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California Pizza Kitchen Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 8, 2009 04:03PM

California Pizza Kitchen Inc. (CPKI) filed Quarterly Report for the period ended 2009-03-29. California Pizza Kitchen Inc. is a leading casual dining chain in the premium pizza segment. The company's full-service restaurants feature an imaginative line of hearth-baked pizzas including the original BBQ Chicken Pizza and a broad selection of distinctive pastas salads soups and sandwiches. Of the chain's two hundred seven restaurants one hundred seventy seven are company-owned and thirty operate under franchise or license agreements. There are twenty five CPK ASAP locations nine of which are company-owned and sixteen are franchised. Another company-owned concept is LA Food Show Grill & Bar which currently has one location in Manhattan Beach California. The company also has a licensing arrangement with Kraft Pizza Company which manufactures and distributes a line of California Pizza Kitchen premium frozen pizzas. California Pizza Kitchen Inc. has a market cap of $354.3 million; its shares were traded at around $14.81 with a P/E ratio of 21.8 and P/S ratio of 0.5. California Pizza Kitchen Inc. had an annual average earning growth of 12.4% over the past 5 years.

Highlight of Business Operations:

Total Revenues. Total revenues decreased by $3.6 million, or -2.2%, to $161.1 million in the first quarter of 2009 from $164.7 million in the first quarter of 2008 due to a $4.0 million decrease in restaurant sales offset by a $0.4 million increase in Kraft royalties and franchise revenues. The decrease in restaurant sales was primarily due to the decrease in comparable restaurant sales in the first quarter of 2009. The 18-month comparable base restaurant sales decrease was 5.9% driven by a 9.0% decrease in guest counts, a 3.4% increase in pricing and a 0.3% decrease in menu mix. If the effect of off premise traffic decline is excluded, the guest count reduction improves from -9.0% to -7.9%. We believe the reduced restaurant traffic was primarily due to macro economic factors impacting the casual dining industry. While Kraft royalties and international franchise revenue increased by 32.1% and 35.1%, respectively, the decline in air travel reduced domestic franchise revenue as the majority of these locations are in airports.

Food, beverage and paper supplies. Food, beverage and paper supplies decreased by $1.7 million, or -4.3%, to $38.0 million in the first quarter of 2009 from $39.7 million in the first quarter of 2008. Food, beverage and paper supplies as a percentage of restaurant sales was 23.9% in the first quarter of 2009 compared to 24.4% in the first quarter of 2008. The decrease in food, beverage and paper supplies as a percentage of restaurant sales was primarily due to decreased pricing in dairy, produce and fuel surcharges and productivity improvements associated with our initiatives to close the gap between actual and theoretical food costs.

Labor. Labor decreased by $1.0 million, or -1.6%, to $61.1 million in the first quarter of 2009 from $62.1 million in the first quarter of 2008. As a percentage of restaurant sales, labor was 38.5% in the first quarter of 2009 compared to 38.2% in the first quarter of 2008. The percentage increase in labor was primarily due to increased hourly labor associated with the federal minimum wage increase and minimum wage increases in nine states and deleveraging of fixed labor costs against lower sales in the first quarter of 2009.

Direct operating and occupancy. Direct operating and occupancy costs increased by $1.6 million, or 4.8%, to $34.8 million in the first quarter of 2009 from $33.2 million in the first quarter of 2008. Direct operating and occupancy costs as a percentage of restaurant sales was 21.9% in the first quarter of 2009 compared to 20.3% in the first quarter of 2008. The dollar increase in direct operating and occupancy costs was primarily due to increased rent resulting from the inclusion of the renewal option period in the lease period for certain locations offset by lower delivery costs, credit card fees and utility expenses.

General and administrative. General and administrative costs decreased by $0.1 million, or -0.8%, to $13.0 million in the first quarter of 2009 from $13.1 million in the first quarter of 2008. General and administrative costs as a percentage of total revenue increased to 8.1% in the first quarter of 2009 from 7.9% in the first quarter of 2008. The increase in general and administrative expenses as a percentage of total revenue was primarily due to the deleveraging of general and administrative costs against lower sales partially offset by lower manager training and travel expenses.

Income tax provision. The effective income tax rate was 31.9% for the first quarter of 2009 compared to 31.0% for the first quarter of 2008. The effective income tax rate for 2009 differed from the statutory income tax rate primarily due to FICA and wage tax credits.

Read the The complete Report

CPKI is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC, Kenneth Fisher of Fisher Asset Management, LLC.


Stocks Discussed: CPKI,
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