FOG CUTTER CAPITAL GROUP INC. REPORTS THIRD QUARTER 2007 OPERATING RESULTS
November 13, 2007
| FOR: |
FOG CUTTER CAPITAL GROUP INC. |
| CONTACT: |
Fog Cutter Capital Group Inc. |
| |
(503) 721-6500 Andrew A. Wiederhorn, Chairman and CEO |
| |
(503) 721-6500 R. Scott Stevenson, Chief Financial Officer |
For Immediate Release
FOG CUTTER CAPITAL GROUP INC.
FOG CUTTER CAPITAL GROUP INC. REPORTS THIRD QUARTER 2007 OPERATING RESULTS
PORTLAND, Ore. — November 13, 2007 – Fog Cutter Capital Group Inc. (OTCBB: FCCG.OB) reported net income of $0.1 million or $0.01 per share for the three months ended September 30, 2007, compared to a net loss of $0.9 million or $0.11 per share for the third quarter of 2006. The company reported a net loss of $7.0 million or $1.19 per share for the nine months ended September 30, 2007, compared to a net loss of $3.5 million for the same period in 2006. Approximately $3.5 million of the loss for the year-to-date 2007 period came from the Company’s Fatburger restaurant chain, which is currently in the process of national and international expansion.
The Company’s year-to-date results include a gain of $2.5 million from the sale of its mortgage brokerage unit, George Elkins Mortgage Banking Company. A Fog Cutter subsidiary owned 51% of George Elkins and, together with Elkins’ management, sold the entire commercial mortgage brokerage operation to a division of MuniMae for $10.4 million. The sale of George Elkins was in line with Fog Cutter’s strategy to divest its non-core subsidiaries and concentrate its focus on the Fatburger restaurant operation. The year-to-date results also include the recognition of an income tax benefit of $4.4 million relating to net operating loss carryforwards that had been utilized on prior year income tax returns.
The Company currently conducts its operations in four business segments: (1) restaurant operations through its Fatburger subsidiary; (2) manufacturing activities conducted through its DAC International subsidiary; (3) real estate operations; and (4) software development and sales conducted through its Centrisoft Corporation subsidiary. The following summarizes the general activities in the Company’s areas of interest:
Restaurant Operations
Fatburger, “The Last Great Hamburger Stand”®, opened its first restaurant in Los Angeles in 1952. At September 30, 2007, there were 90 Fatburger restaurants located in 14 states, Canada and the Company’s first store in China. On October 10, 2007, Fatburger opened another restaurant in Las Vegas, its 13th location in that city, and 91st location overall. The restaurants specialize in fresh, made to order hamburgers and other specialty sandwiches. French fries, homemade onion rings, hand-scooped ice cream shakes and soft drinks round out the menu.
During the third quarter, the Company opened its first Fatburger restaurant in China, located in the Venetian® Macao-Resort-Hotel. Fatburger was joined in this venture by Grammy winning artist and producer Pharrell Williams, who has partnered with Fatburger to open the first 10 locations in China. Fatburger plans to open approximately 25 company-owned locations in China by the end of 2010 including locations in Hong Kong, Macao, Shenzhen, Beijing and Shanghai.
Fatburger plans to open additional restaurants throughout the United States, Canada and China through a combination of company owned restaurants and franchised locations. Franchisees currently own and operate 52 of the Fatburger locations and the company has agreements for approximately 242 new franchise locations in the United States and Canada.
For the nine months ended September 30, 2007, company-owned restaurant sales increased 7.3% to $22.0 million. The operating margin as a percentage of sales for company-owned stores was 36.2% in the first nine months of 2007, down from 39.6% for the same period in 2006. An increase in labor cost accounted for most of the change in the operating margin.
System-wide sales increased 0.2% to $49.6 million during the first nine months of 2007, primarily as the result of the addition of new restaurant locations.
Manufacturing Operations
The Company conducts manufacturing activities through DAC International. DAC is a supplier of computer controlled lathes and milling machinery for the production of eyeglass, contact, and intraocular lenses. In the nine months ended September 30, 2007, DAC had sales revenues of $7.8 million and earned approximately $0.8 million in net income.
Real Estate Operations
The Company invests directly and indirectly in real estate, both in the United States and Europe. During the first nine months of 2007, the Company lost $1.8 million from its real estate operations, including $2.9 million in impairment reserves on property in Barcelona, Spain, partially offset by the recognition of approximately $0.7 million in income from forfeited deposits. The Company’s major holdings in real estate as of September 30, 2007 are as follows:
- Freestanding Retail Properties – The Company owns or controls 72 freestanding retail buildings throughout the United States, either directly or through leases. The buildings are approximately 4,500 square feet and are leased to a variety of tenants including convenience stores, video rental outlets, shoe stores and other small businesses.
- Barcelona Apartments – As of September 30, 2007 the Company owned two apartment buildings through equity participating loans to special purpose Spanish corporations. The properties consist of 33 residential units located in Barcelona, Spain. The two buildings were acquired subject to below market leases and the Company has relocated these tenants and is now selling the properties for development.
Software Development and Sales
The Company’s Centrisoft subsidiary develops and sells software that controls and enhances the productivity of enterprise networks and provides first level security against unauthorized applications and users. Centrisoft is marketing its software to potential customers both directly and through re-seller relationships.
Forward Looking Statements
Certain statements contained herein and certain statements contained in future filings by the Company with the SEC may not be based on historical facts and are “Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-Looking Statements are based on various assumptions and events (some of which are beyond the Company’s control) and may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Actual results could differ materially from those set forth in Forward-Looking Statements due to a variety of factors, including, but not limited to the Risk Factors identified herein and the following:
- economic factors, particularly in the market areas in which the Company operates;
- the financial and securities markets and the availability of and costs associated with sources of liquidity;
- competitive products and pricing;
- the real estate market, including the residential real estate market in Barcelona, Spain;
- the ability to sell assets to maintain liquidity;
- fiscal and monetary policies of the U.S. Government;
- changes in prevailing interest rates;
- changes in currency exchange rates;
- acquisitions and the integration of acquired businesses;
- performance of retail/consumer markets, including consumer preferences and concerns about diet;
- effective expansion of the Company’s restaurants in new and existing markets;
- profitability and success of franchisee restaurants;
- availability of quality real estate locations for restaurant expansion;
- the market for Centrisoft’s software products;
- credit risk management; and
- asset/liability management.
Except as may be required by law, the Company does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions which may be made to any Forward-Looking Statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. The following financial results should be read in conjunction with the Form 10-Q filed with the Securities and Exchange Commission on November 13, 2007.
|
|
