McCormick & Schmick's Seafood Restaurants, Inc. Reports Second Quarter 2009 Financial Results

Financial results for the second quarter 2009 compared to the second quarter 2008:

-- Revenues decreased 7.0% to $92.7 million from $99.7 million

-- Comparable restaurant sales decreased 17.3%

-- Net income of $1.2 million, or $0.08 per diluted share, compared to net income of $2.4 million, or $0.16 per diluted share

-- Pro forma net income was $1.3 million, or $0.09 per diluted share, excluding impairment, restructuring and other charges (see attached reconciliation to GAAP)

Revenues for the second quarter of 2009 decreased 7.0% to $92.7 million from $99.7 million in the second quarter of 2008. The decrease in revenues is primarily attributable to the decline in comparable restaurant sales, partially offset by revenue from new restaurants not in the comparable restaurant base. The decrease in comparable restaurant sales of 17.3% was a result of a 16.7% decrease in traffic, which was coupled with a decrease in net pricing of 0.6%.

Bill Freeman, Chief Executive Officer said, "While the challenging economic environment resulted in a decrease in comparable sales for the quarter, we are pleased with the impact our cost savings initiatives have had on our operating results. Throughout the second quarter we remained focused on our efforts to contain costs while introducing new revenue building initiatives for the future. I am encouraged by the evolution of our marketing strategy as we focus on communicating to a broader audience to strengthen our connectivity to our guests."

2009 Outlook

The Company reaffirms its annual guidance of approximately $370.0 million in revenues and diluted earnings per share of $0.25-$0.30.

The Company expects its annualized effective tax rate to be between 5% to 10% due to the projection of modest taxable income for the year in certain taxing jurisdictions and the change in net deferred tax assets will be insignificant.

The Company opened two new restaurants in the first quarter and did not open any restaurants in the second quarter of 2009. The Company does not plan to open any additional restaurants in 2009. Capital expenditures for 2009 are expected to be approximately $8.0 million.

Conference Call

The Company will host a conference call to discuss second quarter 2009 financial results today at 5:00 PM ET. Hosting the call will be Bill Freeman, Chief Executive Officer.

The conference call can be accessed live over the phone by dialing 888-778-9060, or, for international callers, 913-312-1473. A replay will be available one hour after the call and can be accessed by dialing 888-203-1112, or 719-457-0820 for international callers; the conference ID is 4540695. The replay will be available until Wednesday, August 19, 2009.

The call will be webcast live from the Company's website at www.McCormickandSchmicks.com under the investor relations section.

About McCormick & Schmick's Seafood Restaurants, Inc.

McCormick & Schmick's Seafood Restaurants, Inc. is a leading seafood restaurant operator in the affordable upscale dining segment. The Company now operates 93 restaurants, including 87 restaurants in the United States and six restaurants in Canada under The Boathouse brand. McCormick & Schmick's has successfully grown over the past 37 years by focusing on serving a broad selection of fresh seafood. McCormick & Schmick's inviting atmosphere and high quality, diverse menu offering and compelling price-value proposition appeals to a diverse base of casual diners, families, travelers and the business community.

Definition of Comparable Restaurant Sales

Comparable restaurant sales represent sales at all the restaurants owned by the Company in operation at least eighteen months from the beginning of the period being discussed. Comparable restaurant sales exclude the impact of currency translation. Management reviews the increase or decrease in comparable restaurant sales with the same period in the prior year to assess business trends.

Forward-Looking Statements

The financial guidance and outlook we provide for 2009 are forward-looking statements. These forward-looking statements are based on information available to us on the date of this release and we assume no obligation to update these forward-looking statements for any reason. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: general economic conditions or changes in consumer preferences or discretionary spending; changes in the availability and costs of food; potential fluctuation in our quarterly operating results due to seasonality and other factors; the continued service of key management personnel; our ability to protect our name and logo and other proprietary information; health concerns about our food products; the impact of federal, state or local government regulations relating to our employees and the sale of food or alcoholic beverages; the impact of litigation; the potential effects of inclement weather or terrorist attacks; the effect of competition in the restaurant industry; cost and availability of capital; and other risk factors described from time to time in SEC reports filed by McCormick & Schmick's Seafood Restaurants, Inc.

McCormick& Schmick's Seafood Restaurants, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Margin Analysis
(unaudited)
(in thousands, except per share data)
                                               Thirteen week period ended
                                               June 28, 2008                  June 27, 2009
Revenues                                       $    99,699        100.0 %     $    92,742           100.0 %
Restaurant operating costs
Food and beverage                                   30,038        30.1  %          27,517           29.7  %
Labor                                               32,095        32.2  %          30,269           32.6  %
Operating                                           15,384        15.4  %          14,158           15.3  %
Occupancy                                           9,297         9.3   %          9,501            10.2  %
Total restaurant operating costs                    86,814        87.1  %          81,445           87.8  %
General and administrative expenses                 5,138         5.2   %          4,947            5.3   %
Restaurant pre-opening costs                        692           0.7   %          80               0.1   %
Depreciation and amortization                       3,652         3.7   %          4,293            4.6   %
Impairment, restructuring and other charges         452           0.5   %          371              0.4   %
Total costs and expenses                            96,748        97.0  %          91,136           98.3  %
Operating income                                    2,951         3.0   %          1,606            1.7   %
Interest expense, net                               87            0.1   %          469              0.5   %
Other expense (income), net                         (184    )     (0.2  )%         13               a"EUR
Income before income taxes                          3,048         3.1   %          1,124            1.2   %
Income tax expense (benefit)                        691           0.7   %          (64    )         (0.1  )%
Net income                                     $    2,357         2.4   %     $    1,188            1.3   %
Net income per share
Basic                                          $    0.16                      $    0.08
Diluted                                        $    0.16                      $    0.08
Shares used in computing net income per share
Basic                                               14,699                         14,773
Diluted                                             14,699                         14,807
                                               Twenty-six week period ended
                                               June 28, 2008                  June 27, 2009
Revenues                                       $    192,039       100.0 %     $    184,636          100.0 %
Restaurant operating costs
Food and beverage                                   58,109        30.3  %          55,214           29.9  %
Labor                                               62,492        32.5  %          60,757           32.9  %
Operating                                           29,885        15.6  %          28,498           15.4  %
Occupancy                                           18,095        9.4   %          18,990           10.3  %
Total restaurant operating costs                    168,581       87.8  %          163,459          88.5  %
General and administrative expenses                 10,709        5.6   %          10,793           5.8   %
Restaurant pre-opening costs                        1,876         1.0   %          641              0.3   %
Depreciation and amortization                       7,047         3.7   %          8,373            4.5   %
Impairment, restructuring and other charges         452           0.2   %          552              0.3   %
Total costs and expenses                            188,665       98.2  %          183,818          99.6  %
Operating income                                    3,374         1.8   %          818              0.4   %
Interest expense, net                               416           0.2   %          847              0.5   %
Other expense (income), net                         (258    )     (0.1  )%         27               a"EUR
Income (loss) before income taxes                   3,216         1.7   %          (56         )    a"EUR
Income tax expense (benefit)                        741           0.4   %          (100        )    (0.1  )%
Net income                                     $    2,475         1.3   %     $    44               a"EUR
Net income per share
Basic                                          $    0.17                      $    0.00
Diluted                                        $    0.17                      $    0.00
Shares used in computing net income per share
Basic                                               14,692                         14,750
Diluted                                             14,692                         14,763

McCormick& Schmick's Seafood Restaurants, Inc. and Subsidiaries
Reconciliation of Actual / Pro forma Net Income Per Share -
GAAP to Non-GAAP
(unaudited)
(in thousands, except per share data)
Pro forma net income per share outstanding at the end of the
period is a non-GAAP measurement. The following tables reconcile
actual net income and net income per share determined in
accordance with GAAP to pro forma net income and net income per
share based on the shares outstanding at the end of the period
presented:
                                                         Thirteen week
                                                         period ended
                                                         June 27, 2009
Reconciliation of GAAP to Non-GAAP items
Net income (per GAAP)                                    $             1,188
Income tax benefit                                                     (64           )
Impairment, restructuring and other charges                            371
Pro forma income before income taxes                                   1,495
Income tax expense *                                                   150
Pro forma net income                                     $             1,345
Pro forma net income per share
Basic                                                    $             0.09
Diluted                                                  $             0.09
Shares used in computing pro forma net income per share
Basic                                                                  14,773
Diluted                                                                14,807
* The Company utilized the estimated effective annualized tax rate
of 10.0% for the calculation of pro forma income tax expense in
the presentations above.

The Company believes this non-GAAP measurement is useful to investors since during the periods presented the Company incurred charges that affected the Company's performance related to the incurrence of impairment, restructuring and other charges. During the second quarter the Company incurred a $371,000 net charge which includes a net charge of $132,000 related to a restaurant closing in the second quarter of 2009 due to expiration of its lease, a net credit of $156,000 related to the subleasing and sale of leasehold improvements in the second quarter of 2009 of a previously closed restaurant, which we closed in June of 2008, and severance and other employee termination costs of $395,000.

SOURCE: McCormick & Schmick's Seafood Restaurants, Inc.

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