10.33 | (5) | Amended and Restated Non-Employee Director Compensation Plan, effective April 28, 2009. |
||
10.35 | (5) | First Amendment to 2007 Credit Agreement dated December 31, 2008. |
||
10.36 | (5) | Second Amendment to 2007 Credit Agreement dated June 23, 2009. |
||
31.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 for Richard L. Federico. |
|||
31.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 for Robert T. Vivian. |
|||
31.3 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 for Mark D. Mumford. |
|||
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 for Richard L. Federico. |
|||
32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 for Robert T. Vivian. |
|||
32.3 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 for Mark D. Mumford. |
| Management Contract or Compensatory Plan. |
|
(1) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q filed on
April 25, 2002. |
|
(2) | Incorporated by reference to the Registrants Annual Report on Form 8-K filed on August 14,
2009. |
|
(3) | Incorporated by reference to the Registrants Registration Statement on Form S-1 (File
No. 333-59749). |
|
(4) |
Incorporated by reference to the Registrants Form 8-K filed on February 20, 2009. |
|
(5) | Incorporated by reference to
the Registrants Quarterly Report on Form 10-Q filed on
July 22, 2009. |
28
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
P.F. CHANGS CHINA BISTRO, INC. |
||||
By: | /s/ RICHARD L. FEDERICO | |||
Richard L. Federico | ||||
Chairman and Co-Chief Executive Officer Principal Executive Officer |
||||
By: | /s/ ROBERT T. VIVIAN | |||
Robert T. Vivian | ||||
Co-Chief Executive Officer Principal Executive Officer |
||||
By: | /s/ MARK D. MUMFORD | |||
Mark D. Mumford | ||||
Chief Financial Officer
Principal Financial and Accounting Officer |
Date: October 21, 2009
29
Table of Contents
INDEX TO EXHIBITS
Exhibit | ||||
Number | Description Document | |||
3 | (i)(1) | Amended and Restated Certificate of Incorporation. |
||
3 | (ii)(2) | Amended and Restated Bylaws. |
||
4.1 | (3) | Specimen Common Stock Certificate. |
||
4.2 | (3) | Amended and Restated Registration Rights Agreement dated May 1, 1997. |
||
10.28 | (4) | First Amendment to Amended and Restated Employment Agreement between the Company and
Richard L. Federico, as amended, dated February 18, 2009. |
||
10.29 | (4) | First Amendment to Amended and Restated Employment Agreement between the Company and
Robert T. Vivian, as amended, dated February 18, 2009. |
||
10.33 | (5) | Amended and Restated Non-Employee Director Compensation Plan, effective April 28, 2009. |
||
10.35 | (5) | First Amendment to 2007 Credit Agreement dated December 31, 2008. |
||
10.36 | (5) | Second Amendment to 2007 Credit Agreement dated June 23, 2009. |
||
31.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 for Richard L. Federico. |
|||
31.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 for Robert T. Vivian. |
|||
31.3 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 for Mark D. Mumford. |
|||
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 for Richard L. Federico. |
|||
32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 for Robert T. Vivian. |
|||
32.3 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 for Mark D. Mumford. |
| Management Contract or Compensatory Plan. |
|
(1) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q filed on
April 25, 2002. |
|
(2) | Incorporated by reference to the Registrants Annual Report on Form 8-K filed on August 14,
2009. |
|
(3) | Incorporated by reference to the Registrants Registration Statement on Form S-1 (File No. 333-59749). |
|
(4) | Incorporated by reference to the Registrants Form 8-K filed on February 20, 2009.
|
|
(5) | Incorporated by reference to
the Registrants Quarterly Report on Form 10-Q filed on
July 22, 2009. |
30